Thunderbird Resorts | Annual Report 201
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Thunderbird Resorts | Annual Report 201
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2020 ANNUAL REPORT
2022 ANNUAL REPORT
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Cautionary Note
(Thunderbird Resorts Inc. is a British Virgin Islands company limited by shares
with its registered office in Tortola, British Virgin Islands)
Cautionary Note on “forward-looking statements”
This Annual Report contains certain forward-looking statements within the meaning of the securities laws and
regulations of various international, federal, and state jurisdictions. All statements, other than statements of
historical fact, included herein, including without limitation, statements regarding potential revenue, future
plans, and objectives of the Thunderbird Resorts Inc. are forward-looking statements that involve risk and
uncertainties. There can be no assurances that such statements will prove to be accurate and actual results
could differ materially from those anticipated in such statements. Important factors that could cause actual
results to differ materially from the Group's forward-looking statements include competitive pressures,
unfavorable changes in regulatory structures, and general risks associated with business, all of which are
disclosed under the heading "Risk Factors" and elsewhere in the Group's documents filed from time-to-time
with the Euronext Amsterdam exchange (“Euronext Amsterdam”) and other regulatory authorities.
Thunderbird Resorts Inc. is sometimes referred to herein as “the Company” or “the Group.” All currencies
are in US dollars unless stated otherwise.
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Table of Contents
Table of Contents
Chapter 1: Letter from the CEO 4
Chapter 2: 2022 Overview and Updates 7
Our Operations and Real estate 8
Group Overview 9
Peru 11
Nicaragua 12
Other Key Items 14
Chapter 3: Regulatory Environment 15
Chapter 4: Management Compliance Statement 18
Chapter 5: Report of the Board of Directors 22
Senior Management, Directors and Director Nominees 23
Board of Directors – Governance 25
Compensation to Senior Management and Directors 26
Chapter 6: Investor Relations, Shares & Dividends 30
Conflicts of Interest 32
Related Party Transactions 32
Description of Securities 32
Organizational Documents 33
Chapter 7: 2022 Consolidated Financial Statements
& Report of the Independent Auditors 39
Report of the Independent Auditors 40
Financial Statements 48
Notes to the Consolidated Financial Statements 54
Chapter 8: Risk Factors 121
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Chapter 1: Letter from the CEO
Chapter 1:
Letter from the CEO
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Chapter 1: Letter from the CEO
Dear Shareholders and Investors:
The below summarizes the Group’s performance for the year ended in December 31, 2022.
1. CHANGES IN PERFORMANCE IN 2022
In summary, Group revenue from continuing operations increased by $1.4 million or 10.5%, while adjusted
EBITDA decreased by $172 thousand or -4.5%. Consolidated Profit for the period is $927 thousand, an
improvement of $638 thousand or 220.8% as compared with 2021 results.
A. EBITDA
1
: Peru property EBITDA fell by $7 thousand and Nicaragua property EBITDA increased by
$24 thousand, respectively, as compared to the same period in 2021. Corporate Expense was increased
by $189 thousand in 2022 as compared to 2021. Adjusted EBITDA decreased by $172 thousand or -
4.5% through December 31, 2022 as compared to through December 31, 2021.
B. Profit / (Loss): Our Profit improved by approximately $638 thousand for the period as compared to
2021. This improvement was the result of increased revenue and other gains of $1.4 million and $792
thousand, respectively, partially offset by increased expenses of approximately $1.6 million in 2022 as
compared to 2021.
C. Net Debt: Net debt as of December 31, 2022 decreased to $7.2 million as compared to $16.1 million
as of December 31, 2021. Due to a change in accounting policy as required by IFRS 16, the Group is
required to account for the net present value of real estate operating lease contracts as Obligations under
leases and hire purchase contracts. Approximately $4.1 million of our net debt is comprised of
Obligations under leases and hire purchase contracts.
2. MANAGEMENT TO MITIGATE THE RISKS OF COVID-19
In terms of demand, the tail effects of Covid-19 still could be felt in local demand for offices due to remote
work and in consumer and tourism spending in the hotel business in particular. Having said that, through
2022, Management not only continued to stabilize its office and gaming operations and cash management,
but retooled its business away from hotels with the conversion of its last remaining hotel to apartments (see
below). As a result, we feel reasonably confident that the Group is able to carry on with the shareholder
mandate set forth in the September 21, 2016 Special Resolutions. See more about our progress below.
3. MATERIAL PROGRESS TOWARD SHAREHOLDER MANDATE
We continue to pursue decisions that will support the best interest of shareholders according to the
shareholder mandate set forth in the September 21, 2016 Special Resolutions the status of which is
summarized below in relation to the Group’s key remaining assets:
A. Peru Hotel Real Estate Converted to Apartment Units: As of the date of publication of this 2022
Annual Report, the Group has converted it’s 66-suite hotel in Lima, Peru into a 66-unit condominium
apartment complex. The Group has: i) Legally sub-divided the former hotel in to 66 individually titled
apartment units, procured all change of use and other regulatory approvals, and sold the majority of
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Chapter 1: Letter from the CEO
those units; and ii) Paid off over $4.5 million of senior debt in Lima, Peru. The projection is to generate
in excess of $10 million from all unit sales, which will likely be completed during 2023.
B.
Peru Office Real Estate Performance Improving: The Group also has approximately 6,703 m2 of
rentable-sellable office space, and 83 underground parking spaces. Office occupancies have stabilized
over 2022, but at levels that are lower than those pre-covid. The Group is evaluating whether or not to
convert offices to apartment units and to sell them individually as it has been executing successfully on
for the hotel-to-apartment conversion.
C.
Nicaragua Gaming and Real Estate Assets: As of the publication date of this 2022 Annual Report,
the Group continued to own a 56% interest in a Nicaraguan holding company that owns the following
assets: i) Gaming: Three full casinos and three slot parlors with a combined approximately 630 gaming
positions; and ii) Real Estate: Approximately 4,562 m2 of land divided among 5 parcels as more fully
detailed on page 14.
D.
Costa Rica Real Estate Asset: As of the publication of this 2022 Annual Report, the Group continues
to own a 50% interest in a Costa Rican entity that owns the 11.6-hectare real estate property known as
“Tres Rios”. Tres Rios, with its own, dedicated off ramp, is located close to the country’s 2nd largest
mall on the highway between the capital city of San Jose and the commuter city of Cartago.
We will continue to pursue decisions that will support the best interest of shareholders according to the
shareholder mandate set forth in the September 21, 2016 Special Resolutions.
Salomon Guggenheim
Chief Executive Officer and President
April 30, 2023
1.
“EBITDA” is not an accounting term under IFRS, and refers to earnings before net interest expense, income taxes, depreciation
and amortization, equity in earnings of affiliates, minority interests, development costs, other gains and losses, and discontinued
operations. “Property EBITDA” is equal to EBITDA at the country level(s). “Adjusted EBITDA” is equal to property EBITDA less
“Corporate expenses”, which are the expenses of operating the parent company and its non-operating subsidiaries and affiliates.
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Chapter 2: 2022 Overview and Updates
Chapter 2:
2022 Overview
and Updates
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Chapter 2: 2022 Overview and Updates
Our Operations and Real Estate
(“TBIRD”). After years of downsizing, our core remaining businesses are a mix of real estate, hospitality
and gaming businesses. As of year-end 2022, the Group operated in Peru and Nicaragua . We also retain a
50% ownership in certain real estate as described in the real estate table below.
NICARAGUA
$13.5M Revenue
3 Casinos & 3 Slot Parlors
577 Slots & 15 Table Positions
COSTA RICA
11.6-hectare premium property
located in Tres Rios, between the
cities of San Jose and Cartago.
PERU
$946K Revenue
1 hotel of 66 suites, recently converted to
condominium apartments
1 Office Complex (rentable space of
6,703m2)
83 underground parking spaces
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Chapter 2: 2022 Overview and Updates
As of December 31, 2022, Thunderbird owned the following real estate:
Notes: Given the economic environment post COVID-19, as of December 31, 2022 and continuing through the date
of this publication, it is difficult to properly appraise the market value of real estate in the markets in which we hold
assets. As of 2022, the Peru Fiesta Hotel has been converted into a condominium apartment building with all 66
units now up for sale. Please see “Subsequent Events” for more information.
Group Overview for 2022
Below is our consolidated profit / (loss) summary for the twelve months ended December 31, 2022, as
compared with the same period of 2021. In summary, Group revenue increased by $1.4 million or 10.5%,
while adjusted EBITDA decreased by $172 thousand or -4.5%. Consolidated Profit for the period is $927
thousand, an improvement of $638 thousand or 220.8% as compared with 2021 results.
Country Property Type of Real Estate Type of Property Area in m2 TRI Ownership
Peru
Fiesta Hotel Mixed use building Income producing 9,519 100%
Costa Rica
Tres Rios Project Land Non-income producing 81,971 50%
Nicaragua
Warehouse & Other Offices Office building Non-income producing 1,410
Administrative Offices Office building Income producing 890
Pharaohs Bolivar Casino Income producing 1,242
Pharaohs Chinandega Casino Income producing 832
Carretera a Masaya Land Non-income producing 13,132
108,996
56%
Total
(In thousands)
%
2022 2021
Variance
change
Net gaming wins 11,567$ 10,657$ 910$ 8.5%
Food and beverage sales 1,891 1,547 344 22.2%
Hospitality and other sales 1,069 938 131 14.0%
Total revenues 14,527 13,142 1,385 10.5%
Promotional allowances 687 881 (194) -22.0%
Property, marketing and administration 9,153 7,591 1,562 20.6%
Property EBITDA
4,687 4,670 17
0.4%
Corporate expenses 1,057 868 189 21.8%
Adjusted EBITDA
3,630 3,802 (172) -4.5%
Property EBITDA as a percentage of revenues 25.0% 28.9%
Depreciation and amortization 1,192 1,620 (428) -26.4%
Interest and financing costs, net 1,610 2,006 (396) -19.7%
Management fee attributable to non-controlling interest 7 7 - 0.0%
Project development - 46 (46) -100.0%
Foreign exchange (gain) / loss (161) 232 (393) -169.4%
Other (gains) / losses (1,483) (691) (792) 114.6%
(Gain) / loss from equity investee (93) 134 (227) -169.4%
Income taxes 1,631 159 1,472 925.8%
Profit for the period from continuing operations 927$ 289$ 638$ 220.8%
Twelve months e nded
December 31,
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Chapter 2: 2022 Overview and Updates
Group debt: Below is the Group’s Gross debt and Net debt on December 31, 2022. Please note that as of
2021 and based on IFRS 16, the Group is now required to account for the net present value of real estate
operating lease contracts as Obligations under leases and hire purchase contracts.
The Group estimates its debt schedule as follows starting in January 2023:
(In thousands)
Dec-22 Dec-21
Borrowings 9,057$ 13,493$
Obligations under leases and hire purchase contracts 4,119 4,679
Gross Debt 13,176$ 18,172$
Less:
cash and cash equivalents (excludes restricted cash)
5,957
2,064
Net Debt 7,219$ 16,108$
Principal Balance 2023 2024 2025 2026 2027 Thereafter Total
Corporate 8,692,236$ -$ -$ -$ -$ -$ 8,692,236$
Corporate
8,562,561 - - - - - 8,562,561
Guatemala
129,675 - - - - - 129,675
Peru
- - - - - - -
Nicaragua
949,196 1,030,938 696,044 594,036 530,084 684,223 4,484,521
$ 9,641,432 $ 1,030,938 $ 696,044 $ 594,036 $ 530,084 $ 684,223 $ 13,176,757
Interest Expense 2023 2024 2025 2026 2027 Thereafter Total
Corporate 886,988$ -$ -$ -$ -$ -$ 886,988$
Corporate
886,988 - - - - - 886,988
Guatemala
- - - - - - -
Peru
- - - - - - -
Nicaragua
517,226 408,639 291,865 206,392 125,283 182,736 1,732,141
$ 1,404,214 $ 408,639 $ 291,865 $ 206,392 $ 125,283 $ 182,736 $ 2,619,129
Total
Total
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Chapter 2: 2022 Overview and Updates
Peru Update
Description of Properties
In Peru, as of December 31, 2022, the Group completed the process to convert a 66-suite hotel into a
condominium apartment building with all 66 units for sale. The Group has: i) Legally sub-divided the
former hotel in to 66 individually titled apartment units, procured all change of use and other regulatory
approvals, and sold the majority of those units; and ii) Paid off over $4.5 million of senior debt in Lima,
Peru. The projection is to generate in excess of $10 million from all unit sales, which will likely be
completed during 2023. In the same mixed-use building, the Group also continues to own approximately
5,604 m2 of rentable-sellable office space, and 80 underground parking spaces.
Summary of Peru 2022 Consolidated P&L:
Our Peru profit / (loss) summary for the twelve months ended December 31, 2022, as compared with the
same period of 2021 is set out below. In summary, Peru revenue improved by $206 thousand or 27.8%,
while property EBITDA decreased by only $7 thousand or 1.6%. Loss for the period is -$920 thousand, a
decrease of $920 thousand or -818.8% as compared to the 2021 profit of $128 thousand.
Date
Sold
Thunderbird Buil ding Lima 2007 NA
Apartments for sale
and Office Spaces and
Parking Units for Rent
66
Peru Total 66
ApartmentsName Province Type
Date
Acquired
(In thousands)
%
2022 2021
Variance
change
Hospitality and other sales 946$ 740$ 206$ 27.8%
Total revenues 946 740 206 27.8%
Property, marketing and administration 520 307 213 69.4%
Property EBITDA
426 433 (7)
-1.6%
Property EBITDA as a percentage of revenues 45.0% 58.5%
Depreciation and amortization 117 48 69 143.8%
Interest and financing costs, net 286 291 (5) -1.7%
Foreign exchange (gain) / loss (40) 290 (330) -113.8%
Other (gains) / losses 1 50 (49) -98.0%
Income taxes 982 (374) 1,356 -362.6%
Profit / (loss) for the period from continuing operations (920)$ 128$ (1,048)$ -818.8%
Twelve months e nded
December 31,
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Chapter 2: 2022 Overview and Updates
Nicaragua Update
Description of Properties
In Nicaragua, the Group operates five standalone casinos. Below is a table that outlines information for
each property as of December 31, 2022.
The Group’s largest and most complete operation in Nicaragua is the Pharaoh’s Casino on the highway to
Masaya, which is the main thoroughfare in the heart of Managua. The property is located across from an
Intercontinental Hotel and close to high-end shopping.
Summary of Nicaragua 2022 Consolidated P&L:
Below is our Nicaragua profit / (loss) summary for the twelve months ended December 31, 2022, as
compared with the same period of 2021. In summary, Nicaragua revenue increased by $1.2 million or
10.1%, while property EBITDA increased by $24 thousand or 0.6%. Profit for the period is $1.1 million,
an improvement of $286 thousand or 35.6% as compared to 2021.
Name Province
Date
Acquired
Type Slots Table Positions
Pharaoh’s Casino Chinandega Chinandega 2012 Slot Parlor 74 -
Pharaoh’s Casino Esteli Esteli 2017 Slot Parlor 45 -
Nicaragua Total 577 15
Pharaoh's Central Managua 2000 Casino 149 9
3
107 3
Pharaoh's Bolivar Managua 2015 Slot Parlor 107 -
Pharaoh's Camino Real Managua 2005 Casino 95
Zona Pharaoh's Bell o Hori zonte Managua 2008 Casino
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Chapter 2: 2022 Overview and Updates
Below are graphs exhibiting our expected principal and interest payments based on loan contracts effective
as of December 31, 2022. The principal and interest payments scheduled in the tables below reflects those
debt service payments that are scheduled starting in January 1
st
, 2023.
(In thousands)
%
2022 2021
Variance
change
Net gaming wins 11,567$ $10,657 910$ 8.5%
Food and beverage sales 1,891 1,547 344 22.2%
Hospitality and other sales 3 18 (15) -83.3%
Total revenues 13,461 12,222 1,239 10.1%
Promotional allowances 687 881 (194) -22.0%
Property, marketing and administration 8,513 7,104 1,409 19.8%
Property EBITDA
4,261 4,237 24
0.6%
Property EBITDA as a percentage of revenues 31.7% 34.7%
Depreciation and amortization 1,075 1,572 (497) -31.6%
Interest and financing costs, net 515 578 (63) -10.9%
Management fee attributable to non-controlling interest 1,057 757 300 39.6%
Project development - 46 (46) -100.0%
Foreign exchange loss 17 9 8 88.9%
Other (gains) / losses 50 101 (51) -50.5%
Income taxes 457 370 87 23.5%
Profit / (loss) for the period from continuing operations 1,090$ 804$ 286$ 35.6%
Twelve months ended
December 31,
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Chapter 2: 2022 Overview and Updates
Other Key Items
MARKETING
The Group’s marketing strategy in 2022 was focused on protecting the business.
EMPLOYEES
As of December 31, 2022, we employed 448, including 413 in Nicaragua, 29 in Peru, and 6 elsewhere.
Labor laws in Latin America are generally more protective of employees than employers. Latin America
has laws protecting employees from having their employment terminated without proper cause or without
paying such employees severance compensation in established statutory amounts and, in some Latin
American countries the law establishes a minimum number of vacation days. Each Thunderbird subsidiary
has its own country-level training and development programs according to the Group’s corporate
guidelines. We offer opportunities for employees to be personally challenged with educational assistance
now available at some of the Group’s locations. Most of the Group’s subsidiaries offer life and health
insurance with a preferred provider network and co-payment methods to the Group’s upper/middle
management as well as for the Group’s staff and operational employees.
INSURANCE
We typically obtain the types and amounts of insurance coverage that we consider appropriate for
companies in similar businesses. We currently maintain certain insurance policies, including, without
limitation, general commercial and liability, property (including earthquake coverage in certain markets),
and employee compensation coverage, for all of the Group’s properties. In addition, for certain of the
Group’s properties, we carry business interruption insurance.
