Commitments and Contingencies

6 Months Ended

Jun. 30, 2011

Commitments and Contingencies

Commitments and Contingencies

3. Commitments and Contingencies.

Lease Obligations- The Company is obligated under several operating leases expiring through 2018.  Future aggregate minimum annual rental payments under all of these leases for the next five years are as follows:

Twelve Months Ending June 30,
2012	$	124
2013	$	121
2014	$	122
2015	$	103
2016	$	43

Rent expense under all of these operating leases was approximately $62 and $58 for the six months ended June 30, 2011 and 2010, respectively.

The Company is also obligated under certain five-year, slot equipment operating leases, the projected costs of which are not included in the table above due to fluctuating inventory, expiring in 2011 and 2012, which provide for a monthly fixed rental fee per slot machine, and an option for replacement to a different/newer machine during the term of the lease.  In the second quarter of 2011, the Company’s slot lease expenses were approximately $670 versus $531 in the comparable period in 2010, while for the first six months of 2011, they were $1,304 versus $1,116 for the comparable period in 2010.

Employment Agreements- The Company’s July 1, 2005 employment agreement with its Chief Executive Officer (“CEO”), Mr. Rami S. Ramadan, absent the intervention of either party by September 30th of each year, will renew automatically for another calendar year, currently ending December 31, 2011. In addition to a perpetually renewable employment term of one year absent the intervention of either party, the agreement provides for annual compensation, plus participation in the Company’s benefits programs and equity incentive plans. As of June 30, 2011, approximately $225 of annual compensation remained payable in 2011.

401(k) and Profit Sharing Plan- The Company maintains a contributory 401(k) plan and a profit sharing plan.  These plans are for the benefit of all eligible corporate employees, who may have up to 16.5% of their salary withheld, not to exceed the maximum federally allowed amount.  The Company makes an employer-matching contribution of 60 cents for each employee dollar contributed.

Notes Receivable- In connection with TWC’s management of the Grand Casino Lav, on January 10, 2007, the Company extended three Euro-denominated (“EUR”) loans totaling EUR 967, or $1,400, to Grand Hotel Lav, d.o.o., the owner of the Grand Casino Lav and Nightclub. In light of the slower than expected growth of the operation and the cash flow management challenges experienced during the low seasons by the Grand Hotel Lav, d.o.o. (“GHL”), in December 2009, TWC agreed to a proposal from the owners of Grand Casino Lav to consolidate the three outstanding loans and accrued interest and penalties into a single, three-year, 3.55% per annum interest, term loan (the “Replacement Loan”), effective January 1, 2010, excluding accrued management fees. The Replacement Loan principal amount was approximately EUR 875, or approximately $1,300. Principal payments associated with the loan were deferred in 2010. Monthly payments for the Replacement Loan commenced May 31, 2010, with a four-month, interest-free grace period and continued through October 2010. In December 2010, TWC acquiesced to GHL’s request to defer additional installments for three months due to a seasonal drop in business. In addition to liens on gaming equipment, the Replacement Loan is secured by nine legally-binding receivable (demand) notes, which can be presented at any time to the owner’s bank for the satisfaction of the Replacement Loan. In the event of a sale of the business, the Replacement Loan would be assumed by the new owner. TWC management believes the loan is fully collectible.

Advance Receivable- In August 2009, in pursuit of obtaining a gaming license in Hungary, TWC partnered with Vigotop Limited, a Cyprus-based company, to form a Hungarian company, KC Bidding Kft. (“KCB”), in which TWC became holder of a 25% equity interest. Subsequently, TWC extended KCB a three-year, 1.0% interest per annum loan of approximately EUR 930, or approximately $1,300, to form a Hungarian license concession company, SDI Europe Kft. (“SDI”), for the purpose of eventually operating the Class I casino in Hungary. SDI is a wholly-owned subsidiary of KCB. Through SDI’s intermediary, IMT LLC (“IMT”), a Delaware-incorporated company, TWC received a three-year, 2.1505% interest per annum loan of approximately $1,300. TWC expects the full lump sum repayment of the loan, upon maturity, from KCB, to offset its outstanding loan with IMT LLC. TWC management believes the loan to KCB is fully collectible. In the event KCB defaults in its repayment obligation to ACC with respect to the above mentioned loan, IMT will cancel the loan obligation from ACC to IMT and ACC will no longer be obligated to pay off the loan principal of approximately EUR 930, or $1,300. In November 2010, the loan agreement between ACC and KCB was amended to change the maturity date to January 31, 2016 from December 31, 2012 and to establish an interest rate of 1.0% from January 1, 2012 through the new maturity date of the loan. On March 5, 2011, the loan agreement between IMT and ACC was amended to change the maturity date to February 21, 2016 from January 31, 2013, and to establish an interest rate of 1.0% from January 1, 2012 through the new maturity date of the loan.

