6. Acquisition and Purchase Price Allocation – Hotel Donauwelle, Austria.

On March 1, 2017, TWC acquired 100% of the shares of Hotel Donauwelle Betriebsgesellschaft M.B.H (legally renamed as “Trans World Hotels Austria” (“TWHA”), which owned a four-star business hotel, Steigenberger Hotel (i.e., the Hotel Donauwelle), located in Linz, Austria. The hotel is situated on the banks of the Danube River in Linz, approximately 35 minutes driving time from our Route 55 Casino. The hotel was operating under a contractual management agreement with the Steigenberger Hotels AG, which expired on September 30, 2017 and was not renewed. Subsequently, TWC assumed active management and renamed the hotel the “Hotel Donauwelle.” The assets acquired include the ground lease rights through March 2062 on the plot upon which the hotel building stands, and the building contents. The hotel features 176 rooms, six meeting/banquet rooms, a 120-seat restaurant, a 40-seat bar, a 100-seat outdoor terrace, and a spa and gym room. At the date of the acquisition, the total acquisition cost was €4,431, or $4,741, inclusive of the €4,263, or $4,517, purchase price. TWC paid cash of €368, or $390, and had a 10% contingency payable to the seller of €29, or $31 upon the post-closing settlement based on the finalized and approved financial statements of February 28, 2017. The post-closing settlement was in TWC’s favor, with a payment of €75, or approximately $89, made by the seller. The balance of the purchase price was financed through the assumption of an existing 5-year amortizing bank loan in the amount of €3,866, or $4,096, from Erste Bank, Austria, with a fixed-interest rate of 2.95%, payable quarterly, maturing on December 31, 2021, pursuant to which the €1,966, or $2,083, remaining balance will be either paid off or financed. There was no relationship between the Company or their respective directors or officers, or any affiliate or associate thereof, and the seller of this property in this transaction.

The Company accounted for its Hotel Donauwelle acquisition under the acquisition method of accounting as indicated in FASB ASC 805, Business Combinations, which requires the acquiring entity in a business combination to recognize the fair value of all assets acquired, liabilities assumed, and establishes the acquisition date as the fair value measurement point. Accordingly, the Company identified and recorded assets acquired and liabilities assumed in this business combination, based on fair value estimates as of the date of acquisition, March 1, 2017. The purchase price allocation process requires an analysis and valuation of acquired assets, which included fixed assets, technologies, customer contracts and relationships, trade names and liabilities assumed, including contractual commitments and legal contingencies. Based on an asset evaluation performed by an independent, certified appraiser, the Company determined that there was no material fair values in the technologies, customer contracts and relationships and trade names in the acquisition of the Hotel Donauwelle and that the acquisition was considered a “bargain purchase,” for which the fair value of the net assets acquired exceeded the price paid for the acquisition. Thus, the excess value of €758, or approximately $803, was recognized as a gain in Other income in the Company’s consolidated income statement for the nine months ended September 30, 2017. ASC 805 also requires that prior to recognizing the gain, the acquirer must reassess whether it has correctly identified all of the assets acquired and liabilities assumed and recognize any additional assets or liabilities that result from that review. TWC has reviewed the measurement procedures used in valuing the assets acquired and liabilities assumed and determined that all assets and liabilities have been correctly identified and recognized.

Thus, the Company allocated the final fair value of all acquired assets, before depreciation, as follows:


	Final Fair		Final Fair
	Value at		Value at
	Acquisition Date		Acquisition Date
Purchase Price Allocation	in €		in $
	(Unaudited)		(Unaudited)
Cash	€	368	$	390
Due to seller (10% contingency)		29		31
Erste Bank Loan		3,866		4,096
Total purchase price consideration		4,263		4,517
Gain on bargain purchase		758		803
Total	€	5,021	$	5,320

Fair value amounts assigned to assets and liabilities acquired:
Buildings	€	6,905	$	7,315
Property & equipment		654		693
Intangibles		5		5
Financial assets		1		1
Current assets		589		625
Short-term liabilities (including current portion of unfavorable lease liability)		(608)		(644)
Long-term liabilities (unfavorable lease liability)		(2,525)		(2,675)
Fair value estimate of assets and liabilities acquired	€	5,021	$	5,320

The following unaudited pro forma results of operations for the nine months ended September 30, 2017 and the twelve months ended December 31, 2016 presented are provided for illustrative purposes only and assume the acquisition occurred as of January 1, 2016 and do not assume any cost savings from TWC’s management of the operations. The unaudited pro forma financial results do not purport to be indicative of the results of operations for future periods or the results that actually would have been realized had TWC operated the Hotel Donauwelle during these periods. The unaudited pro forma results are presented in thousands, except share and per share information.


	Nine Months Ended		Twelve Months Ended
	September 30, 2017		December 31, 2016
	(Unaudited)		(Unaudited)


REVENUES	$	42,102	$	57,929

NET INCOME	$	3,129	$	7,111

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		8,872,509		8,838,984
Diluted		9,887,222		9,498,578

EARNINGS PER COMMON SHARE:
Basic	$	0.35	$	0.80
Diluted	$	0.32	$	0.75