LITIGATION AND CONTROVERSIES
The Group has disclosed ongoing litigation in Notes 18 and 23 of the financial statements. In addition to
the litigation described in these Notes, we are subject to legal proceedings arising in the ordinary course of
business or related to the Group’s discontinued business operations.
Other than as described in this 2022 Annual Report in Notes 18 and 23 of the 2022 Consolidated Financial
Statement, there are not and have not been any governmental, legal or arbitration proceedings that may
have or have had significant effects on the Group’s financial position or profitability.
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Chapter 3: Regulatory Environment
Chapter 3:
Regulatory Environment
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Chapter 3: Regulatory Environment
GOVERNMENT REGULATION
The Group’s gaming operations are subject to extensive regulation, and each of the Group’s subsidiaries
and joint ventures holds registrations, approvals, gaming licenses or permits in each jurisdiction in which
it operates gaming activities. Gaming laws are based upon declarations of public policy designed to protect
gaming consumers and the viability and integrity of the gaming industry, including prevention of cheating
and fraudulent practices. Gaming laws may also be designed to protect and maximize state and local
revenues derived through taxation and licensing fees imposed on gaming industry participants and enhance
economic development and tourism. To accomplish these public policy goals, gaming laws establish
procedures to ensure that participants in the gaming industry meet certain standards of character and fitness,
or suitability. The limitation, conditioning, suspension, revocation or non-renewal of gaming licenses, or
the failure to reauthorize gaming in certain jurisdictions would materially and adversely affect the Group’s
gaming operations in that jurisdiction. Statutes and regulations can require us to meet various standards
relating to, among other things, business licenses, registration and background investigations of employees,
floor plans, building, fire and accessibility requirements, payment of gaming taxes, and regulations
concerning equipment, machines, tokens, gaming participants and ownership interest. Civil and criminal
penalties can be assessed against us and/or the Group’s Officers to the extent of their individual participation
in, or association with, a violation of certain gaming statutes or regulations. We are also subject to safety
and health, employment and environmental laws, regulations and ordinances that apply to the Group’s
operations. For example, rules and regulations regarding the service of alcoholic beverages are often strict,
and the loss of a license that permits such service would significantly impair the Group’s operations. Local
building, parking and fire codes also affect the Group’s operations. We believe that we are currently in
compliance with all applicable gaming and non-gaming regulations in the jurisdictions where we operate.
The following is an overview of the gaming regulations in each of the Group’s current jurisdictions of
operation. We are not subject to any material environmental regulation.
NICARAGUA
The Nicaraguan Casino Law was published in The Gazette, Official Newspaper Number 124, on July 5,
2011. Its full name is Law 766 Special Law for the Control and Regulation of Casinos and Slot Parlors.
This law (Article 5) appoints the Nicaraguan Institute of Tourism (“INTUR”) as the Application Authority,
with the express obligation to enforce the law, through the creation of a new Casino Commission, headed
by a Director to be designated by the INTUR Executive President. The Law creates four categories for the
casinos in Nicaragua:
1. Category A: Every casino with 71 slots machines or more and three or more table games will be
considered an “A” class casino. The Group’s operations in Nicaragua are all Category A.
2. Category B: Every casino with 25 to 70 slots machines and/or two table games at least will be
considered a “B” class casino.
3. Category C: A slots operator with 16 to 24 slot machines operating in one slot parlor will be
considered a “C” Class casino, in counties with 30,000 inhabitants or less.
4. Category D: A slot parlor with 10 to 15 slot machines in counties with 30,000 inhabitants or less.
This Nicaraguan Casino Law was reformed by the recently approved Law 884 “Law for the reform and
addition to Law 766 Special Law for the Control and Regulation of Casinos and Slot Parlors”, which was
published in The Gazette, Official Newspaper Number 215 on November 12
th
, 2014.
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Chapter 3: Regulatory Environment
By this Law 884 (Article 4), the Application Authority was changed from the Nicaraguan Institute of
Tourism (INTUR) to the Nicaraguan Ministry of Finance and Public Credit, with the express obligation to
enforce this law through the creation of a special Office for the Casinos and Slot Parlors, headed by a
Director to be appointed by the Minister of Finance and Public Credit.
Article 5 of the Law 884 mandates the creation of a Board of Control and Regulation of Casinos and Slot
Parlors, consisting of the Minister of Finance and Public Credit (President of this Board), the General
Director of Income or his deputy, the General Director of the National Police or his (her) deputy, the General
Director of the Financial Analysis Unit or his deputy and the Director from the Office for the Casinos and
Slot Parlors, with voice but no vote in the meetings of this Board.
This Board is in charge of hearing the appeals from the members of the Casinos and Slot Parlors, issuing
rules and regulations for the industry, and supervision of tax payments.
The Nicaraguan government applies specific taxes including corporate income tax, which apply to the
Group’s operations as follows:
a. Municipal tax of 1% of gross revenue, payable monthly.
b. Advance monthly income tax payment of $400 per table; plus, advance monthly income tax
payment of $25 per slot machine for the first 100 slots, $35 from 101 to 300 slots, and $50 from
301 or more per slot machine and per location or 1% of net win, whichever is higher.
c. Income tax of 30% of taxable net income, payable annually, which is reduced by the amounts paid
as monthly advance income tax payment; if the advance payments are higher than the 30% the
higher amount paid becomes your tax obligation.
d. We must pay the annual matriculate tax to the municipal government for the Group’s operating
licenses, which is 2% of the average monthly revenue for the months of October, November and
December. The matriculate tax applies to all companies in Nicaragua not just casinos.
In 2013, the Financial Analysis Unit of Nicaragua issued certain regulations intended to strengthen the
efforts to deter money laundering in certain businesses including casinos. With the new regulations
effective on or about January 1, 2014, gaming companies are required to appoint a “compliance officer” to
be the direct liaison between the company and the regulator. The compliance officer is responsible for
presenting quarterly reports regarding the compliance efforts of the company with respect to these
regulations and certain aspects of the company’s operations, before the regulator.
PROVISIONS AND OTHER CONTINGENCIES
See Notes 18 and 23 of the Group’s Financial Statements that describe certain matters such as the Costa
Rica tax controversy, the Daman Hospitality loan guarantee, the Canadian tax controversy, the Guatemala
controversy, the San Diego Federal District Court case, and the Costa Rica-CIRSA Escrow claim. Please
note that effective February 25, 2015, and in conjunction with the sale of our Costa Rican operations, the
Group’s Costa Rican subsidiaries paid in protest approximately $3.3 million (50% of which relates to the
Group’s 50% stake in those subsidiaries at time of sale) to the Costa Rican tax authorities. The Group
continues to dispute the validity of the Costa Rican contingent taxes as described in Note 23, as per our
agreements with the buyers of our interests in our Costa Rican operations, any recovery is the benefit of the
former shareholders, meaning 50% of any recovery will be to the benefit of the Group.
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Chapter 4: Management Compliance Statement
Chapter 4:
Management
Compliance Statement
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Chapter 4: Management Compliance Statement
The management of risks, internal controls, integrity and compliance forms an integral part of the business
management within the Group and continues to be strengthened and embedded into the Group’s business
objectives setting processes and its operations. It also documents the necessary disclosures as required by
Management under the most recent best practice provisions of the EU Transparency Directive as incorporated
in the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht).
THE GROUP’S APPROACH TO RISK MANAGEMENT, INTERNAL
CONTROL, AND COMPLIANCE INTERNAL CONTROL OVER
FINANCIAL REPORTING
Implement technology-based infrastructure and controls. The Group’s technology-based infrastructure and
controls include, but are not limited to the following:
•
Daily and per-shift reporting and reconciliation of casino gaming activities;
•
Daily drop and win reports by game type and slot type and denomination, as well as food and
beverage sales;
•
Weekly closing cycles for basic reconciliations and reporting of cash positions;
•
Monthly income statements versus budgets by casino property, as well as reviews of capital
expenditures and cash position;
•
High quality, interlinked communication and monitoring systems to allow real-time monitoring of
operations, which permits us to market the Group’s facilities, and manage the Group’s people and
assets, more effectively;
•
Country-level accounting with budget compilation and variance reporting at the property and country
levels;
•
Daily, detailed sales reports compared to budgets for all pertinent gaming and hospitality sales; and
•
Digital surveillance, online slot security systems, online liquor inventory control and custom cash
management systems.
The Group’s internal controls in each country are monitored by the Group’s principal operations office for
that country. We implement similar standards in each of the Group’s properties to ensure consistency in
security of assets and protection against theft. In addition, in many of the Group’s operations,
communication and monitoring systems (such as the Group’s point of sale monitoring system) provide the
ability to monitor cash inflows on a real-time basis. We believe that operating the Group’s properties using
a consistent, high standard of controls provides us with a higher-quality operation, and we believe that the
Group’s patrons recognize that higher quality.
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Chapter 4: Management Compliance Statement
RISK MANAGEMENT
For more detail on Risk Factors, see Chapter 8 of this Annual Report.
MANAGEMENT STATEMENT ON “GOING CONCERN”
Management has reviewed their plan with the Directors and has collectively formed a judgment about the
going concern of the Group. In arriving at this judgment, Management has prepared the cash flow
projections of the Group. The Group has suffered recurring losses the past years. In response to the recurring
losses of the previous years, Management has taken actions which will be described in the following
paragraphs.
Directors have reviewed this information provided by Management and have considered the information in
relation to the financing uncertainties in the current economic climate, the Group’s existing commitments
and the financial resources available to the Group. Specifically, Directors have considered: (i) there are
probably no sources of new financing available to the Group; (ii) the Group has limited trading exposures
to our local suppliers and retail customers; (iii) other risks to which the Group is exposed, the most
significant of which is considered to be regulatory risk; (iv) sources of Group income, including
management fees charged to and income distributed from its various operations; (v) cash generation and
debt amortization levels; (vi) fundamental trends of the Group’s businesses; (vii) ability to re-amortize and
unsecured lenders; and (vii) level of interest of third parties in the acquisition of certain operating assets,
and status of genuine progress and probability of closing within the Going Concern period. The Directors
have also considered certain critical factors that might affect continuing operations, as follows:
• Special Resolution: On September 21, 2016, the Group’s shareholders approved a special resolution
that, among other items, authorized the Board of Directors of the Corporate to sell “any or all remaining
assets of the Corporation in such amounts and at such times as determined by the Board of Directors.”
This resolution facilitates the sale of any one or any combination of assets required to support
maintaining of a going concern by the Group.
• Corporate Expense and Cash Flow: Corporate expense has decreased materially in recent years, but
still must accommodate for compliance as a public company.
• Liquidity and Working Capital: As of the date of publication of this 2022 Annual Report, the Group
forecasts to operate with higher levels of reserves and working capital than in recent years, but to create
a healthy level of working capital reserves for periods beyond the Going Concern period may require
the sale of additional assets.
In part, the Group believes that it is in a stronger position to sustain going concern as of the publication date
of this 2022 Annual Report as compared to recent years during the covid crisis because of the following:
• Peru Real Estate Sales: As of the date of publication of this 2022 Annual Report, the Group has
converted it’s 66-suite hotel in Lima, Peru into a 66-unit condominium apartment complex. The Group
has: i) Legally sub-divided the former hotel in to 66 individually titled apartment units, procured all
change of use and other regulatory approvals, and sold the majority of those units; and ii) Paid off over
$4.5 million of senior debt in Lima, Peru. The projection is to generate in excess of $10 million from
all unit sales, which will likely be completed during 2023.
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Chapter 4: Management Compliance Statement
• Other liquidity events: The Group continues to work with unsecured lenders and, in some cases, to
negotiate payment plans and balances that meet the Group’s cash flow. If the Group is not able to create
other liquidity events from its remaining Peru, Costa Rica and Nicaragua assets in 2023-2024, it is
reasonable to expect that some unsecured lenders may pursue years of litigation at that time, though as
to whether this would then have an impact on Going Concern is hard to assess.
Considering the above, Management and Directors are satisfied that the consolidated Group has adequate
resources to mitigate uncertainty and that the Group is able to continue as a going concern for at least the
12 months following the filing date of this report. For these reasons, Management and Directors have
therefore prepared the consolidated financial statements on a going concern basis.
MANAGEMENT’S RESPONSIBILITY STATEMENT
The Directors and the Officers are responsible for preparing the Annual Report and the consolidated
financial statements in accordance with applicable law and regulations, as promulgated by the Euronext
and the AFM.
In conjunction with the EU Transparency Directive as incorporated in the Dutch Financial Markets
Supervision Act, Management confirms to the best of its knowledge that:
• The consolidated financial statements for the year ended December 31, 2022, give a true and fair view
of the assets, liabilities, financial position, and profit and loss of the Group’s consolidated companies;
• The additional management information disclosed in the Annual Report gives a true and fair view of the
Group as at December 31, 2022, and the state of affairs during the financial year to which the report
relates; and
• The Annual Report describes the principal risks facing the Group. These are described in detail in
Chapter 8, “Risk Factors.”
April 30, 2023
Salomon Guggenheim, President, CEO and Director
Albert Atallah, Corporate Secretary and General Counsel
Peter LeSar, Chief Financial Officer
Stefan Fitch, Director
Reto Stadelmann, Director
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Chapter 5: Report of the Board of Directors
Chapter 5:
Report of the
Board of Directors
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Chapter 5: Report of the Board of Directors
Senior Management, Directors and Director Nominees
The following table sets forth certain information about the persons who serve on the Group’s Board of
Directors as of December 31, 2022. Members of the Group’s Board of Directors serve for a one-year term,
which expires at each annual meeting. Unless otherwise indicated, the business address of each person
listed below is Apartado 0823-00514 Zona 7, Panama City, Panama.
There is no familial relationship between any of our senior management or members of the Group’s Board
of Directors.
The following table sets forth certain information about persons who serve as key management personnel
that are not on our board of directors (see above):
SENIOR MANAGEMENT
Salomon Guggenheim – President and CEO: Mr. Guggenheim joined us in 2002 as a Director. In 1987, he
joined Gutzwiller & Partner Ltd., Zurich, a portfolio management company, where he was responsible for
Investments and Trading. In 1991, he took over Gutzwiller & Partner from E. Gutzwiller & Cie., Banquiers,
Basle (a privately-held Swiss bank) together with the senior management of Gutzwiller & Partner, through
a management buy-out and sold the company in 1997. Gutzwiller & Partner was renamed Rabo Investment
Management Ltd., where Mr. Guggenheim worked as a Managing Director until December 2001. From
2001 until 2012 he has owned and operated his own company, IC Day Trading Consulting Corp., a Swiss
corporation focused on the advisement of private individuals in portfolio management and daily trading
activities in different markets worldwide. From 2002 until 2011 he was also the Chief Executive Officer
for Ecopowerstations Ltd., a Swiss corporation dealing with pollutant and emission-free wind power
stations. Furthermore, he serves in various Companies as a board member and advisor. Mr. Guggenheim
became the President and CEO of Thunderbird in January 2013.
Albert Atallah – Corporate Secretary and General Counsel: Mr. Atallah has been the Group’s General
Counsel and a Director since 2000, and is also the Corporate Secretary, having served as a consultant for
Name Age Position Date of Birth
Salomon Guggenheim
62
President, CEO and Director
04-mar-60
Reto Stadelmann
58
Director
12-sep-64
Stephan Fitch
64
Director
30-ago-58
Name Age Position Date of Birth
Albert Atallah
66
General Counsel and Corporate Secretary
09-abr-56
Peter LeSar
54
Chief Financial Officer
14-jun-68
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Chapter 5: Report of the Board of Directors
us from 1997 to 2000. Before joining us, he was a partner with the California law firm of LaRocque,
Wilson, Mitchell & Skola. He was admitted to the California and Michigan bars and is licensed to practice
before the U.S. District Courts of California and Michigan, the U.S. Tax Court, and the U.S. Supreme
Court. He received a B.B.A. in 1978 from the University of Michigan, a Juris Doctorate in 1981 from the
University of Detroit School of Law, and an L.L.M. in Taxation from the University of San Diego School
of Law in 1989. Mr. Atallah is a tax specialist certified by the California Board of Legal Specialization.
Peter LeSar – CFO. Mr. LeSar has been the CFO of Thunderbird since June 2011. Previously, he has
worked for the Group as President of Thunderbird Philippines and as Vice President of Business
Development at the Group level. Previous to Thunderbird, Mr. LeSar was the founding Executive Director
of the Council for Investment & Development, which represented the Group in its successful bid in the
privatization of Panama's state-owned casinos. Mr. LeSar has also been the General Manager of
MinAmerica Corporation, a publicly-traded mining company, and the Founder & CEO of iSpeak, a VC
funded internet-based translation and localization venture.
INDEPENDENT BOARD OF DIRECTORS
Reto Stadelmann. Mr. Stadelmann joined us as a Director in June 2021. In 1985 and 1986 Mr. Stadelmann
studied law at the University of Zurich in Switzerland. In 1986 to 1987 he was involved in the International
Educational Programme for the Union Bank of Switzerland in Zurich. In 1988 he was an FX-Forward
Trader responsible for CHF currency for the Union Bank of Switzerland in Zurich. From 1989 to 1991 he
was the Head of FX-Forward Products at the Union Bank of Switzerland in Tokyo. In 1984 to 1995, Mr.
