Acquisition and Purchase Price Allocation - Hotel Donauwelle, Austria

3 Months Ended

Mar. 31, 2017

Hotel Donauwelle Betriebsgesellschaft

Acquisition and Purchase Price Allocation

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 (to be legally renamed as “Trans World Hotels Austria” (“TWHA”), which owns a four-star business hotel, Steigenberger Hotel (i.e. 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 is currently operating under a contractual management agreement with the Steigenberger Hotels AG, expiring on September 30, 2017.  Upon the expiration of the contractual management agreement with Steigenberger, TWC will rename the hotel as 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 terrace, and a spa and gym room.   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 has 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 balance was financed through the assumption of an existing 5-year 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. 

Pending finalization of the Company’s review of the fair value of assets acquired and liabilities assumed, the Company allocated initial fair value of all acquired assets, before depreciation, as follows:

	Fair Value		Fair Value
	Estimate at		Estimate at
	Acquisition		Acquisition
Purchase Price Allocation	Date		Date
	(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
Fair value amounts assigned to assets and liabilities acquired:
Buildings	€	4,120	$	4,365
Property & equipment		654		693
Intangibles		5		5
Financial assets		1		1
Current assets		589		625
Accounts payable		(52)		(55)
Short-term liabilities		(773)		(819)
Long-term liabilities		(281)		(298)
Fair value estimate of assets and liabilities acquired	€	4,263	$	4,517

The estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed.  The Company believes that information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but the Company is waiting for additional information necessary to finalize those fair values.  Therefore, the provisional measurements of fair value reflected are subject to change and such changes could be significant.  The Company expects to finalize the valuation and complete the purchase price allocation no later than the first quarter of 2018.

The following unaudited pro forma results of operations for the years ended December 31, 2017 and 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.

	Three Months Ended		Twelve Months Ended
	March 31, 2017		December 31, 2016
	(Unaudited)		(Unaudited)
REVENUES	$	13,585	$	57,929
NET INCOME	$	727	$	7,111
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		8,859,289		8,838,984
Diluted		9,889,113		9,498,578
EARNINGS PER COMMON SHARE:
Basic	$	0.08	$	0.80
Diluted	$	0.07	$	0.75