Company Operations and Structure - Codere Online has only operated as an independent company since June 4, 2021, following the spin-off of its online casino and sports betting businesses [138]. - Codere Online's operations are subject to a 19% VAT tax on online deposits and a 1% stamp duty on documents effective from February 22, 2025, which may adversely affect its business in Colombia [176]. - Codere Online's reporting currency is the euro, and fluctuations in exchange rates of non-euro currencies could lead to foreign exchange gains or losses, impacting its financial condition [186]. - Codere Online's management and key personnel are critical to its business strategy, and the loss of these individuals could negatively impact operations [251][253]. - Codere Online is organized under the laws of Luxembourg, with substantial assets located outside the United States, making it difficult for U.S. investors to enforce judgments against the company [311]. Regulatory Environment and Compliance - The online gaming industry is subject to extensive regulation, including a 20% tax on gross gaming revenue in Spain, which can significantly impact profitability [148]. - Codere Online relies on licenses to conduct operations, and failure to renew or obtain these licenses could adversely affect its business [143]. - Regulatory changes, such as the recent ruling by the Spanish Supreme Court, may affect advertising practices and market strategies [150]. - The DGOJ has introduced new advertising restrictions and reinforced due diligence and client verification requirements as of August 5, 2023 [152]. - Codere Online's licenses may be revoked by regulatory authorities even if the company is in compliance with obligations, particularly in Mexico [160]. Financial Performance and Risks - Codere Online's future performance may differ significantly from prospective financial information due to various uncontrollable factors [136]. - The company may require additional capital to support growth plans, which may not be available on favorable terms [132]. - The gaming industry is subject to significant taxation, and increases in gaming taxes may impact profitability and have a material adverse effect on Codere Online's business [166]. - Codere Online faces increased regulatory and tax compliance costs due to potential increases in taxation, which could materially affect its business [169]. - Codere Online's performance is subject to significant volatility due to the nature of sports betting, where actual results can differ markedly from theoretical profit expectations [222]. Cybersecurity and Operational Risks - Codere Online faces risks related to cyberattacks and system breaches, which could disrupt operations and affect financial performance [132]. - The company faces risks from cyberattacks, which could lead to system failures, business disruptions, or loss of customer data, adversely affecting its financial condition [218]. - Codere Online has implemented internal controls to monitor unusual transaction patterns to mitigate exposure to fraud, but success is not guaranteed [238]. - The company relies on third-party providers for geolocation and identity verification, and any failure in these systems could adversely affect its compliance with legal requirements [229]. - Codere Online's platforms contain third-party open source software, which may expose the company to risks if it fails to comply with open source software licenses [230]. Market and Competitive Landscape - Codere Online operates in emerging markets, including Mexico, Panama, Colombia, and Argentina, which presents additional costs and risks [132]. - The company may face increased competition from retail operators as the threat of the COVID-19 pandemic diminishes and consumer preferences shift [177]. - Codere Online operates in a highly competitive environment, facing competition from larger companies and illegal gaming activities, which could adversely affect its revenues and profitability [195][197]. - The success of Codere Online's mobile apps relies on compatibility with major operating systems and high-bandwidth data capabilities, which are outside the company's control [223]. - Codere Online's business is sensitive to reductions in discretionary consumer spending, influenced by economic and political conditions in its operating markets [179]. Internal Controls and Governance - Codere Online has identified a material weakness in its internal control over financial reporting, which could negatively impact its market price [133]. - The company reported four material weaknesses related to technical accounting personnel, cash disbursement controls, cybersecurity processes, and overall internal controls [270]. - As of December 31, 2023, three of the four material weaknesses were remediated, but the fourth remains unresolved [271]. - Codere Online's management is implementing enhancements to its internal control system to address the fourth material weakness, but cannot assure timely remediation [273]. - Codere Online's corporate governance is governed by Luxembourg law, which may not provide the same level of protection for minority shareholders as U.S. laws [317]. Shareholder and Market Dynamics - Codere Newco controls approximately 65.7% of Codere Online's outstanding Ordinary Shares, which may lead to conflicts of interest [281]. - Codere Online received a determination letter from Nasdaq regarding potential delisting due to failure to timely file its Form 20-F for the year ended December 31, 2023 [286]. - If Codere Online's securities are delisted from Nasdaq, it may face significant adverse consequences, including reduced liquidity and increased regulatory scrutiny [284]. - Codere Online's shareholders' proportionate ownership interest will decrease with the issuance of additional Ordinary Shares [293]. - The ability to amend the terms of Codere Online Warrants is unlimited, which could adversely affect holders without their approval [294]. Legal and Tax Considerations - The company may face tax liabilities due to its historical membership in a consolidated tax group, which could adversely affect its financial condition [261][262]. - Luxembourg insolvency and bankruptcy laws may offer less protection to Codere Online shareholders compared to U.S. laws, complicating recovery in liquidation scenarios [316]. - The enforceability of U.S. court judgments in Luxembourg is subject to specific conditions, including compliance with Luxembourg procedural codes [312]. - Codere Online believes it should not be treated as a U.S. corporation for U.S. federal income tax purposes, as the ownership percentage of DD3 stockholders in Codere Online was less than 60% [321]. - If treated as a U.S. corporation, Codere Online could face substantial additional U.S. income tax liabilities and a 30% withholding tax on dividends paid to non-U.S. shareholders [322].
ere Online Luxembourg(CDRO) - 2024 Q4 - Annual Report