Stadelmann was the Treasurer at Schweizerische Bankgelsellschaft in Frankfurt, Germany. From 1995 to
1997 he was the European Head of FX-Forward Products at the Union Bank of Switzerland in Zurich. Then
from 1997 to 1998, Mr. Stadelmann was the Global Head FX-Forward Products with the Union Bank of
Switzerland in Zurich. From 1998 to 1999 he was the Head of Short Term Interest Rate Products with Asia
Pacific UBS AG in Singapore. In 1999 he then became the Global Head of Cash and Collateral Trading
Cash at UBS AG in Zurich. From 2000 to 2003 he was the Global Head of Cash and Collateral Trading at
UBS AG in Zurich. From 2003 to 2009 he was the Global Co-Head of Foreign Exchange and Money
Market at UBS AG. From 2009 to 2010 he was the Global Co-Head of Macro at UBS AG and was also a
member of the UBS Investment Bank Board
Stephan Fitch. Mr. Fitch joined us as a Director in September 2016. Mr. Fitch was born in the United States
of America and is the co-founder and Managing Director of the London based IAG Holdings Ltd. (IAGH),
a private company which specializes in international merchant banking activities. Mr. Fitch has been
involved in international corporate finance/investment banking activities for over 27 years specializing
primarily in start-up, venture capital and small-capitalized public companies.
FURTHER INFORMATION ON THE BOARD OF DIRECTORS AND
SENIOR MANAGEMENT
None of the members of the Group’s Board of Directors or the Group’s senior management has been
convicted in relation to any fraudulent offenses, served as a member of the administrative, management or
supervisory body, been a partner with unlimited liability, founder or senior manager of any company
currently subject to bankruptcy proceedings, receiverships or liquidations, or been disqualified by any court
from acting as a member of the administrative, management or supervisory body of any issuer or from
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Chapter 5: Report of the Board of Directors
participating in the management or conduct of the affairs of any issuer, or has been subject to any public
incrimination and/or sanctions by statutory or regulatory authorities or bodies.
MANAGEMENT ON THE BOARD OF DIRECTORS
For information regarding Salomon Guggenheim see above.
Board of Directors - Governance
GENERAL
The Group’s Board of Directors consists of 3 Directors as of the date of this Annual Report, of whom 2
(Messrs. Stadelmann and Fitch) are independent. Independence determinations were made by the Group’s
Board of Directors using the current guidelines of the Euronext for companies listed on that exchange.
Members of the Group’s Board of Directors serve for a one-year term, which expires at each annual
meeting.
COMMITTEES OF THE BOARD
The Group’s Board of Directors has established an Audit Committee, a Nominating and Governance
Committee, a Compensation Committee and an Investment Committee. Each such committee has at least
2 independent Directors except the Investment Committee that is composed of three members of senior
management and one independent Director.
AUDIT COMMITTEE
The Group’s Audit Committee consists of Messrs. Fitch, Stadelmann and LeSar as advisory member.
Mr. Fitch is the Chairman of the Group’s Audit Committee. The audit committee is responsible for
engaging independent public accountants, reviewing with the independent public accountants the plans and
results of the audit engagement, approving professional services provided by the independent public
accountants, reviewing the independence of the independent public accountants, considering the range of
audit and non-audit fees the Group’s compliance with legal and regulatory requirements and reviewing the
adequacy and integrity of the Group’s internal accounting controls.
COMPENSATION COMMITTEE
The Group’s Compensation Committee consists of Messrs. Stadelmann, Fitch and Guggenheim.
Mr. Stadelmann is the Chairperson of this committee, which reviews and approves, or makes
recommendations to the Board of Directors with respect to senior Management and Director (who are not
employees) compensation, and the Group’s long-term incentive compensation program and equity
incentive plans.
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Chapter 5: Report of the Board of Directors
NOMINATING AND GOVERNANCE COMMITTEE
The Group’s Nominating and Governance Committee consists of Messrs. Fitch, Stadelmann and
Guggenheim. Mr. Fitch is the Chairman of this committee, which is responsible for, among other things,
seeking, considering and recommending to the Board of Directors qualified candidates for election as
Directors and recommending nominees for election at the Group’s annual meeting, recommending the
composition of committees of the Group’s Board, developing the Group’s corporate governance guidelines
and policies and adopting a code of business conduct and ethics. In March 2012, the Group Board of
Directors amended the Group’s articles of association, authorizing the Nominating and Governance
Committee to adopt procedures and rules for the nomination and election of Directors, which completed in
Q1 2012, and such procedures and rules are now reflected in the Committee’s charter, which is available
upon request to info@thunderbirdresorts.com.
INVESTMENT COMMITTEE
The Group’s Investment Committee is composed of at least three members of senior management (currently
Salomon Guggenheim, Albert Atallah and Peter LeSar) and one independent director (Mr. Stephan Fitch),
who acts as Chairman for the Committee and as liaison to the full Board (the “Liaison”).
The purpose of the Investment Committee is to set investment policy and strategy, review proposals from
management, set limits and structure with regard to investment authority, establish annual goals and
objectives for investment concepts and the like. To that end, the Committee shall identify, consider,
evaluate, analyze, prioritize material investments, material contracts, material loans and all guaranties
granted by the Group, and shall make recommendations to the Board and implement the Board’s decisions.
VACANCIES ON OUR BOARD OF DIRECTORS
The Group’s charter provides that any and all vacancies on the Group’s Board of Directors may be filled
only by the affirmative vote of a majority of the remaining Directors in office, even if the remaining
Directors do not constitute a quorum, and any Director elected to fill a vacancy shall serve for the remainder
of the full term of the Directorship in which the vacancy occurred and until a successor is elected.
Any Director may resign at any time and may be removed with cause by our stockholders upon the
affirmative vote of at least two-thirds of all the votes entitled to be cast for the election of Directors or
without cause by the Group’s stockholders upon the affirmative vote of at least two-thirds of all the votes
entitled to be cast for the election of Directors.
Compensation to Senior Management and Directors
SENIOR MANAGEMENT COMPENSATION
Senior management is defined as officers and directors of the parent company. The following table sets
forth the compensation of each of the Group’s senior management for 2022. For a discussion of the
compensation of certain of senior management going forward, please see “Employment Agreements.”
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Chapter 5: Report of the Board of Directors
BOARD OF DIRECTOR COMPENSATION
Director’s fees for Independent Directors is equal to $24,000 annually. The level of compensation and
method will be reviewed annually. We also reimburse the Group’s Directors for their travel, hotel and other
expenses incurred in the performance of their duties as Directors, including expenses incurred in attending
Board of Directors meetings, Committee meetings and shareholder meetings. We do not have any pension
programs for the Group’s Board of Directors, senior management or other employees.
2007 EQUITY INCENTIVE PLAN
The Group’s 2007 Equity Incentive Plan (the “Equity Plan”) is designed to enable us and the Group’s
affiliates to obtain and retain the services of the types of employees, consultants and Directors who will
contribute to the Group’s long-term success and to provide incentives that are linked directly to increases
in share value which will inure to the benefit of all of the Group’s shareholders. We have reserved up to
5% of our currently issued and outstanding common shares (as of any given date) for the issuance of awards
under the Equity Plan.
The Equity Plan is administered by the Group’s Board of Directors or a committee designated by the Board
of Directors (in either case, referred to as the “Administrator”). The Administrator has the power and
authority to select Participants (as defined below) in the Equity Plan and grant Awards (as defined below)
to such Participants pursuant to the terms of the Equity Plan. All decisions made by the Administrator
pursuant to the provisions of the Equity Plan shall be final and binding on us and the Participants.
Awards may be in the form of options (incentive stock options and non-statutory stock options), restricted
stock, restricted stock units, performance compensation awards and stock appreciation rights (collectively,
“Awards”). Awards may be granted to employees, Directors and, in some cases, consultants
(“Participants”), provided that incentive stock options may be granted only to employees.
Notwithstanding the shares issued to directors as payment for Board of Director Compensation (see section
above), there has been no equity issued to employees, consultants and/or directors in 2022 under the 2007
Equity Incentive Plan.
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Chapter 5: Report of the Board of Directors
PERFORMANCE COMPENSATION AWARDS
The Equity Plan provides the Administrator with the authority, at the time of grant of any Award (other
than options and stock appreciation rights granted with an exercise price or grant price equal to or greater
than the fair market value per share of stock on the date of the grant), to designate such Award as a
performance compensation award in which case, the vesting of such award shall be based on the satisfaction
of certain pre-established performance criteria.
STOCK APPRECIATION RIGHTS
Stock appreciation rights may be granted either alone (“Free Standing Rights”) or, provided the
requirements of the Equity Plan are satisfied, in tandem with all or part of any option granted under the
Equity Plan (“Related Rights”). Upon exercise thereof, the holder of a stock appreciation right would be
entitled to receive from us an amount equal to the product of (i) the excess of the fair market value of the
Group’s common shares on the date of exercise over the exercise price per share specified in such stock
appreciation right or its related option, multiplied by (ii) the number of shares for which such stock
appreciation right is exercised. The exercise price of a Free Standing Right shall be determined by the
Administrator, but shall not be less than 100% of the fair market value of the Group’s common shares on
the date of grant of such Free Standing Right. A Related Right granted simultaneously with or subsequent
to the grant of an option shall have the same exercise price as the related option, shall be transferable only
upon the same terms and conditions as the related option, and shall be exercisable only to the same extent
as the related option. A stock appreciation right may be settled, at the sole discretion of the Administrator,
in cash, common shares or a combination thereof. No stock appreciation rights are currently outstanding.
CHANGE IN CONTROL
The Group has entered into various loan agreements in which a change in control (as defined in certain
Loan Agreements) will result in such loan(s) becoming due and payable immediately upon the occurrence of
a change of control. “Change of control” in these various loan agreements in general includes one or more
of the following: a) Acquisition of more than 20% of shares by a shareholder or a shareholder group; b) An
involuntary change in more than 1/6
th
of the directors; c) An involuntary termination of 2 of 3 persons
currently holding positions of General Counsel, Chief Financial Officer and VP Corporate Development
(excluding resignations, retirements or terminations for cause); or d) Involuntary removal of more than one
incumbent board of directors under certain circumstances.
AMENDMENT AND TERMINATION
The Group’s Board of Directors may, at any time and from time to time, amend or terminate the Equity
Plan. However, except as provided otherwise in the Equity Plan, no amendment shall be effective unless
approved by the Group’s shareholders to the extent shareholder approval is necessary to satisfy any
applicable law or securities exchange listing requirements. The Administrator at any time, and from time
to time, may amend the terms of any one or more Awards; provided, however, that the Administrator may
not affect any amendment which would otherwise constitute an impairment of the rights under any Award
unless we request the consent of the Participant and the Participant consents in writing.
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Chapter 5: Report of the Board of Directors
EMPLOYMENT AGREEMENTS
This section describes employment agreements that are currently in place effect for Senior Management as
defined in the section on Senior Management Compensation.
In a series of Board Resolutions dated effective from December 31, 2015 to January 1, 2020 the board has
approved various employment agreements with Senior Management and resolved that due to the financial
condition of the Company, and to make the best use of the Company’s cash flow, Salomon Guggenheim,
Peter LeSar, and Albert W. Atallah, as officers and members of the Company’s management team, agreed
to be paid part in cash with the remainder of the salary portion of their compensation to be paid either in
cash in the event of a sale of assets or in the Company’s shares. Throughout the period January 1, 2016,
and up to December 31, 2022, the Board has recognized and considered the risk that Management is taking
for deferring salary, and agreed that if Management opted to receive the remainder of the salary portion of
their compensation in the Company’s shares for the deferral period, the share price used to determine the
number of shares to be issued shall be the amount of foregone salary for each specific month divided by
the 30-day average share price for that same specific month as published on the
www.euronext.com. Such
issuances are subject to regulatory approval under the rules of the AFM and Euronext (hereafter “legally
issuable TRI Publicly tradeable shares”). Moreover, In the event of a Change of Control as referenced in the
various Management Agreements each member of the Senior Management shall be entitled to receive as a
grant from the Company 1/3 of 10% of the then outstanding TRI Publicly tradable shares; The Deferred Salary
and the legally issuable TRI Publicly Tradable Shares shall become due and payable (in the case of the deferred
salary) and issuable (in the case of the legally issuable TRI Publicly tradable shares) immediately upon the
occurrence of a Change of Control as set forth in the various employment agreements.
As previously stated in order to reduce the Group’s cost structure to a level that is sustainable, the Group
has taken the following actions in relation to the Executive compensation and employment contracts: The
CEO, CFO and General Counsel continue to work full time, but with a continued deferral of 50% or more
of their compensation until such time as there are sufficient cash reserves to pay and/or until such time as
these officers receive shares for their deferred time, which ongoing agreements will be subject to a coming
review by the board’s Compensation Committee. During the second half of 2022, the monthly
compensation for each of Salomon Guggenheim and Peter LeSar was confirmed at USD $20,000 and that
of Albert Atallah was confirmed at USD $15,000. The Company owes each of its Senior Management
certain deferred salary as reflected in note 21 of the Group’s Financial Statements as of December 31, 2022
“The Deferred Salary”).
2022 PERFORMANCE BONUSES
No performance bonuses were paid to officers during 2022.
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Chapter 6: Investor Relations, Shares & Dividends
Chapter 6:
Investor Relations, Shares
& Dividends
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Chapter 6: Investor Relations, Shares & Dividends
The following table sets forth information regarding the beneficial ownership of the Group’s common
shares as of December 31, 2022 by:
• Each person or entity that we know is more than a 5% beneficial owner;
• Each Director or executive officer who beneficially owns more than 1% equity interest; and
• All of the Group’s Directors and executive officers as a group (including those that are no longer
executive officers as of December 31, 2022).
All holders of the Group’s common stock have the same voting rights. Beneficial ownership generally
includes any interest over which a person exercises sole or shared voting or investment power.
Name
Country of
residence Position
Approximate # of common
shares beneficially owned,
directly or indirectly, or
controlled or directed
(4)
Percentage of issued and
outstanding shares as of
December 31, 2022
(1)
Switzerland President-Director 3,775,143 12.21%
United States
General Counsel
1,734,146
5.61%
United States
Chief Financial Officer
2,227,626
7.21%
United Kingdom
Independent Director
183,956
0.60%
Total 7,920,871 25.62%
(1)
(2)
(3)
(4)
Salomon Guggenheim
(3)
Albert Atallah
Peter LeSar
Stephan Fitch
(2)
Percentage based on 30,914,077 issued and outstanding shares as of December 31, 2022.
Member of the Audit, Compensation, Investment and Nominating and Governance Committees.
Member of the Investment Committee.
Shares beneficially owned, directly or indirectly, or over which control or direction is exercised as at December 31, 2022, is based on
information furnished to Thunderbird by individual Directors and officers.
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Chapter 6: Investor Relations, Shares & Dividends
Conflicts of Interest
There are no conflicts of interest or potential conflicts of interest exist between the private interests of any
other officer or director of the Group and their duties to the Group.
Related Party Transactions
For information regarding related party transactions with joint ventures and with partners in the Group’s
operating entities, see Note 21 to the Group’s consolidated financial statements for the year ended
December 31, 2022, incorporated herein by reference.
Description of Securities
GENERAL
The Group was registered in the British Virgin Islands on October 6, 2006 as a British Virgin Islands
Business Company, number 1055634. Prior to such registration, the Group was incorporated under the laws
of the Province of British Columbia, Canada, on September 4, 1987 under the name “Winters Gold Hedley
Ltd.” On August 26, 1993, the Group changed its name to “Regal Gold Corporation.” On June 23, 1994,
the Group changed its name to “International Thunderbird Gaming Corporation.” On February 5, 1999, the
Group converted, by continuing its charter documents, from a British Columbia, Canadian corporation to a
Yukon, Canadian corporation. On July 12, 2005, the Group changed its name to “Thunderbird Resorts Inc.”
On October 6, 2006 the Company moved its domicile and reincorporated (by continuing its charter
documents) in the British Virgin Islands.
We comply with the British Virgin Islands’ corporate governance requirements. Pursuant to our
Memorandum of Association, the Group has the authority to issue an aggregate of 1.0 billion shares of
capital stock, consisting of 500 million no par value common shares, and 500 million no par value preferred
shares. The shares are governed by the laws of the British Virgin Islands. The Group’s common shares are
listed on Euronext Amsterdam under the symbol “TBIRD.”
COMMON SHARES AND OPTIONS
As of December 31, 2022, we had 30,914,077 common shares outstanding, ISIN VGG885761061; each
common share is fully paid. The Group’s common shares do not have a conversion feature. The number
of outstanding common shares as stated above may be impacted in the future by issuance of common shares
available for future issuances under the Group’s 2007 equity incentive plan.
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Chapter 6: Investor Relations, Shares & Dividends
Organizational Documents
The Group’s organizational documents consist of the Group’s Memorandum of Association and the
Group’s Articles of Association which contain relevant information, including without limitation, meeting
of the board or directors, meeting of shareholders, distributions, issuance of stock (both preferred and
common) liability and indemnification of officers and directors, borrowing of money, election and removal
of directors, the lack of pre-emptive rights for shareholders, limited rights for shareholders to call a meeting,
and distribution of assets on liquidation. Certain material provisions are set forth below:
• Holders of common shares are each entitled to cast one vote for each share held at a meeting of the
shareholders or on any resolution of the shareholders. We have not provided for cumulative voting for
the election of Directors in our Memorandum and Articles of Association. This means that the holders
of a majority of the shares voted can elect all of the Directors then standing for election. The holders of
outstanding common shares are entitled to receive an equal share in any dividend paid out of assets
legally available for the payment of dividends at the times and in the amounts as the Group’s Board of
Directors from time to time may determine. Upon the Group’s liquidation, holders of common shares
are entitled to an equal share in the distribution of surplus assets. The Group’s common shares are not
entitled to preemptive rights and are not subject to conversion into any other class of shares. We may
purchase, redeem, or otherwise acquire any of our own shares for fair value. However, no purchase,
redemption, or other acquisition of shares can be made unless the Directors determine that, immediately
after the acquisition, the value of our assets will exceed our liabilities, and we will be able to pay our
debts as they fall due.
• Preferred shares may be issued in one or more series, and our Board of Directors is authorized to provide
for the issuance of preferred shares in series, to establish the number of shares to be included in each
series, to fix the rights, designation, preferences and powers of the shares of each series and its
qualifications, limitations and restrictions.