TWC’s development and operations teams in Europe played key roles in the award process, providing critical industry expertise and technical support to the majority owner of KCB, Vigotop. In exchange for TWC’s services to obtain a gaming license, the Company received the aforementioned ownership stake in KCB, from which there is a potential for the Company to earn a fee by means of a structured buyout by Vigotop. Under the terms of the buyout option agreement, which expires on August 14, 2012, TWC’s minority interest in KCB is subject to acquisition by Vigotop, at Vigotop’s option, through the purchase of TWC’s shares in KCB for approximately $1,300, which would represent TWC’s fee for services rendered.

Since January 12, 2011, KCB has had several letter correspondences with the Ministry for the National Economy of Hungary (the “MOE”). The first letter declared that the State of Hungary was terminating the concession contract that was concluded between the parties on October 9, 2009 for alleged breaches of the terms of the concession contract by the concession holder. Further, in this letter, the Hungarian government demanded payment of a cancelation penalty in the amount of 900,000 Hungarian Forint (“HUF”), approximately $4,500. The second letter was a demand for a penalty payment in the amount of HUF 864,500 plus interest in the amount of HUF 380,400, approximately $6,220 in aggregate, regarding an alleged claim of non-compliance with update reports on the progress of the King’s City development project that were due in January 2010 and July 2010.  KCB has responded to the MOE, challenging the reasons provided by the MOE for the immediate cancelation of the concession contract and argued that the terms on which the cancelation was based were wrongful and disputed the MOE’s claim that such progress reports were due during 2010.

On April 26, 2011, KCB received a court summons for a hearing, which was originally scheduled for January 17, 2012 but has since been moved up to August 30, 2011.  KCB’s attorneys are drafting a statement of defense for this hearing. In its letters and statement of defense, KCB is accusing the Hungarian government of acting in bad faith and is prepared to take the appropriate legal actions if necessary.  KCB’s attorneys believe that KCB has a strong legal case against the MOE. Notwithstanding the foregoing, litigation results are never predictable. Further, by virtue of an existing agreement between Vigotop and TWC, all costs associated with obtaining the casino license were and will be borne by Vigotop. In the opinion of TWC’s management, after consultation with legal counsel, the amount of ultimate liability with respect to these actions will not materially affect the Company’s consolidated financial statements and/or results of operations.

If the MOE is successful in terminating the concession contract, it would be highly unlikely that any buyout would occur and very likely that KCB would become insolvent, resulting in the loss of TWC’s entire non-cash investment. In the event that Vigotop does not exercise its buyout option, the shareholders of KCB will continue their ongoing development of the casino project until the license has been granted, and it is possible that the Company could ultimately manage the mega casino under its American Chance Casinos brand. There are no assurances that TWC would be selected to manage this future operation, if and when completed.

Taxing Jurisdiction-The Czech Republic currently has a number of laws related to various taxes imposed by governmental authorities.  Applicable taxes include gaming tax, value-added tax or VAT, charity tax, and payroll (social) taxes.  Tax declarations, together with other legal compliance areas (e.g. customs and currency control matters) are subject to review and investigation by a number of governmental authorities, which are enabled by law to impose fines, penalties and interest charges, create tax risks in the Czech Republic.  Management believes that it has adequately provided for its Czech tax liabilities as of June 30, 2011.

Legal Proceedings - The Company is often subject to various contingencies, the resolutions of which, its management believes, will not have a material adverse effect on the Company’s consolidated financial position or results of operations.  TWC was not involved in any material litigation during the quarter ended June 30, 2011, or through the date of this filing.