Acquisition and Purchase Price Allocation - Hotel Kranichhohe, Germany

12 Months Ended

Dec. 31, 2017

Acquisition and Purchase Price Allocation

NOTE 13 – Acquisition and Purchase Price Allocation - Hotel Kranichhöhe

On December 21, 2016, TWHG acquired the Lindner Sport & Aktivhotel Kranichhöhe (subsequently rebranded by the Company as “Hotel Kranichhöhe”), a 107-room hotel with extensive meeting space and recreational amenities located in Much, Germany, for a purchase price of approximately $5.3 million, excluding closing costs and a real estate

transfer tax. There was no relationship between TWHG, the Company or their respective directors or officers, or any

affiliate or associate thereof, and the seller of this property in this transaction.

The assets acquired by TWHG include: the hotel building and its contents; three food and beverage outlets; 18 meeting rooms; a wellness center and spa; a fitness center with an indoor swimming pool; an adjoining tennis complex with two indoor courts and two outdoor courts; and a “beach” volleyball court.

The Company accounted for its Hotel Kranichhöhe 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, agreed by the parties to be as of December 1, 2016. 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 value in the technologies, customer contracts and relationships, and trade names in the acquisition of Hotel Kranichhöhe 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 €117, or approximately $124, was recognized as a gain in Other Income in the Company’s consolidated statement of operations for the year ended December 31, 2016. 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’s allocation of the final fair value of all acquired assets, before depreciation, remained unchanged from its initial estimate, and is presented in the table below:


	Final Fair		Final Fair
	Value at		Value at
	Acquisition		Acquisition
Purchase Price Allocation	Date in €		Date in $
Cash	€	900	$	957
Kreissparkasse Köln Loan		4,000		4,251
Total purchase price consideration		4,900		5,208
Gain on bargain purchase		117		124
Total	€	5,017	$	5,332
Fair value assigned to assets acquired:
Land	€	1,686	$	1,792
Buildings		2,360		2,508
Property & equipment		465		494
Inventory and receivables		506		538
Final fair value of assets acquired	€	5,017	$	5,332

The following unaudited pro forma results of operations for the year 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 Kranichhöhe during the presented year. The unaudited pro forma results are presented in thousands, except share and per share information.


	Year Ended
	December 31, 2016
	(Unaudited)
REVENUES	$	57,555

NET INCOME	$	6,772

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		8,838,984
Diluted		9,498,578

EARNINGS PER COMMON SHARE:
Basic	$	0.77
Diluted	$	0.71

TRANS WORLD CORP 10-K