• If the Group’s common or preferred shares are divided into different classes of shares, the rights
attached to any class (unless otherwise provided by the terms of the shares of that class) may be changed
only with the consent in writing of the holders of a majority of the issued shares of that class or series
and of the holders of a majority of the issued shares of any other class or series of shares which may be
affected by such variation.
• Dividend Policy: We have never paid any cash dividends on the Group’s common shares, and we do
not expect to declare or pay any cash or other dividends in the foreseeable future. We may enter into
credit agreements or other borrowing arrangements in the future that restrict the Group’s ability to
declare cash dividends on our common shares. If our Board of Directors ever elects to declare a
dividend, such dividend will be paid to shareholders of record out of legally available funds, and may
be paid annually, semi-annually or quarterly, as determined by the Group’s Board of Directors. Any
such declaration of dividends and any other payments by us, as determined by the Group’s Board of
Directors, will be announced by us in a national daily newspaper distributed throughout the
Netherlands, and in the Official Daily List of Euronext.
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Chapter 6: Investor Relations, Shares & Dividends
• Compulsory Transfer of Shares: The Group’s Board of Directors has the ability under certain
circumstances to force a transfer of common shares in the manner described below, provided, however,
that such forced transfer (including any change to the Company’s register of members) would occur at
the direction of the Group without interference with the purchase, sale, or settlement of the Company’s
common shares on Euronext Amsterdam or without interference with the settlement of such shares
through any settlement system, including Euroclear Nederland and Euroclear Bank (for the sake of
clarity, as a result of the foregoing there will be no null and void trades on Euronext Amsterdam or
settlement of such trades through Euroclear Nederland and/or Euroclear Bank). If it comes to the notice
of the Group’s Board of Directors that any common shares:
a) Are or may be owned or held directly or beneficially by any person in breach of any law, rule,
regulation or requirement applicable to us of any jurisdiction in which we operate or by virtue of
which such person is not qualified to own those shares and, in the sole and conclusive determination
of the Board of Directors, such ownership or holding or continued ownership or holding of those
shares (whether on its own or in conjunction with any other circumstance appearing to the board to
be relevant) would in the reasonable opinion of the Board of Directors, cause a significant pecuniary
disadvantage to us which we might not otherwise have suffered or incurred; or
b) Are or may be owned or held directly or beneficially by any person that is an “employee benefit
plan” subject to the fiduciary provisions of Title I of ERISA, a plan subject to the prohibited
transaction provisions of Section 4975 of the Code, a person or entity whose assets include the
assets of any such “employee benefit plan” or “plan” by reason of the DOL Plan Asset Regulations
or otherwise, or any other employee benefit plan subject to any federal, state, local or foreign law
that is substantially similar to Section 406 of ERISA or Section 4975 of the Code and their
ownership of the shares means that the investor is a Benefit Plan Investor as that term is defined by
the U.S. DOL Plan Asset Regulations and the investor’s interest is “significant” under those
Regulations, or will result in a non-exempt “prohibited transaction” as defined in ERISA or section
4975 of the Code, the Board of Directors may serve written notice (a “Transfer Notice”) upon the
person (or any one of such persons where shares are registered in joint names) appearing in the
register as the holder (the “Vendor”) of any of the shares concerned (the “Relevant Shares”)
requiring the Vendor within thirty days (or such extended time as in all the circumstances the Board
of Directors consider reasonable) to transfer (and/or procure the disposal of interests in) the
Relevant Shares to another person who, in the sole and conclusive determination of the Group’s
Board of Directors, would not fall within paragraphs (a) or (b) above (such a person being
hereinafter called an “Eligible Transferee”). On and after the date of such Transfer Notice, and until
registration of a transfer of the Relevant Shares to which it relates pursuant to the provisions
referred to in this paragraph or the following paragraph, the rights and privileges attaching to the
Relevant Shares will be suspended and not capable of exercise. If within thirty days after the giving
of a Transfer Notice (or such extended time as in all the circumstances the Board of Directors
considers reasonable), the Transfer Notice has not been complied with to the satisfaction of the
Board of Directors, we may sell the Relevant Shares on behalf of the holder at the best price
reasonably obtainable at the time of sale to any one or more Eligible Transferees. To give effect to
a sale, the Board of Directors may authorize in writing the Group’s officers or employees to transfer
the Relevant Shares on behalf of the holder thereof (or any person who is automatically entitled to
the shares by transmission or by law) or to cause the transfer of the Relevant Shares to the Eligible
Transferee. An instrument of transfer executed by that person will be as effective as if it had been
executed by the holder of or the person entitled by transmission to, the Relevant Shares. An Eligible
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Chapter 6: Investor Relations, Shares & Dividends
Transferee is not bound to see to the application of the purchase money and the title of the Eligible
Transferee is not affected by any irregularity in or invalidity of the proceedings connected to the
sale. The net proceeds of the sale of the Relevant Shares, after payment of our costs of the sale,
shall be received by us, and receipt shall be a good discharge for the purchase moneys, and shall
belong to us and, upon their receipt, we shall become indebted to the former holder of the Relevant
Shares, or the person who is automatically entitled to the Relevant Shares by transmission or by
law, for an amount equal to the net proceeds of transfer, in the case of certificated shares, upon
surrender by him or them of the certificate for the Relevant Shares which the Vendor shall forthwith
be obliged to deliver to us. We are deemed to be a debtor and not a trustee in respect of that amount
for the member or other person. No interest is payable on that amount and we are not required to
account for money earned on it. The amount may be employed in our business or as we think fit.
We may register or cause the registration of the Eligible Transferee as holder of the Relevant Shares
and thereupon the Eligible Transferee shall become absolutely entitled thereto. A person who
becomes aware that he falls within any of paragraphs (a) or (b) above shall forthwith, unless he has
already received a Transfer Notice either transfer the shares to one or more Eligible Transferees or
give a request in writing to the Directors for the issue of a Transfer Notice. Every such request
shall, in the case of certificated shares, be accompanied by the certificate(s) for the shares to which
it relates. Subject to the provisions of our Articles of Association, our Board of Directors will,
unless any Director has reason to believe otherwise, be entitled to assume without inquiry that none
of the shares are held in such a way as to entitle the Board of Directors to serve a Transfer Notice
in respect thereof. The Board of Directors may, however, at any time and from time-to-time call
upon any holder (or any one of joint holders or a person who is automatically entitled to the shares
by transmission or by law) of shares by notice in writing to provide such information and evidence
as they require upon any matter connected with or in relation to such holder of shares. In the event
of such information and evidence not being so provided within such reasonable period (not being
less than thirty calendar days after service of the notice requiring the same) as may be specified by
the Board of Directors in the said notice, the Board of Directors may, in its absolute discretion,
treat any share held by such a holder or joint holders or person who is automatically entitled to the
shares by transmission or by law as being held in such a way as to entitle them to serve a Transfer
Notice in respect thereof. The Board of Directors will not be required to give any reasons for any
decision, determination or declaration taken or made in accordance with these provisions. The
exercise of the Board of Director’s powers with respect to the compulsory transfer of shares may
not be questioned or invalidated in any case on the grounds that there was insufficient evidence of
direct or beneficial ownership or holding of shares by any person or that the true direct or beneficial
owner or holder of any shares was otherwise than as appeared to the Board of Directors at the
relevant date provided that the said powers have been exercised in good faith.
BRITISH VIRGIN ISLANDS LAW
The laws of the British Virgin Islands do not contain any limitations on the right of nonresident or foreign
owners to hold or vote the Group’s common shares. There are no laws, decrees, statutes or other provisions
of the laws of the British Virgin Islands which would operate to prohibit or regulate the remittance of
dividends, interest and other payments to nonresident holders of common shares. British Virgin Islands law
permits the Group’s Board of Directors to modify any of the Group’s governing documents without
shareholder approval, so long as such modification does not have an adverse effect on the rights of the
Group’s shareholders. Any modification that would have such an adverse effect requires the approval of
holders of at least a majority of our outstanding shares.
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36
Chapter 6: Investor Relations, Shares & Dividends
CANADIAN LAW
Prior to July 1, 2009, the Group’s common shares were listed on the CNSX. Effective July 1, 2009 and
thereafter, at the request of the Company, the Group’s shares have been delisted from the CNSX. Though
delisted, we continue to be a “reporting issuer” subject to securities laws of British Columbia and Ontario
due to the number of the Group’s existing Canadian shareholders. Those laws require any 10% holder of a
reporting issuer to file reports disclosing that holder’s direct or indirect beneficial ownership of, or control
or direction over, securities of the reporting issuer, and any changes in that ownership. If they acquire 10%
or more of our outstanding common shares, they will be required to file an “insider report form” within ten
business days from the date their ownership exceeded 10%, and then within ten business days after any
trades or other changes in their holdings of common shares. They would also be required to issue a press
release and file a report every time they acquire an additional 2% or more of the Group’s common shares.
If a person or entity acquires 20% or more of our outstanding common shares, it would be a “control person”
of ours. As such, it would be deemed to be not only knowledgeable about our affairs, but to have the ability,
by virtue of its significant equity position, to direct the Group’s affairs. Thereafter, any sale by that holder
of common shares would be deemed under provincial law to be a distribution, requiring the filing of a
prospectus and compliance with other securities disclosure laws.
In addition, if a person or entity acquires 20% or more of the Group’s common shares, it will be deemed
under provincial securities laws to have made a “take-over bid” and, accordingly, unless it can obtain an
exemption, or unless an exemption exists by virtue of the Company’s status as a “designated foreign issuer”
as described below, that holder would be required to comply with detailed rules governing bids. 20%
holders are also required to file insider reports within three calendar days versus the normal 10-day
requirement that applies to all other parties required to file insider reports. The provincial securities
commission has the right to veto the individual or entity from remaining an insider or control person if the
individual or entity is deemed unsuitable to be involved in the Canadian public markets.
Additionally, as a “designated foreign issuer” under Canadian securities laws, the Group’s financial
reporting requirements can be met by filing on SEDAR the same financial information we provide to and
file with the Euronext Amsterdam. Since January 1, 2009, the Group’s financial information prepared
under IFRS is sufficient to meet the requirements of Canadian securities laws.
YEARLY AND HALF-YEARLY INFORMATION
As a result of the implementation of the EU Directive 2004/109 of December 15, 2004 on the harmonization
of transparency requirements in relation to information about issuers whose securities are admitted to
trading on a regulated market (the “Transparency Directive”), the Group is required to make its annual
financial report available to the public 4 months after the end of each financial year. The annual financial
information consists of the audited annual accounts, the annual report, a description of the main risks and
uncertainties facing the Group and a statement by persons within the Group designated by the latter as the
“responsible persons,” indicating (i) that the annual accounts give a fair view of the assets and financial
position of the Group and, in the case of consolidated accounts, of the enterprises included in the
consolidation, and (ii) that the annual report gives a fair view of the Group’s condition on the balance sheet
date, the development of the Group and its affiliated companies during the previous financial year and all
material risks to which the Group is exposed.
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Chapter 6: Investor Relations, Shares & Dividends
The Group must publish its half-yearly information within two months after the end of the first six months
of its financial year. Both the annual and half-yearly financial information must be filed with the AFM and
Euronext Amsterdam and must remain publicly available for at least five years.
INTERIM MANAGEMENT STATEMENTS
As of January 1, 2016 the Group is no longer obligated to publish and file Q1 and Q3 reports. If the Group
wishes to publish Q1 and Q3 reports, those interim reports are to be filed as Price-Sensitive Statements via
the Portal: https://www.afmextranet.nl/AFMPortal/logon.aspx?LanguageID=ENG
DUTCH TAKEOVER ACT
On October 28, 2007, the Dutch Act implementing the European Directive 2004/25/EC of April 2004
relating to public takeover bids (the “Dutch Takeover Act”) and the rules promulgated thereunder came
into force. The provisions of the Dutch Takeover Act are included in the Financial Supervision Act and the
rules promulgated thereunder apply to us. In general, under these provisions, we cannot launch a public
offer for securities that are admitted to trading on a regulated market, such as the Group’s shares unless an
offer document has been approved by the Dutch Authority for the Financial Market (“AFM”) and has
subsequently been published. These public offer rules are intended to ensure that in the event of such a
public offer, sufficient information will be made available to the holders of the Group’s securities, that the
holders of the Group’s securities will be treated equally, that there will be no abuse of inside information
and that there will be a proper and timely offer period. The provisions in the Dutch Takeover Act regarding
mandatory takeover bids will not be applicable to us.
MARKET ABUSE REGIME
The market abuse regime set out in the Financial Supervision Act, which implements the European Union
Market Abuse Directive (2003/6/EC), is applicable to us, our Directors, officers, other key employees, the
Group’s insiders and persons performing or conducting transactions in the Group’s securities. Market abuse
rules set out in the Financial Supervision Act that are relevant for investors are described hereunder.
We make public price-sensitive information, which is information that is concrete and that directly concerns
us which information has not been publicly disclosed and whose public disclosure might significantly affect
the price of the shares or derivative securities, such as the options and warrants. We must also provide the
AFM with this information at the time of publishing the Prospectus. Further, we must immediately publish
the information on the Group’s website and keep it available on the Group’s website for at least one year.
DISCLOSURE OF HOLDINGS
The following provisions apply to us and to the Group’s shareholders:
• If the substantial holding or short position of a shareholder equals or exceeds 3% of the issued capital,
the shareholder should report this. Subsequently, the shareholder should notify the AFM again when
the substantial holding or short position consequently reaches, exceeds or falls below a threshold. This
can be caused by the acquisition or disposal of shares by the shareholder or because the issued capital
of the issuing institution is increased or decreased. Thresholds are: 3%, 5%, 10%, 15%, 20%, 25%,
30%, 40%, 50%, 60%, 75% and 95%. The duty to notify applies to legal entities and to natural persons.
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Chapter 6: Investor Relations, Shares & Dividends
•
We are required to notify the AFM of any changes in the Group’s outstanding share capital, including
in the case of redemption of shares, and any amendment to the Group’s Articles of Association
regarding voting rights. The AFM will publish any notification in a public registry. If, as a result of
such change, a person’s interest in the Group’s capital or voting rights passively reaches or crosses the
thresholds mentioned in the above paragraph, the person in question must immediately give written
notice to the AFM no later than the 4
th
trading day after the AFM has published the Group’s notification.
TRANSFER AGENT AND REGISTRAR
The Group’s transfer agent and registrar for the Group’s common shares is Computershare, Inc., 510
Burrard Street, 3
rd
Floor, Vancouver, British Columbia, Canada V6C 3B9.
PAYING AGENT
ING Commercial Banking, Paying Agent Services, location code: TRC 01.013, Foppingadreef 7, 1102
BD Amsterdam, the Netherlands.
SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES
We are incorporated under the laws of the British Virgin Islands. Certain members of the Group’s Board
of Directors are not residents of the United States, and a substantial portion of their assets are located outside
the United States. As a result, it may be difficult for the Group’s shareholders to effect service of process
in the United States on persons who are not U.S. residents or to enforce in the United States judgments
obtained in the United States against us or persons who are not U.S. residents based on the civil liability
provisions of the U.S. securities laws. We have been advised by the Group’s British Virgin Islands counsel,
O’Neal Webster, that there is doubt as to the direct enforceability in the British Virgin Islands of civil
liabilities predicated upon the securities laws of other foreign jurisdictions.
AVAILABILITY OF DOCUMENTS
This Annual Report may also be inspected through the Euronext website (www.euronext.com) by Dutch
residents only or through the website of the Netherlands Authority for the Financial Markets
(www.afm.nl).
This Annual Report may be obtained on the Group’s website (www.thunderbirdresorts.com). In addition,
for so long as common shares are listed for trading on Euronext Amsterdam, the following documents (or
copies thereof), where applicable, may be obtained free of charge (1) by sending a request in writing to us
at Apartado 0823-00514, Panama City, Panama, (2) by emailing us at the following address
info@thunderbirdresorts.com, or (3) at the offices of the Group’s local paying agent ING Commercial
Banking, location code: TRC 01.013, Foppingadreef 7, 1102 BD Amsterdam, the Netherlands (Tel: + 31
20 563 6619, Fax: + 31 20 563 6959, Email: iss.pas@ing.nl)
(a) This Annual Report and the Group’s Memorandum and Articles of Association.
(b) All reports, letters, other documents, historical financial information (such as the Group’s 2022,
2021, 2020, 2019, 2018, 2017, 2016 and 2015 consolidated financial statements), valuations and
statements prepared by an expert at the Group’s request, any part of which is included or referred to
in this Annual Report.
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Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
Chapter 7:
2022 Consolidated Financial Statements
& Report of the Independent Auditors
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40
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
Report of the Independent Auditors
To the Shareholders and Board of Directors of Thunderbird Resorts Inc.
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Thunderbird Resorts Inc. and its subsidiaries (the
Group), which comprise the consolidated statement of financial position as at December 31, 2022, the
consolidated statement of comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, and notes to the consolidated financial
statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of the Group as at December 31, 2022, its consolidated financial
performance and its consolidated cash flows for the year then ended in accordance with International
Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the
Consolidated Financial Statements section of our report. We are independent of the Group in accordance
with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants
(IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Emphasis of Matter – Going Concern
We draw attention to Note 2 Management Statement on Going Concern, which indicates that uncertainties
exist that may cast doubt on the Group’s ability to continue as a going concern, and that the Group has
adequate resources in place to mitigate the uncertainty and that the Group is able to continue as a going
concern for at least the 12 months following the filing date of the report.
Our opinion is not modified in respect of this matter.
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Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
Emphasis of Matters – Commitments and Contingencies
We draw attention to Note 23 Commitments and Contingencies to the consolidated financial statements
which describes the ongoing contingencies related to regulatory and tax legislation in the jurisdictions in
which the Group operates. The ultimate outcome of the matters disclosed in note 23 cannot presently be
determined, and no provisions for any liabilities has been made in the consolidated financial statements,
except for those disclosed in the note.
Our opinion is not modified in respect of this matter.
Materiality
We define materiality as the magnitude of misstatement in the consolidated financial statements that makes
it probable that the economic decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality in determining the nature, timing and extent of our audit work and in
evaluating the results of that work.
We have determined materiality for the audit of the Group’s consolidated financial statements as a whole
to be US$289,000, which is based on the total gross revenues. This basis is considered the most appropriate
because this is a key performance measure used by the directors to report to investors on the financial
performance of the Group. To each component in our audit scope, we allocate, based on our judgement,
materiality that is less than our overall group materiality. The range of materiality allocated across
components was between US$ 50,000 and US$ 100,000.
We agreed with the audit committee the threshold at which we will communicate misstatements to be
US$14,450. In addition, we will communicate misstatements below that threshold that, in our view, warrant
reporting on qualitative grounds.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in the
context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
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42
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
Key Audit Matters
Going concern
As disclosed in note 2
management statement on going
concern, the consolidated
financial statements have been
prepared on a going concern
basis. The Group has been
making recurring losses and has
been showing a negative equity
for the past years. We therefore
identified the going concern as a
key audit matter requiring
special audit consideration.
How we responded to these
matters
We have reviewed the forecast
model prepared by management
and assessed the appropriateness of
the key assumptions used and we
have analyzed the effect on the
financial position of the Group. We
have verified the status and
progress of the various strategies
that management adopted and
assessed their effects on the
forecast model and the impact on
the consolidated financial
statements. We exercised
professional judgement and
maintained professional scepticism
when discussing and evaluating the
going concern assessment.
Our procedures did not result in
outcomes contrary to
management’s assumptions and
judgements used in the application
of the going concern assumption. In
addition, during 2022 the Group
generated positive result for the
year and the Group achieved a
positive shareholder’s equity.
Key observations
Management has
adequately disclosed the
uncertainties related to the
going concern
assumptions in the
consolidated financial
statements in note 2 and
has correctly prepared the
consolidated financial
statement on the going
concern basis.
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Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
Key Audit Matters
Gaming revenue recognition
How we responded to these
matters
Key observations
The Group main revenue is the
Net gaming wins. The Group
generates high volumes of cash
due to the gaming revenues
earned with the casinos.
Auditing standards prescribe a
presumed risk of fraud in
revenue recognition in that
revenue may be misstated
through improper recognition.
We have therefore identified
gaming revenue recognition as a
key audit matter requiring
special audit consideration.
Food, beverage, and other
revenue recognition
The Group also generates
revenue from Food, beverage
and other revenue. Auditing
standards prescribe a presumed
risk of fraud in revenue
recognition in that revenue may
be misstated through improper
recognition.
We have therefore identified
revenue recognition from the
above-mentioned services and
sales as a key audit matter
requiring special audit
consideration.
We have evaluated the design,
effectiveness and implementation
of internal procedures and internal
controls relating to the Group’s
gaming revenues. We have
performed test of operating
effectiveness of controls of key
controls relating to the Group’s
gaming revenues.
We have reconciled revenues from
slot machines and table games with
accounting records and underlying
documentation.
We have performed substantive
analytical procedures based on
actual figures in relation to
expectations and the forecast.
We have evaluated the design,
effectiveness and implementation
of internal procedures and internal
controls and we have performed
test of operating effectiveness of
controls relating to the Group’s
revenues from food, beverage, and
other revenue.
We have performed substantive
analytical procedures based on
actual figures in relation to
expectations and the forecasts.
Based on our procedures
performed we consider
the gaming revenue to be
recognized properly.
Based on our procedures
performed we consider
the revenue from food,
beverage and other
revenue to be recognized
properly.
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Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
Key Audit Matters
Impairment of Intangible assets,
goodwill and non-current assets
How we responded to these
matters
Key observations
As the Going concern is a key
audit matter, a yearly
assessment of impairment of
assets is performed. For the
impairment assessment,
management prepares the
impairment models, using the
forecasting model. Therefore,
we consider impairment testing
a key audit matter requiring
special audit consideration.
We have reviewed the models
used by management to
determine the value in use for
assets tested for impairment. We
have assessed the
appropriateness of the
assumptions used, including
support for the assumptions.
We have performed a sensitivity
analysis.
We have concluded that
the models used are
appropriate and
consistently applied. We
have determined that the
data arrays are consistent
with current year’s
performance and that
growth assumptions are
acceptable. The
determination of discount
rates used are consistent
with prior years.
Report on other information included in the Annual Report
Management is responsible for the other information. The other information comprises the information
included in the Annual Report but does not include the consolidated financial statements and our auditor’s
report thereon. Our opinion on the consolidated financial statements does not cover the other information
and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements, or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report in this
regard.
Report on other legal and regulatory requirements and ESEF
Engagement
We were engaged by management following the approval of the appointment of the auditor during the
Annual General Meeting of the Shareholders held on January 20, 2023.
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Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
European Single Electronic Format (ESEF)
The Group has prepared the annual report, including the consolidated financial statements, in ESEF. The
requirements for this are set out in the Commission Delegated Regulation (EU) 2019/815 with regard to
regulatory technical standards on the specification of a single electronic reporting format (these
requirements are hereinafter referred to as: the RTS on ESEF).
In our opinion, the annual report prepared in XHTML format, including the (partially) marked-up
consolidated financial statements as included in the reporting package by the Group, complies in all material
respects with the RTS on ESEF.
Management is responsible for preparing the annual report, including the consolidated financial statements,
in accordance with the RTS on ESEF, whereby management combines the various components into a single
reporting package.
Our responsibility is to obtain reasonable assurance for our opinion whether the integrated annual report in
this reporting package, complies with the RTS on ESEF.
We performed our examination in accordance with Dutch Standard 3950N on assurance engagements
relating to compliance with criteria for digital reporting.
Our examination included amongst others:
• obtaining an understanding of the Group’s financial reporting process, including the preparation
of the reporting package.
• identifying and assessing the risks that the consolidated financial statements does not comply in
all material respects with the RTS on ESEF and designing and performing further assurance
procedures responsive to those risks to provide a basis for our opinion, including:
o obtaining the reporting package and performing validations to determine whether the
reporting package, containing the Inline XBRL instance document and the XBRL
extension taxonomy files, have been prepared, in accordance with the technical
specifications as included in the RTS on ESEF.
o examining the information related to the consolidated financial statements in the reporting
package to determine whether all required mark-ups have been applied and whether these
are in accordance with the RTS on ESEF.
No prohibited non-audit services
To the best of our knowledge and belief, we have not provided prohibited non-audit services as referred to
in article 5(1) of the European Regulation on specific requirements regarding statutory audit of public-
interest entities.
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Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
Responsibilities of Management and Those Charged with Governance for
the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements
in accordance with IFRS as issued by the International Accounting Standards Board, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless management either intends to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial
Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an
audit conducted in accordance with ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
Thunder
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Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Group to cease to continue as a
going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements. We
are responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that were
of most significance in the audit of the consolidated financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Curacao, April 30, 2023
Baker Tilly
signed by C.S.S. da Silva de Jesus RA
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Financial Statements
THUNDERBIRD RESORTS, INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Expressed in thousands of United States dollars)
For the year ended December 31, 2022
- continued -
The accompanying notes are an integral part of these consolidated financial statements.
2022 2021
Assets
Non-current assets
Property, plant and equipment (Note 10) 7,898 $ 8,485 $
Investment Property (Note 11) 1,091 1,113
Investment accounted for using the equity method (Note 28) 2,183 1,944
Intangible assets (Note 9) 1,392 1,391
Deferred tax asset (Note 8) 589 1,073
Trade and other receivables (Note 13) 836 823
Due from related parties (Note 21) 433 423
Total non-current assets 14,422 15,252
Current assets
Trade and other receivables (Note 13) 673 647
Due from related parties (Note 21) 2,085 2,038
Inventories (Note 14) 229 185
Restricted cash (Note 15) 823 1,531
Cash and cash equivalents (Note 15) 5,957 2,064
Other financial assets (Note 26) 112 118
Total current assets 9,879 6,583
Assets classified as held for sale (Note 12) 674 2,475
Total assets 24,975 $ 24,310 $
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THUNDERBIRD RESORTS, INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued)
(Expressed in thousands of United States dollars)
For the year ended December 31, 2022
The consolidated financial statements were approved by the Board of Directors on April 25, 2023.
The accompanying notes are an integral part of these consolidated financial statements.
2022 2021
Equity and liabilities
Capital and reserves
Share capital (Note 19) 111,757 111,757
Retained earnings (104,941 ) (110,252 )
Translation reserve (7,626 ) (7,700 )
Equity attributable to equity holders of the parent (810 ) (6,195 )
Non-controlling interest 1,747 2,228
Total equity 937 (3,967 )
Non-current liabilities
Borrowings (Note 17) 293 5,177
Obligations under leases and hire purchase contracts (Note 22) 3,242 4,046
Deferred tax liabilities (Note 8) 36 37
Provisions (Note 18) 824 1,281
Trade and other payables (Note 16) 243 215
Total non-current liabilities 4,638 10,756
Current liabilities
Trade and other payables (Note 16) 6,193 5,413
Due to related parties (Note 21) 1,661 1,986
Borrowings (Note 17) 8,764 8,316
Obligations under leases and hire purchase contracts (Note 22) 877 633
Other financial liabilities 529 504
Current tax liabilities 959 451
Provisions (Note 18) 417 218
Total current liabilities 19,400 17,521
Total liabilities 24,038 28,277
Total equity and liabilities 24,975 $ 24,310 $
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Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
THUNDERBIRD RESORTS, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Expressed in thousands of United States dollars)
For the year ended December 31, 2022
- continued –
The accompanying notes are an integral part of these consolidated financial statements
2022 2021
Net gaming wins
$ 11,567 $ 10,657
Food, beverage and other sales
Total revenue
Cost of goods sold
(3,525 ) (3,106 )
Gross profit
Other operating costs
Operating, general and administrative
(7,379 ) (6,241 )
Project development
Depreciation and amortization
(1,192 ) (1,620 )
Other gain / (loss) (Note 5)
Operating profit
Share of profit / (loss) from equity accounted investments (Note 28)
Financing
Foreign exchange loss
Financing costs (Note 7)
(1,569 ) (1,996 )
Financing income (Note 7)
Other interest (Note 7)
(81 ) (35 )
Finance costs, net
(1,449 ) (2,238 )
Profit before tax
Income taxes expense
Current (Note 8)
(1,130 ) (543 )
Deferred (Note 8)
(501 )
Income taxes expense
(1,631 ) (159 )
Profit / (loss) for the year from continuing operations
$ 927
$ 289
Profit / (loss) for the year from discontinued operations (Note 12)
Profit / (loss) for the year
$ 5,792 $ (277 )
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THUNDERBIRD RESORTS, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (continued)
(Expressed in thousands of United States dollars)
For the year ended December 31, 2022
The accompanying notes are an integral part of these consolidated financial statements.
2022 2021
Other comprehensive income (amounts, which will be recycled)
Exchange differences arising on the translation of foreign operations
$ 74
$ (410 )
Other comprehensive income (amounts, which will not be recycled)
Remeasurement of employee benefits
Income tax relating to remeasurement of employee benefits
Other comprehensive income / (loss) for the year
Total comprehensive income / (loss) for the year
$ 5,866 $ (678 )
Profit / (loss) for the year attributable to:
Owners of the parent
Non-controlling interest
$ 5,792 $ (277 )
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interest
$ 5,866 $ (678 )
Basic and diluted earnings / (loss) per share (in $) : (Note 20)
Earnings from continuing operations
Earnings / (loss) from discontinued operations
Total
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THUNDERBIRD RESORTS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Expressed in thousands of United States dollars)
For the year ended December 31, 2022
The accompanying notes are an integral part of these consolidated financial statements.
Share
capital
Share
options
reserve
Currency
translation
reserve
Retained
earnings
Total
Non-
controlling
interest
Total equity
Balance at January 1, 2021
Transactions with owners:
Issue of new shares - - - - - - -
Payment of dividends - - - - - (845 ) (845 )
-$ -$ -$ -$ -$ (845 )$ (845 )$
Profit / (loss) for the year - - - (632 ) (632 ) 355 (277 )
Other comprehensive income:
Exchange differences arising on translation of
foreign operations
- - (410 ) - (410 ) - (410 )
Remeasurement of employee benefits
-
-
-
Total comprehensive income for the year - - (410 ) (627 ) (1,037 ) 359 (678 )
Balance at December 31, 2021
Share
capital
Share
options
reserve
Currency
translation
reserve
Retained
earnings
Total
Non-
controlling
interest
Total equity
Balance at January 1, 2022
Transactions with owners:
Issue of new shares - - - - - --
Payment of dividends - - - - - (962 ) (962 )
-$ -$ -$ -$ -$ (962 )$ (962 )$
Profit / (loss) for the year - - - 5,311 5,311 481 5,792
Other comprehensive income:
Exchange differences arising on translation of
foreign operations
- - 74 - 74 - 74
Remeasurement of employee benefits
-
-
-
-
--
-
Total comprehensive income for the year - - 74 5,311 5,385 481 5,866
Balance at December 31, 2022
Attributable to equity holders of parent
Attributable to equity holders of parent
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THUNDERBIRD RESORTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in thousands of United States dollars)
For the year ended December 31, 2022
The accompanying notes are an integral part of these consolidated financial statements.
2022 2021
Cash flow from operating activities
Profit for the year 927 $ 289 $
Adjustments for:
Depreciation and amortization 1,192 1,620
Foreign exchange (173 ) 222
(Decrease) / increase in provision (258 ) 40
Bad debt expense - 10
Other losses 57 81
Fair value adjustment on financial assets 3 3
Finance income (40 ) (25 )
Finance cost 1,569 1,996
Other interests 81 35
Results from equity accounted investments (93 ) 134
Tax expenses 1,631 159
Net change in non-cash working capital items
(Increase) in trade, prepaid and other receivables (86 ) (252 )
(Increase) in inventory (44 ) (24 )
Increase / (decrease) in trade payables and accrued liabilities
(88 )
Cash from operations
Total tax paid (622 ) (503 )
Net cash generated by operations 4,398 3,697
Net cash (used in) / from discontinued operations (1,093 ) 38
Net cash from operating activities 3,305 $ 3,735 $
Cash flow from investing activities
Expenditure on property, plant and equipment (498 ) (461 )
Proceeds on sale of Asset Held for Sale 7,857 -
Interest received 29 25
Net cash (use d in) / from investing activities 7,388 $ (436 )$
Cash flow from financing activities
Dividends paid to non-controling interest (962 ) (845 )
Repayment of loans and leases payable (5,605 ) (721 )
Interest paid (981 ) (847 )
Net cash used in financing activities (7,548 )$ (2,413 )$
Net change in cash and cash equivalents during the year
Cash and cash equivalents, beginning of the year
Effect of foreign exchange adjustment 40 (126 )
Cash and cash equivalents, end of the year 6,780 $ 3,595 $
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Notes to the Consolidated
Financial Statements
1. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL
STATEMENTS
Nature of operations
The principal activities of Thunderbird Resorts Inc and its subsidiaries “the Group” is to develop,
These activities are grouped into the following service lines:
• Gaming – the provision of table and slot games within a number of operating locations in the
Group's chosen markets. The Group also has a limited sportsbook offering, however, it is
considered to be immaterial to the Group's performance.
• Offices – the Group has office spaces in Peru that it leases to 3
rd
parties.
General information and statement of compliance with IFRS
incorporated and domiciled in the British Virgin Islands , number 1055634.
The Group’s common shares are listed on Euronext Amsterdam under the symbol “TBIRD.”
The Group’s 2022 consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC)
interpretations applicable to companies reporting under IFRS. The consolidated financial
statements have been prepared under the historical cost convention, financial assets and financial
liabilities (including derivative instruments) at fair value through profit or loss.
The preparation of financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgment in the process of
applying the group’s accounting policies. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are significant to the consolidated financial
statements are disclosed in note 3, page 56.
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2. MANAGEMENT STATEMENT ON “GOING CONCERN”
Management has reviewed their plan with the Directors and has collectively formed a judgment
about the going concern of the Group. In arriving at this judgment, Management has prepared the
cash flow projections of the Group. The Group has suffered recurring losses the past years. In
response to the recurring losses of the previous years, Management has taken actions which will be
described in the following paragraphs.
Directors have reviewed this information provided by Management and have considered the
information in relation to the financing uncertainties in the current economic climate, the Group’s
existing commitments and the financial resources available to the Group. Specifically, Directors
have considered: (i) there are probably no sources of new financing available to the Group; (ii) the
Group has limited trading exposures to our local suppliers and retail customers; (iii) other risks to
which the Group is exposed, the most significant of which is considered to be regulatory risk; (iv)
sources of Group income, including management fees charged to and income distributed from its
various operations; (v) cash generation and debt amortization levels; (vi) fundamental trends of the
Group’s businesses; (vii) ability to re-amortize and unsecured lenders; and (vii) level of interest of
third parties in the acquisition of certain operating assets, and status of genuine progress and
probability of closing within the Going Concern period. The Directors have also considered certain
critical factors that might affect continuing operations, as follows:
• Special Resolution: On September 21, 2016, the Group’s shareholders approved a special
resolution that, among other items, authorized the Board of Directors of the Corporate to sell
“any or all remaining assets of the Corporation in such amounts and at such times as determined
by the Board of Directors.” This resolution facilitates the sale of any one or any combination
of assets required to support maintaining of a going concern by the Group.
• Corporate Expense and Cash Flow: Corporate expense has decreased materially in recent years
but still must accommodate for compliance as a public company.
• Liquidity and Working Capital: As of the date of publication of this 2022 Annual Report, the
Group forecasts to operate with higher levels of reserves and working capital than in recent
years, but to create a healthy level of working capital reserves for periods beyond the Going
Concern period may require the sale of additional assets.
In part, the Group believes that it is in a stronger position to sustain going concern as of the
publication date of this 2022 Annual Report as compared to recent years during the covid crisis
because of the following.
• Peru Real Estate Sales: As of the date of publication of this 2022 Annual Report, the Group
has converted it’s 66-suite hotel in Lima, Peru into a 66-unit condominium apartment complex.
The Group has: i) Legally sub-divided the former hotel in to 66 individually titled apartment
units, procured all change of use and other regulatory approvals, and sold the majority of those
units; and ii) Paid off over $4.5 million of senior debt in Lima, Peru. The projection is to
generate in excess of $10 million from all unit sales, which will likely be completed during
2023.
• Other liquidity events: The Group continues to work with unsecured lenders and, in some
cases, to negotiate payment plans and balances that meet the Group’s cash flow. If the Group
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Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
is not able to create other liquidity events from its remaining Peru, Costa Rica and Nicaragua
assets in 2023-2024, it is reasonable to expect that some unsecured lenders may pursue years
of litigation at that time, though as to whether this would then have an impact on Going Concern
is hard to assess.
Considering the above, Management and Directors are satisfied that the consolidated Group has
adequate resources to mitigate the uncertainty and that the Group is able to continue as a going
concern for at least the 12 months following the filing date of this report. For these reasons,
Management and Directors have therefore prepared the consolidated financial statements on a
going concern basis.
3. SIGNIFICANT ACCOUNTING POLICIES
3.1 Changes in accounting policies
The consolidated financial statements have been prepared in accordance with the accounting
policies adopted in the last annual consolidated financial statements for the year ended
December 31, 2022, except for the adoption of the following new interpretations, revisions,
and amendments to IFRS issued by the International Accounting Standards Board, which are
relevant to, and effective for the Group’s consolidated financial statements for the annual
period beginning January 1, 2022.
New currently effective requirements
These Standards are required to be applied by an entity with an annual reporting period
beginning on January 1, 2022:
• Reference to the Conceptual Framework (Amendments to IFRS 3)
• COVID-19 – Related Rent Concessions beyond 30 June 2021 (Amendments to IFRS 16)
• Property, Plant and Equipment: Proceeds Before Intended Use (Amendments to IAS 16)
• Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)
• Annual Improvements (2018-2020 Cycle):
– Subsidiary as a First-time Adopter (Amendments to IFRS 1)
– Fees in the ‘10 per cent’ Test for Derecognition of Liabilities (Amendments to IFRS 9)
– Lease Incentives (Amendments to IFRS 16)
– Taxation in Fair Value Measurements
The new requirements listed above did not have any impact on the amounts recognized in
prior periods and are not expected to significantly affect the current or future periods.
Standards issued but not yet effective
At the date of authorization of these consolidated financial statements, several new, but not
yet effective, Standards and amendments to existing Standards, and Interpretations have been
published by the IASB or IFRIC. None of these Standards or amendments to existing Standards
have been adopted early by the Group and no Interpretations have been issued that are
applicable and need to be taken into consideration by the Group at either reporting date.
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Management anticipates that all relevant pronouncements will be adopted for the first period
beginning on or after the effective date of the pronouncement. New Standards, amendments
and Interpretations not adopted in the current year have not been disclosed as they are not
expected to have a material impact on the Group’s consolidated financial statements
3.3 Summary of accounting policies
The accounting policies have been applied consistently throughout the Group for the purposes
of preparation of these consolidated financial statements.
A summary of the Group’s significant accounting policies is set out below.
Critical accounting estimates and judgments
The preparation of financial statements with IFRS requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial
information and the reported amounts of revenues and expenses during the reporting period.
Estimates and judgments are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under
the circumstances. The areas involving a higher degree of judgment or complexity, or areas
The best estimates of the Directors may differ from the actual results.
3.3 a Depreciable lives of assets and realisable
residual value
10
3.3 b
Future operating results growth rates, and
discount factor applied
9
3.3 c Recognition of deferred tax asset 8
3.3 e Determination of control over economic
activities
29
Recoverability of amounts due from related
parties
21
3.3 h Judgments on probability of payment as a
result of disputes
23
3.3 i Assessment of significance of debt
modifications
17
a. Property, plant and equipment
All property, plant and equipment is stated at acquired cost less depreciation and
impairment. Land is not depreciated as no finite useful life can be determined. Acquired
cost includes expenditures that are directly attributable to the acquisition of the asset.
Depreciation on assets is calculated using the straight-line method to allocate their cost
over their estimated useful lives, as follows:
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Properties 20 – 30 years
Furniture and equipment 3 – 10 years
Gaming machines 5 – 10 years
Leasehold improvements over the lease term
Profits and losses on disposals are determined by comparing proceeds with carrying
amount. These are included in profit or loss.
Construction in progress represents properties under construction and is stated at cost. This
includes cost of construction, borrowing costs, and other direct costs. The assets are not
depreciated until such time that the assets are completed and available for use. Transfers
are made from the construction in progress category to the appropriate property, plant and
equipment asset categories when the construction of the asset has been substantially
completed.
Management reviews the useful lives of depreciable assets at least each reporting date. At
December 31, 2022, Management assesses that the useful lives represent the expected
utility of the assets of the Group. The carrying amounts are analyzed in Note 10. Actual
results, however, may vary due to obsolescence.
b. Investment property
Investment properties are lands with no defined use, and are accounted for using the cost
model.
Investment properties are recorded at cost, which comprises its purchase price and any
directly attributable expenditure; subsequently, on each reporting date these investment
properties are measured at cost less impairment losses.
c. Impairment testing of intangible assets and property, plant and equipment
For impairment assessment purposes, assets are grouped at the lowest levels for which
there are largely independent cash inflows (cash-generating units). As a result, some assets
are tested individually for impairment and some are tested at cash-generating unit level.
Goodwill is allocated to those cash-generating units that are expected to benefit from
synergies of the related business combination and represent the lowest level within the
Group at which Management monitors goodwill.
Cash-generating units to which goodwill has been allocated are tested for impairment at
least annually, as set out in Note 9.
All other individual assets or cash-generating units are tested for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable.
An impairment loss is recognized for the amount by which the asset’s or cash-generating
unit’s carrying amount exceeds its recoverable amount, which is the higher of fair value
less costs of disposal and value-in-use. To determine the value-in-use, Management
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estimates expected future cash flows from each cash-generating unit and determines a
suitable rate in order to calculate the present value of those cash flows. The data used for
impairment testing procedures are directly linked to the Group’s latest approved budget,
adjusted as necessary to exclude the effects of future reorganizations and asset
enhancements. Discount factors are determined individually for each cash-generating unit
and reflect Management’s assessment of respective risk profiles, such as market and asset-
specific risks factors. Impairment losses for cash-generating units reduce first the carrying
amount of any goodwill allocated to that cash-generating unit. Any remaining impairment
loss is charged pro rata to the other assets in the cash-generating unit. With the exception
of goodwill, all assets are subsequently reassessed for indications that an impairment loss
previously recognized may no longer exist. An impairment loss is reversed if the asset’s or
cash-generating unit’s recoverable amount exceeds its carrying amount.
Impairment losses of continuing operations are recognized in our statement of
comprehensive income in those expense categories consistent with the function of the
impaired asset under review.
c. Taxation including deferred tax
The income tax expense recognized in profit or loss comprises the sum of deferred tax and
current tax not recognized in other comprehensive income or directly in equity. Current
tax is applied to taxable profits at the prevailing rate in the relevant country. Current tax
assets and liabilities are measured at the amount expected to be paid to (recovered from)
taxation authorities, using the rates/laws that have been enacted or substantively enacted
by the balance sheet date (IAS 12).
Current income tax assets and/or liabilities comprise those obligations to, or claims from,
fiscal authorities relating to the current or prior reporting periods, that are unpaid at the
reporting date. Current tax is payable on taxable profit, which differs from profit or loss in
the financial statements.
Deferred tax is provided for in full, using the liability method, on temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the
consolidated financial statements. However, if deferred tax arises from the initial
recognition of goodwill, it is not recognized nor is deferred tax arising on the initial
recognition of an asset or liability unless the related transaction is a business combination
or affects tax or accounting profit. Deferred tax is determined using tax rates (and laws)
that have been enacted or substantively enacted by the reporting date and are expected to
apply when the related deferred tax asset is realized or the deferred tax liability is settled.
Withholding taxes on earnings of foreign operations are provided in the accounts only to
the extent earnings are expected to be repatriated.
Deferred tax assets are recognized to the extent that it is probable that future taxable profit
will be available against which the temporary differences can be utilized.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set
off current taxation assets against current taxation liabilities and it is the intention to settle
these on a net basis.
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Deferred tax is provided on temporary differences arising on investments in subsidiaries
and associates, except where the timing of the reversal of the temporary difference is
controlled by the Group and it is probable that the temporary difference will not reverse in
the foreseeable future.
Management’s assessment over the probability of future taxable income in which deferred
tax assets can be utilized is based on forecasts. The tax rules in the jurisdictions in which
the Group operates are also taken into consideration. The recognition of deferred tax assets
subject to legal or economic uncertainties are assessed by Management on the individual
facts and circumstances.
d. Reporting and foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured
using the currency of the primary economic environment in which the entity operates
(the “functional currency”). The consolidated financial statements are presented in US-
dollars, which is also the Parent Company’s functional currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency of each
individual entity using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognized in profit or loss in financing costs.
When a gain or loss on a non-monetary item is recognized in other comprehensive
income, any exchange component of that gain or loss is recognized in other
comprehensive income. When a gain or loss on a non-monetary item is recognized in
profit or loss, any exchange component of that gain or loss is recognized in profit or
loss.
(c) Foreign operations
The results and financial position of all the Group entities (none of which has the
currency of a hyper-inflationary economy) that have a functional currency other than
the presentation currency are translated into the presentation currency on consolidation
as follows:
(i) Assets and liabilities for each statement of financial position presented are
translated at the closing rate at each reporting date.
(ii) Income and expenses for each statement of comprehensive income are translated
at average exchange rates (unless this average is not a reasonable approximation
of the cumulative effect of the rates prevailing on the transaction dates, in which
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Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
case income and expenses are translated at the dates of the transactions) for the
period presented.
(iii) All resulting exchange differences are recognized in other comprehensive
income and accumulated in a separate component of equity.
When a foreign operation is disposed of or control is lost, the cumulative amount of
the exchange differences relating to that operation accumulated in the separate
component of equity is reclassified from equity to profit or loss and recognized as part
of the gain or loss on disposal. Goodwill and fair value adjustments arising on the
acquisition of a foreign entity are treated as assets and liabilities of the foreign entity
and are translated at the closing rate.
e. Consolidation
The Group’s consolidated financial statements consolidate the financial statements of
Thunderbird Resorts Inc. and the entities it controls drawn up to December 31, 2022 and
its comparative periods.
(a) Subsidiaries
The parent controls a subsidiary if it is exposed, or has rights, to variable returns from
its involvement with the subsidiary and has the ability to affect those returns through
its power over the subsidiary. All subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are de-consolidated from the date that
control ceases.
Inter-company transactions, balances and unrealized gains on transactions between
Group subsidiaries are eliminated. Unrealized losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting
policies as applied to the subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Non-controlling interests represent the portion of profit or loss and net assets in
subsidiaries that are not held by the Group and are presented separately within equity
in the consolidated statement of financial position, from parent shareholders’ equity.
(b) Business combinations
The Group applies the acquisition method of accounting when accounting for business
combinations. The cost of an acquisition is measured at the fair value of the assets
transferred, equity instruments issued and liabilities incurred or assumed at the date of
exchange. Costs directly attributable to the acquisition are charged to profit or loss as
incurred. Identifiable assets acquired, liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at the acquisition date,
irrespective of any non-controlling interest. The excess of the cost of acquisition over
the fair value of the Group’s share of the identifiable net assets acquired is recorded as
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goodwill. If the cost of acquisition is less than the fair value of the net assets for the
subsidiary acquired, the difference is recognized directly in profit or loss.
(c) Investment in Joint ventures
The Group has contractual arrangements with other parties which represent joint
ventures. In this case, the arrangements take the form of agreements to share control
over economic activities with Costa Rican assets. Strategic financial and operating
decisions relating to these assets require the unanimous consent of both parties.
Investments in joint ventures are accounted for using the equity method.
Any goodwill or fair value adjustment attributable to the Group’s share in the joint
venture is not recognized separately and is included in the amount recognized as
investment.
The carrying amount of the investment in joint ventures is increased or decreased to
recognize the Group’s share of the profit or loss and other comprehensive income of
the associate and joint venture, adjusted where necessary to ensure consistency with
the accounting policies of the Group.
Unrealized gains and losses on transactions between the Group and its joint ventures
are eliminated to the extent of the Group’s interest in those entities. Where unrealized
losses are eliminated, the underlying asset is also tested for impairment.
f. Intangible assets
(a) Goodwill
Goodwill represents the excess of the fair value of consideration transferred in a
business combination over the fair value of the Group’s share of the net identifiable
assets, liabilities and contingent liabilities at the date of the business combinations and
is not amortized. Goodwill is tested annually for impairment and carried at cost less
accumulated impairment losses.
Gains and losses on the disposal of an entity include the carrying amount of goodwill
relating to the entity sold.
(b) Software and software licenses
The Group includes acquired and internally developed software used in operations or
administration as intangible assets. They are accounted for using the cost model
whereby capitalized costs are amortized on a straight-line basis over their estimated
useful life. Residual values and useful lives are reviewed at each reporting date. In
addition, they are subject to impairment testing as described in Note 10. The following
useful lives are applied:
Software 2 – 5 years
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Amortization has been included within depreciation, amortization and impairment of
non-financial assets. Acquired computer software licenses are capitalized on the basis
of the costs incurred to acquire and install the specific software.
g. Leases
The Group as a lessee
For any new contracts entered into, the Group considers whether a contract is, or contains
a lease. A lease is defined as “a contract, or part of a contract, that conveys the right to use
an asset (the underlying asset) for a period of time in exchange for consideration”. To apply
this definition, the Group assesses whether the contract meets three key evaluations which
are whether or not:
• the contract contains an identified asset, which is either explicitly identified in the
contract or implicitly specified by being identified at the time the asset is made
available to the Group;
• the Group has the right to obtain substantially all of the economic benefits from use of
the identified asset throughout the period of use, considering its rights within the
defined scope of the contract; and
• the Group has the right to direct the use of the identified asset throughout the period of
use. The Group assess whether it has the right to direct “how and for what purpose”
the asset is used throughout the period of use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognizes a right-of-use asset and a lease liability
on the balance sheet. The right-of-use asset is measured at cost, which is made up of the
initial measurement of the lease liability, any initial direct costs incurred by the Group, an
estimate of any costs to dismantle and remove the asset at the end of the lease, and any
lease payments made in advance of the lease commencement date (net of any incentives
received).
The Group depreciates the right-of-use assets on a straight-line basis from the lease
commencement date to the earlier of the end of the useful life of the right-of-use asset or
the end of the lease term.
The Group also assesses the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the present value of
the lease payments unpaid at that date, discounted using the interest rate implicit in the
lease if that rate is readily available or the Group’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up of fixed
payments (including in substance fixed), variable payments based on an index or rate,
amounts expected to be payable under a residual value guarantee and payments arising
from options reasonably certain to be exercised.
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Subsequent to initial measurement, the liability will be reduced for payments made and
increased for interest. Interest is charged on the lease liability at an even rate on the
carrying amount of that liability (see above). It is re-measured to reflect any reassessment
or modification, or if there are changes in lease liability.
When the lease liability is re-measured, the corresponding adjustment is reflected in the
right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value assets using
the practical expedients. Instead of recognizing a right-of-use asset and lease liability, the
payments in relation to these are recognized as an expense in profit or loss on a straight-
line basis over the lease term. On the statement of financial position, right-of-use assets
have been included in property, plant and equipment (except those meeting the definition
of investment property) and lease liabilities have been included in Obligations underleases
and hire purchase contracts.
h. Provisions
(a) Employee benefits
The Group recognizes a liability and an expense for bonuses and profit-sharing based
on a formula that takes into consideration the Group’s profits. The Group recognizes a
provision where it is contractually obliged to pay the benefits, and/or where there is a
past practice that has created a constructive obligation.
Defined Benefit Obligation (DBO)
Management’s estimate of the DBO is based on a number of critical underlying
assumptions such as standard rates of inflation, mortality, discount rate and
anticipation of future salary increase. Variation in these assumptions may significantly
impact the DBO amount and the annual defined benefit expenses. The liability
recognized in the statement of financial position for DBO’s is the present value of the
DBO at the report date.
Management estimates the DBO annually using simplifications of the projected unit
credit method as follow: (i) ignore estimated future salary increases, (ii) ignore future
service of current employees and (iii) ignore possible in-service mortality of current
employees between the reporting date and the date employees are expected to begin
receiving post-employment benefits. Discount factors are determined close to each
year-end by reference to high quality corporate bonds that are denominated in the
currency in which the benefits will be paid and that have terms to maturity
approximating the terms of the related liability.
Service cost on the Group’s defined benefit plan is included in employee benefit
expense. Net interest expense on the net defined benefit liability is included in finance
cost. Gains and losses resulting from re-measurements of the defined benefit liability
are included in other comprehensive income and are not reclassified to profit or loss in
subsequent periods.
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(b) Other
Provisions are recognized when the Group has a present legal or constructive
obligation as a result of past events; it is more likely than not that an outflow of
resources will be required to settle the obligation, and the amount can be reliably
estimated. Provisions are measured at the best estimate of the expenditure required to
settle the present obligation at the end of each reporting period.
(c) Litigation provisions
The Group provides against various litigation proceedings once judgments are
rendered against it, as in Management’s view this provides the best indication that
payment has become probable. The award amount is used as the Directors’ best
estimate of the potential liability, even if the Group is appealing the judgment.
Provisions are discounted to their present value, where the time value of money is material.
i. Financial instruments
Non-derivative financial instruments consist of:
Financial assets
Financial assets, which include cash and cash equivalents, trade receivables, unbilled
revenues, finance lease receivables, employee and other advances, investments in equity
and debt securities and eligible current and non-current assets.
Financial assets are derecognized when substantial risks and rewards of ownership of the
financial asset have been transferred. In cases where substantial risks and rewards of
ownership of the financial assets are neither transferred nor retained, financial assets are
derecognized only when the Company has not retained control over the financial asset.
Financial liabilities
Financial liabilities, which include long and short-term loans and borrowings, bank
overdrafts, trade payables, eligible current and non-current liabilities.
Subsequent measurement of financial assets
Non-derivative financial instruments are recognized initially at fair value. Subsequent to
initial recognition, non-derivative financial instruments are measured as described below:
Financial assets
Financial assets are measured at initial recognition at fair value and are classified and
subsequently measured at fair value through profit or loss, fair value through other
comprehensive income or amortized cost. Financial assets are assigned to these different
categories by Management on initial recognition, depending on the purpose for which they
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were acquired. The designation of financial assets is re-evaluated at every reporting date at
which a choice of classification or accounting treatment is available.
All financial assets are recognized when the Group becomes a party to the contractual
provisions of the instrument.
Trade receivables, related party receivables and cash and cash equivalents are measured
subsequent to initial recognition at amortized cost using the effective interest method, less
provision for impairment. Any change in their value through impairment or reversal of
impairment is recognized in profit or loss.
Provision against trade receivables is made when there is objective evidence that the Group
will not be able to collect all amounts due to it in accordance with the original terms of
those receivables. The Group applies the expected credit loss model for recognizing
impairment loss on trade receivables. Expected credit loss is the difference between the
contractual cash flows and the cash flows that the entity expects to receive, discounted
using the effective interest rate. Loss allowances for trade receivables are measured at an
amount equal to lifetime expected credit loss. Lifetime expected credit losses are the
expected credit losses that result from all possible default events over the expected life of
a financial instrument. Lifetime expected credit loss is computed based on a provision
matrix which takes in to account risk profiling of customers and historical credit loss
experience adjusted for forward looking information. Accounts receivable are presented
net of an allowance for doubtful accounts. The carrying amount of the receivable is reduced
through use of an allowance account.
A financial asset is derecognized only where the contractual rights to the cash flows from
the asset expire or the financial asset is transferred, and that transfer qualifies for de-
recognition. A financial asset is transferred if the contractual rights to receive the cash
flows of the asset have been transferred or the Group retains the contractual rights to
receive the cash flows of the asset but assumes a contractual obligation to pay the cash
flows to one or more recipients. A financial asset that is transferred qualifies for de-
recognition if the Group transfers substantially all the risks and rewards of ownership of
the asset, or if the Group neither retains nor transfers substantially all the risks and rewards
of ownership but does transfer control of that asset.
Financial liabilities
Financial liabilities are obligations to pay cash or other financial assets and are recognized
when the Group becomes a party to the contractual provisions of the instrument. Financial
liabilities categorized at fair value through profit or loss, are recorded initially at fair value.
All other financial liabilities are recorded initially at fair value, net of direct issue costs.
Financial liabilities categorized as at fair value through profit or loss, are measured at each
reporting date at fair value, with changes in fair value being recognized in profit or loss.
All other financial liabilities are recorded at amortized cost using the effective interest
method, with interest-related charges recognized as an expense in finance cost in the
statement of comprehensive income. Finance charges, including premiums payable on
settlement or redemption and direct issue costs, are charged to profit or loss on an accrual
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basis using the effective interest method and are added to the carrying amount of the
instrument to the extent that they are not settled in the period in which they arise.
A financial liability is derecognized only when the obligation is extinguished, that is, when
the obligation is discharged, cancelled or expires. Where an existing financial liability is
replaced by another from the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange or modification is treated
as de-recognition of the original liability and the recognition of a new liability, such that
the difference in the respective carrying amounts together with any costs or fees incurred
are recognized in profit or loss.
Trade and other payables are initially recognized at fair value, and subsequently carried at
amortized cost using the effective interest method. For these financial instruments, the
carrying amounts approximate fair value due to the short-term maturity of these
instruments.
j. Inventories
Inventories are valued at the lower of cost and net realizable value. Cost of inventory is
determined on a ‘first-in-first-out’ basis. Inventory consists of food, beverages and
supplies.
k. Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks with
maturities of 3 months or less from inception, other short term highly liquid investments
that are readily convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown
within borrowings in current liabilities on the statement of financial position.
Restricted cash includes all cash balances that are required to be maintained under
regulatory requirements. Casino industry regulations vary by country but all require our
casino operations to maintain specified minimum levels of cash to support chips in play,
slot hoppers, and reserves.
l. Borrowings and borrowing costs
Borrowings are classified as current liabilities unless the Group has an unconditional right
to defer settlement of the liability for at least 12 months after the period end date.
Borrowing costs directly attributable to the acquisition, construction or production of a
qualifying asset, or assets that take a substantial period of time to prepare for their intended
use or sale are added to the cost of those assets, until such time as the assets are substantially
ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending
their expenditure on qualifying assets is deducted from the borrowing costs eligible for
capitalization.
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All other borrowing costs are recognized in profit or loss in the period in which they are
incurred.
m. Share capital
Common shares are classified as equity.
Where the Group purchases the Group’s equity share capital (treasury shares), the
consideration paid, including any directly attributable incremental costs (net of income
taxes) is deducted from equity attributable to the Group’s equity holders until the shares
are cancelled or reissued. Where such shares are subsequently sold or reissued, any
consideration received, net of any directly attributable incremental transaction costs and
the related income tax effects are included in equity attributable to the Group’s equity
holders.
n. Share-based payments
Where share options are awarded to employees, the fair value of the options at the date of
grant is charged to profit or loss over the vesting period, with the corresponding credit to
the share option reserve. Non-market vesting conditions are taken into account by adjusting
the number of equity instruments expected to vest at each Balance Sheet date so that,
ultimately, the cumulative amount recognized over the vesting period is based on the
number of options that eventually vest.
Market vesting conditions are factored into the fair value of the options granted. As long
as all other vesting conditions are satisfied, a change is made irrespective of whether the
market vesting conditions are satisfied. The cumulative expense is not adjusted for failure
to achieve a market vesting condition. Where the terms of the options are modified before
they vest, the increase in the fair value of the options, measured immediately before and
after the modification, is also charged over the remaining vesting period.
All share-based remuneration is ultimately recognized as an expense in profit or loss with
a corresponding credit to retained earnings. If vesting periods or other vesting conditions
apply, the expense is allocated over the vesting period, based on the best available estimate
of the number of share options expected to vest. Upon exercise of share options, the
proceeds received net of any directly attributable transaction costs up are recognized as
share capital.
Where equity instruments are granted to persons other than employees, the Statement of
Comprehensive Income is charged with the fair value of goods and services received. If
fair value cannot be reliably measured the fair value of the goods or services received, the
value of the services are recognized, and the corresponding increase in equity, is recognized
indirectly, by reference to the fair value of the equity instruments granted.
o. Net gaming wins and revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow
to the Group, the revenue can be reliably measured, the risks and rewards of ownership
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have been transferred to the buyer, the Group no longer has control over the goods, and the
costs incurred in respect of the transaction can be reliably measured. Revenue is
recognized on specific items as follows:
(a) Net gaming wins – Casino revenues represent the net wins/(losses) from gaming
activities, which is, for slot machines, the difference between coins and currencies
deposited into the machines and the payments to customers and, for other (table and
sports book) games, the difference between gaming wins and losses. Net gaming wins
are recognized when they occur.
(b) Food, beverage and hospitality sales – Revenue is recognized at the point of sale or
upon the actual rendering of service.
(c) Interest income – Revenue is recognized as the interest is accrued (taking into account
the effective yield on the asset).
Costs and expenses are recognized in profit or loss upon utilization of the service or at the
date they are incurred.
p. Earnings per share
Basic earnings per share is calculated using the weighted-average number of shares
outstanding during the period.
The Group uses the treasury stock method to compute the dilutive effect of options,
warrants and similar instruments. Under this method, the dilutive effect on earnings per
share is recognized on the use of the proceeds that could be obtained upon exercise of
options, warrants and similar instruments. It assumes that the proceeds would be used to
purchase common shares at the average market price during the period.
q. Project development costs
Project development costs incurred in an effort to identify and develop new gaming
locations are expensed as incurred.
r. Profit or loss from discontinued operations
A discontinued operation is a component of the entity that either has been disposed of, or
is classified as held for sale, and:
• represents a separate major line of business or geographical area of operations;
• is part of a single coordinated plan to dispose of a separate major line of business or
geographical area of operations; or
• is a subsidiary acquired exclusively with a view to resell.
Profit or loss from discontinued operations, including prior year components of profit or
loss, are presented in a single amount in the statement of comprehensive income.
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s. Fair value measurement
Fair value is defined as the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date.
Management uses valuation techniques to determine the fair value of financial instruments
(where active market quotes are not available) and non-financial assets. This involves
developing estimates and assumptions consistent with how market participants would price
the instrument. Management bases its assumptions on observable data as far as possible
but this is not always available. In that case Management uses the best information
available.
Estimated fair values may vary from the actual prices that would be achieved in an arm’s
length transaction at the reporting date.
4. SEGMENTAL INFORMATION
In identifying its operating segments, Management generally follows the Group's geographic
country lines. These operating segments are monitored by the Group’s chief operating decision
makers and strategic decisions are made on the basis of adjusted operating results.
The activities undertaken by each operating segment include the operation of casinos and related
food, beverage and hospitality activities.
Each of these operating segments is managed separately by country managers as each country has
a different regulatory environment and customs, as well as, different marketing approaches. All
inter-segment transfers are carried out at arm's length prices when they occur.
The measurement policies the Group uses for segment reporting under IFRS 8 are the same as those
used in its financial statements, except that expenses relating to share-based payments are not
included in arriving at the operating profit of the operating segments and results for the Group’s
equity accounted joint venture is shown proportionally. Corporate assets that are not directly
attributable to the business activities of any operating segment are not allocated to a segment.
There have been no changes from prior periods in the measurement methods used to determine
reported segment profit or loss. No asymmetrical allocations have been applied between segments.
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
- continued -
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Operating segments
Costa Rica Nicaragua Peru
2022 2021 2022 2021 2022 2021
Continuing operations
Total revenue
- - 13,461 12,222 946 740
Operating profit / (loss) before: project development, depreciation,
amortization and other gains and losses (Adjusted EBITDA)
- - 4,261 4,237 426 433
Project development
- - - (46) - -
Depreciation and amortization
- - (1,075) (1,572) (117) (48)
Other gains and (losses)
- - (50) (101) (1) (50)
Segments result
- - 3,136 2,518 308 335
Foreign exchange gain / (loss)
- - (17) (9) 40 (290)
Share of profit / (loss) from equity accounted investments
93 (134) - - - -
Finance costs
- - (499) (557) (234) (290)
Finance income
- - 13 13 - -
Other interest
- - (29) (34) (52) (1)
Management fees - intercompany charges
- - (1,057) (757) - -
Profit / (loss) before taxation
93 (134) 1,547 1,174 62 (246)
Taxation
- - (457) (370) (982) 374
Profit / (loss) for the year-continuing operations
93 (134) 1,090 804 (920) 128
Profit / (loss) for the year-discontinued operations
- - - - 4,865 (566)
Profit / (loss) for the year
93 (134) 1,090 804 3,945 (438)
Currency translation reserve and remeasurement of employee benefits
- - - - - -
Total comprehensive income for the year
93 (134) 1,090 804 3,945 (438)
Non-controlling interest
- - (481) (359) - -
Total comprehensive income attributable to owners of the parent
93 (134) 609 445 3,945 (438)
Assets and liabilities
Segment intangible assets:
Intangible assets with indefinite useful lives
- - 1,387 1,387 - -
Intangible assets with finite useful lives
- - - - 5 4
Segment as sets:
Property, plant and equipment
- - 5,557 6,120 2,341 2,365
Other segment assets (including cas h)
(1,043) - 3,057 2,976 18,792 18,336
Total segment assets
(1,043) - 10,001 10,483 21,138 20,705
Assets classified as held for sale
4,251 3,965 - - 674 2,475
Total assets
3,208 3,965 10,001 10,483 21,812 23,180
Total segment liabilities
- - 6,190 6,437 2,420 6,976
Liabilities associated with assets held for sale
- - - - - -
Total liabilities
- - 6,190 6,437 2,420 6,976
Net assets
3,208 3,965 3,811 4,046 19,392 16,204
Non-controlling interest
- - 1,747 2,228 - -
Other segment items
Capital expenditure
- - 498 1,250 672 48
Depreciation and amortization
- - 1,075 1,572 117 48
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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Total Operation
Corporate and non-allocated
(1)
Costa Rica IFRS 11
Adjustments (2) Total
2022 2021 2022 2021 2022 2021 2022 2021
Continuing operations
Total revenue
14,407 12,962 120 180 - - 14,527 13,142
Operating profit / (loss) before: project development, depreciation,
amortization and other gains and losses (Adjusted EBITDA)
4,687 4,670 (1,057) (868) - - 3,630 3,802
Project development
- (46) - - - - (46)
Depreciation and amortization
(1,192) (1,620) - - - - (1,192) (1,620)
Other gains and (losses )
(51) (151) 1,534 842 - - 1,483 691
Segments result
3,444 2,853 477 (26) - - 3,921 2,827
Foreign exchange gain / (loss)
23 (299) 138 67 - - 161 (232)
Share of profit / (loss) from equity accounted investments
93 (134) - - - - 93 (134)
Finance costs
(733) (847) (836) (1,149) - - (1,569) (1,996)
Finance income
13 13 27 12 - - 40 25
Other interest
(81) (35) - - - - (81) (35)
Management fees - intercompany charges
(1,057) (757) 1,050 750 - - (7) (7)
Profit / (loss) before taxation
1,702 794 856 (346) - - 2,558 448
Taxation
(1,439) 4 (192) (163) - - (1,631) (159)
Profit / (loss) for the year-continuing operations
263 798 664 (509) - - 927 289
Profit / (loss) for the year-discontinued operations
4,865 (566) - - - - 4,865 (566)
Profit / (loss) for the year
5,128 232 664 (509) - - 5,792 (277)
Currency translation reserve and remeasurement of employee benefits
- - 74 (401) - - 74 (401)
Total comprehensive income for the year
5,128 232 738 (910) - - 5,866 (678)
Non-controlling interest
(481) (359) - - - - (481) (359)
Total comprehensive income attributable to owners of the parent
4,647 (127) 738 (910) - - 5,385 (1,037)
Ass ets and liabilities
Segment intangible assets:
Intangible assets with indefinite useful lives
1,387 1,387 - - - - 1,387 1,387
Intangible assets with finite useful lives
5 4 - - - - 5 4
Segment assets :
Property, plant and equipment
7,898 8,485 - - - - 7,898 8,485
Other segment assets (including cash)
20,806 21,312 (6,579) (8,855) 784 (498) 15,011 11,959
Total segment assets
30,096 31,188 (6,579) (8,855) 784 (498) 24,301 21,835
Assets classified as held for sale
4,925 6,440 - - (4,251) (3,965) 674 2,475
Total assets
35,021 37,628 (6,579) (8,855) (3,467) (4,463) 24,975 24,310
Total segment liabilities
8,610 13,413 15,428 14,864 - - 24,038 28,277
Liabilities associated with assets held for sale
- - - - - - - -
Total liabilities
8,610 13,413 15,428 14,864 - - 24,038 28,277
Net assets / (liabilities)
26,411 24,215 (22,007) (23,719) (3,467) (4,463) 937 (3,967)
Non-controlling interest
1,747 2,228 - - - - 1,747 2,228
Other segment items
Capital expenditure
1,170 1,298 - - - - 1,170 1,298
Depreciation and amortization
1,192 1,620 - - - - 1,192 1,620
(1)
Includes non-operating entities
(2)
Includes adjustment to Costa Rica segment results for equity accounting under IFRS 11.
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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5. OTHER GAINS AND (LOSSES)
2022 2021
Sun Nippon Company S.A.C. - Coin-in Settlement (a)
1,643$ -$
Tax provision Guatemala (b) (109) -
Loss on disposal, write off of assets and liabilities (c) (40) (95)
Restructuring costs (d) (11) (55)
Reimburesment to Group on lender settlement - 866
Other - (25)
Total 1,483$ 691$
a. Sun Nippon Company S.A.C. - Coin-in Settlement
During the year ended December 31, 2022, the group collected reimbursements related to an
outstanding tax case that was settled with the tax authority in Peru. Additional details can be
found in Note 23 - Commitments and Contingencies, a. Peru tax controversies.
b. Tax provision Guatemala
During the year ended December 31, 2022 the group recorded a provision of $109,000 due to
a tax judgement in Thunderbird de Guatemala for a case related to the 2009 tax period.
c. Loss on disposal, write off of assets and liabilities
During the year ended December 31, 2022, the Group recognised losses on the disposal of
property, plant, and equipment of $37,000 and fair value loss on financial asset through profit
and loss of $3,000.
d. Restructuring costs
During the year ended December 31, 2022, in an effort to restructure Peru overhead, the Group
reduced it's Peru head count. The restructuring costs are made up of severance settlements to
liquidate employees totaling $11,000
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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6. COMPENSATION OF KEY PERSONNEL
Key Management of the Group are the members of the Board of Directors and officers.
The remuneration of key management personnel during the year was as follows:
2022 2021
Salaries and bonuses 669 588
Short-term benefits 29 -
Total 698$ 588$
The following table provides additional detail of remuneration to key management personnel
during the year:
Name
Officer/Director Salary Bonus
Short-term
benefits
Total
compensation
Salomon Guggenheim
(1)
Director-Officer 226$ -$ 4$ 230$
Albert Atallah
(2)
Officer 180 - 10 190
Peter Lesar
(3)
Director-Officer 215 - 15 230
Stephan Fitch Director 24 - - 24
Reto Stadelmann Director 24 - - 24
Total 669$ -$ 29$ 698$
(1)
Aggregate other compensation includes discretionary expenses of $4,000.
(2)
Aggregate other compensation includes discretionary expenses of $10,000.
(3)
Aggregate other compensation includes discretionary expenses of $15,000.
The remuneration of key personnel is determined by the compensation committee taking into
account the performance of individuals and market trends.
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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75
7. FINANCING COSTS AND INCOME
Finance cost and income includes all interest-related expenses and income, other than those arising
from financial assets at fair value through profit or loss. The following amounts have been included
in profit or loss for the reporting periods presented:
2022 2021
Finance cost
Bank loans 267$ 335$
Other loans 597 557
Related party loans 113 104
Related party payables 120 482
Finance charges payable under finance leases and hire purchase contracts 453 510
Amortization of borrowing costs 8 2
Other finance charges 11 6
Total finance costs (on a historical cost basis) 1,569 1,996
Finance income
Bank interest receivable 29 15
Amortization of transaction discounts - -
Related party interest receivable 11 10
Third party interest receivable - -
Total finance income (on a historical cost basis) 40$ 25$
Other interest
Other interest 81 35
Total other interest 81$ 35$
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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76
8. INCOME TAXES AND DEFERRED TAX LIABILITY
a) Tax charged in profit or loss
2022 2021
Current Income Tax
Foreign tax
1,130$ 543$
Total current income tax
1,130 543
Deferred Tax
Origination and reversal of temporary differences
501 (384)
Total deferred tax
501 (384)
Tax charged in the statement of comprehensive income
1,631$ 159$
Taxes allocated to:
Loss for the year
1,631 159
Totals
1,631$ 159$
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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77
b) Reconciliation of the total tax charge
The tax expense in the statement of comprehensive income for the year is higher than the
standard rate of corporate tax in the British Virgin Islands of 0%. The differences are
reconciled below:
2022 2021
Accounting profit / (loss) before income tax
2,558$ 448$
Effect of different tax rates on overseas earnings
1,631 159
Total tax expense reported in the statement of income
1,631$ 159$
Deferred income tax assets
Non-capital loss carryforwards
- 297
Temporary differences on net assets
589 776
Total deferred tax
589$ 1,073$
Deferred income tax liabilities
Other
36 37
Total deferred tax liabilities
36$ 37$
At December 31, 2022, the Group has unrecognized United States income tax net operating losses
of $18,622,000 (2021 - $19,055,000). These operating losses expire at various dates for up to 20
years. The potential income tax benefits related to United States loss carry forwards have not been
reflected in the accounts as the Group does not anticipate future United States net income. At
December 31, 2022, the Group has unrecognized Peru income tax net operating losses of $1,114.
The $447 tax benefit associated with the Peru loss carry forwards has not been recognized as it is
probable that the subsidiaries that hold the losses will not have sufficient net income to make use
of the tax benefits before, they expire in one to four years.
The Group has recorded a deferred tax asset in the amount of $589,000 (2021 - $1,073,000), related
to leases in the Group’s Nicaragua Subsidiary and to provisions and book reserves in certain Peru
subsidiaries.
Statement of Financial Position
2022
Statement of Financial Position
2021
Deferred Tax
Assets
Deferred Tax
Liabilities
Deferred Tax
Total
Deferred Tax
Assets
Deferred Tax
Liabilities
Deferred Tax
Total
Balance at beginning of year
1,073$ (37)$ 1,036$ 733$ (44)$ 689$
Movement in profit or loss
(501) - (501) 388 6 394
Foreign exchange and other
17 1 18 (48) 1 (47)
Balance at end of year
589$ (36)$ 553$ 1,073$ (37)$ 1,036$
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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78
9. INTANGIBLE ASSETS
2022 2021
Goodwill
Others
(Software and
license)
Total Goodwill
Others
(Software and
license)
Total
Cost
Balance at beginning of year
1,387$ 3,044$ 4,431$ 1,387$ 3,044$ 4,431$
Additions
- - - - - -
Sale of subsidiary
- - - - - -
Balance at end of year
1,387 3,044 4,431 1,387 3,044 4,431
Accumulated amortization and impairment
Balance at beginning of year
- 3,040 3,040 - 3,039 3,039
Change for the year
- (1) (1) - 1 1
Balance at end of year
- 3,039 3,039 - 3,040 3,040
Carrying amount
At beginning of year
1,387 4 1,391 1,387 5 1,392
At end of year
1,387$ 5$ 1,392$ 1,387$ 4$ 1,391$
Impairment review
For the purposes of assessing potential impairment, the Group’s assets are grouped and reviewed
for impairment at the lowest cash generating unit (CGU) level, where cash flows are independent
of one another. The review is focused on our ongoing operating segments located in Nicaragua,
where GCU is deemed by operating location/venue.
For the purpose of annual impairment testing, goodwill in Nicaragua was allocated to each
individual CGU proportional to its percentage of country-wide revenue.
2022
Goodwill
Other assets
considered for
impairment
Total assets
considered for
impairment
Nicaragua 1,387 5,603 6,990
Total 1,387$ 5,603$ 6,990$
(1) Calculated as net asset of the CGU plus borrowings less cash and cash equivalents.
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
The recoverable amount of each CGU was determined based on value-in-use calculations. The
following paragraphs describe the key assumptions on which Management has based its cash flow
projections for the period covered by the most recent budgets/forecasts and a description of
Management’s approach to determining the value(s) assigned to each key assumption.
Management’s key assumptions to forecast cash flow include:
1. Revenue and revenue growth / reduction: Revenue and revenue growth / reduction were both
considered as key assumptions. Specifically, revenue for future years was forecasted by: a)
Taking into account as a base line the revenue generated in each CGU in 2022; b) Increasing
that base line revenue equal to an organic growth that is equal to the long-term GDP growth
forecasted by independent analysts for Nicaragua; and c) Adjusting for management actions
that have recently been made or are significantly advanced and considered non-speculative,
which could generate a net growth of revenue or a net reduction of revenue resulting from the
net impact of the identified non-speculative events.
2. Cost of goods sold and growth / reduction of costs of goods sold: Cost of goods sold and
growth / reduction in cost of goods sold were both considered as key assumptions. Specifically,
costs of goods sold for future years was forecasted by: a) Taking into account as a base line the
cost of goods sold in each CGU in 2022; b) Increasing that base line cost of goods sold by the
long-term rate of inflation rate forecasted by independent analysts for Nicaragua; and c)
Adjusting for management actions that have recently been made or are significantly advanced
and considered non-speculative, which could generate a net growth of cost of goods sold or a
net reduction of cost of goods sold resulting from the net impact of the identified non-
speculative events.
3. Operating costs and growth / reduction of operating costs: Operating costs and growth /
reduction in operating costs were both considered as key assumptions. Specifically, operating
costs for future years were forecasted by: a) Taking into account as a base line the operating
cost of in each CGU in 2022; b) Increasing those base line operating costs by the long-term
rate of inflation rate forecasted by independent analysts for Nicaragua; and c) Adjusting for
management actions that have recently been made or are significantly advanced and considered
non-speculative, which could generate a net growth of operating costs or a net reduction of
operating costs sold resulting from the net impact of the identified non-speculative events.
4. Depreciation and amortization: Depreciation and amortization are forecasted based on the
known future schedule of depreciation and amortization as of December 31, 2022 for each
CGU, and then adjusted based on the future depreciation of assets to be purchased in the future
using maintenance capex. For the purpose of annual impairment testing, depreciation and
amortization in Nicaragua were allocated to each individual CGU proportional to its percentage
of country-wide revenue.
5. Financing costs, net: Financing costs, net are forecasted based on the schedule of all known
debt as of December 31, 2022 for each CGU. For the purpose of annual impairment testing,
financing costs, net in Nicaragua were allocated to each individual CGU proportional to its
percentage of country-wide revenue.
6. Direct and indirect taxes: Direct and indirect taxes were forecasted based on the tax regime in
place as of December 31, 2022.
7. Maintenance Capex: Maintenance capex was forecasted for future years based on the
percentage of revenue allocated to maintenance capex in 2022 for each CGU.
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79
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
Discount rates
The present value of the expected cash flows of each segment is determined by applying a suitable
discount rate. The discount rate was derived based on the calculation of Weighted Average Cost of
Capital (WACC) for the Group, adjusted to reflect market data for companies in the gaming
industry. The discount rates reflect appropriate adjustments relating to market risk and specific risk
factors of each segment (incorporating adjustments for geographic location and currency risk). The
discount rate applied to Nicaragua was 18.69%.
With regard to the assessment of value in use of each acquisition, there are possible changes in key
assumptions that could cause the carrying value of the unit to exceed its recoverable amount. These
are discussed below:
1. Revenue and revenue growth / reduction: Gaming revenue can be impacted by a) Changes in
drop levels, which may be affected by the number of customers, seasonality, effective
marketing efforts, a change in technology, competition or regulatory changes; and b) Changes
in Hold %, representing the probability of individual games, which change can happen through
chance, changes in gaming regulation and changes in gaming technology. Hotel revenue can
be impacted by competition and seasonality. Growth rates, which are based on estimated GDP
growth may be affected by material shifts in disposable income available for entertainment and
hospitality.
2. Cost of goods sold and growth / reduction of costs of goods sold: Costs of goods sold can be
impacted by changes in the market price of different goods and services, our competitiveness
and requirements to increase promotional allowances, and by payroll adjustments because of
changes in labor market conditions and/or management efficiencies. Cost of goods growth
rates, which are based on estimated inflation rates, may be affected by changes in market and/or
economic conditions.
3. Operating costs and growth / reduction of operating costs: Operating costs can be impacted by
changes in the market price of different goods and services, our competitiveness and
requirements to increase marketing expense, and by payroll adjustments because of changes in
labor market conditions and/or management efficiencies. Operating cost growth rates, which
are based on estimated inflation rates, may be affected by changes in market and/or economic
conditions.
4. Depreciation and amortization: Depreciation and amortization may be affected by the addition
or sale of depreciable property, plant and equipment, including capital expenditures for
maintenance purposes.
5. Financing costs, net: Financial Costs, net may be affected by the addition or pre-payment of
debt from the current debt schedule and by changes in the financial interest charged by banks.
6. Direct and indirect taxes: Direct and indirect taxes may be affected by changes in tax
legislation, regulation and judicial rulings.
7. Maintenance Capex: Maintenance capex may be affected by the non-planned deterioration of
assets, whose replacement will deviate from the investment time and investment amount
considered in our estimations.
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Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
10. PROPERTY, PLANT AND EQUIPMENT
Property
Leasehold
improvements
Gaming machines
Furniture and
equipment
Construction in
progress and
advances
Total
Cost
As of January 1, 2022 10,465$ 1,654$ 4,834$ 3,914$ 18$ 20,885$
Foreign exchange adjustments (7) (32) (73) (50) 1 (161)
Additions 617 (4) 248 307 2 1,170
Transfer to Assets Held for Sale (672) - - - - (672)
Disposals (32) (255) (277) - (564)
Transfers 15 4 - 2 (21) -
As of December 31, 2022 10,386 1,622 4,754 3,896 - 20,658
Depreciation
As of January 1, 2022 2,818$ 1,511$ 4,463$ 3,608$ -$ 12,400$
Foreign exchange adjustments (14) (30) (66) (45) - (155)
Charge for the year 797 53 196 146 - 1,192
Transfer to Assets Held for Sale - - - - - -
Correction to accumulated depreciation (176) - - - - (176)
Disposals (21) (245) (235) - (501)
As of December 31, 2022 3,404 1,534 4,348 3,474 - 12,760
Net book value as of January 1, 2022
7,647
143
371
306
18
8,485
Net book value as of December 31, 2022
$
6,982
$
88
$
406
$
422
$
-
$
7,898
Property
Leasehold
improvements
Gaming machines
Furniture and
equipment
Construction in
progress and
advances
Total
Cost
As of January 1, 2021 23,493$ 1,678$ 4,833$ 5,664$ 37$ 35,705$
Foreign exchange adjustments (1,254) (32) (74) (1,425) (23) (2,808)
Additions 901 8 161 150 78 1,298
Transfer to Assets Held for Sale (11,607) (11,607)
Transfer to Investment Property (1,124) (1,124)
Disposals (14)
-
(86) (479)
-
(579)
Transfers 70
-
-
4 (74) -
As of December 31, 2021 10,465 1,654 4,834 3,914 18 20,885
Depreciation*
As of January 1, 2021 11,056$ 1,490$ 4,329$ 5,098$ -$ 21,973$
Foreign exchange adjustments (676) (30) (65) (1,360) - (2,131)
Charge for the year 1,617 51 254 302 - 2,224
Transfer to Assets Held for Sale (9,174)
-
-
-
- (9,174)
Disposals (5)
-
(55) (432) - (492)
As of December 31, 2021 2,818 1,511 4,463 3,608 - 12,400
Net book value as of January 1, 2021
12,437
188
504
566
37
13,732
Net book value as of December 31, 2021
$
7,647
$
143
$
371
$
306
$
18
$
8,485
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Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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82
Assets pledged as security
Assets with the following amounts have been pledged to secure borrowings of the Group:
December 31, 2022
December 31, 2021
Cost Amortized cost Cost Amortized cost
Property 2,043$ 711$ 15,864$ 5,518$
Total 2,043$ 711$ 15,864$ 5,518$
The carrying value of assets held under finance leases and hire purchase contracts at December
31, 2022 was $2,729,000 (2021 - $3,261,000).
11. Investment Property
Investment property includes land in the Group's Nicaraguan subsidiary located adjacent to its
headquarters on the highway to Masaya, whose use has not been defined by the Group. The land
is carried at historical cost.
2022 2021
Land 1,091$ 1,113$
Total 1,091$ 1,113$
The fair value of this property is up to $4,249,000, according to the last valuation performed by an
independent appraisal.
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
Thunder
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83
12. ASSETS CLASSIFIED AS HELD FOR SALE AND DISCONTINUED
OPERATIONS
In 2021, the Group decided to convert it’s 66-suite hotel in Lima, Peru into a 66-unit condominium
apartment complex. As of October 31, 2021 the Group’s Peru hotel ceased operations as a hotel
and legally cancelled its hotel operating license. The Group has completed the process to: i) Legally
sub-divide the former hotel in to 66 individually titled apartment units; ii) Procure all change of
use and other regulatory approvals. The decision was taken in line with the Group’s strategy to
reduce debt and to improve the Group’s financial position. The Peru hotel operation has been
reported as a discontinued operation. As of the date of publication of this 2022 Annual Report, the
Group has sold 65 out of the 66 apartment units: 50 apartments were sold in 2022 and 15 in 2023.
Revenues and expenses, gains and losses relating to the Peru hotel operation have been eliminated
from the Group’s statement of comprehensive income and are shown in a single line item on the
face of the statement of comprehensive income (see “profit/ (loss) for the period from discontinued
operations”).
2022 2021
Food, beverage, hospitality and other sales -$ 583$
Total revenue
- 583
Cost of goods sold - (229)
Gross profit
- 354
Other operating costs
Operating, general and administrative (483) (320)
Depreciation and amortization - (604)
Other (losses) and gains 62 4
Operating (loss) / profit
(421) (566)
Loss before tax
(421) (566)
Profit for the year
(421) (566)
Gain on disposal 5,286
Profit / (loss) for the year from discontinued
operations
4,865$ (566)$
The carrying amount of Peru hotel assets that are held for sale may be summarized as follows:
Peru Hotel
2022 2021
Property, plant and equipment
674$ 2,475$
Assets classified as held for sale 674$ 2,475$
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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84
Cash flows generated by the Peru Hotel operation for the reporting period are summarized as
follows:
2022 2021
Net cash from operating activities
(421) (566)
Net cash (used) for investing activities
(672) -
Net cash (used) for financing activities
- -
Effect of foreign exchange adjustment - -
Cash flows from discontinued operations (1,093)$ (566)$
Gain on disposal
During the period ended December 31, 2022, a portion of the apartment held for sale were sold and
the remainder should be sold by the end of 2023. The transactions resulted in a gain on disposal to
the Group of approximately $5.29 million. The consideration received was approximately $7.86
million in cash as described below.
Peru Asset Sales
Property, plant and equipment
2,571$
Net assets disposed
2,571$
Consideration in cash
7,857
Fair value of proceeds
7,857$
Gain on Disposal 5,286$
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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85
13. TRADE AND OTHER RECEIVABLES
Trade and other receivables consist of the following:
2022 2021
Trade and other receivables (Non-current)
Deposits for rental, land and equipment
83 69
Other receivables
753 754
Total trade and other receivables (non-current)
836$ 823$
Trade and other receivables (Current)
Trade receivables, gross
994
1,038
Allowance for credit losses
(813)
(813)
Notes receivable
2 2
Prepaid expense
155 129
Value added tax and employee receivables
335 291
Total trade and other receivables (current)
673$ 647$
Trade and other receivables
The carrying value of the trade receivables is considered a reasonable approximation of fair value.
All of the Group’s trade and other receivables have been reviewed for indicators of impairment.
Certain trade receivables were found to be impaired and a provision of $Nil (2021 - $10,000) has
been recorded accordingly.
The age of the trade receivables past due but not impaired is as follows:
2022 2021
Not more than 3 months 99 112
More than 3 months but not more than 6 months 27 81
More than 6 months but not more than 1 year 37 27
More than 1 year 18 5
Total 181$ 225$
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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86
14. INVENTORIES
2022 2021
Food and beverage supplies 77 52
Casino goods and promotional items 63 41
Hotel food service and room supplies - 2
Uniform and operational supplies 56 54
Gaming machine parts 33 36
Total 229$ 185$
ended December 31, 2022.
15. CASH AND CASH EQUIVALENTS
For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise the
following at December 31, 2022 and December 31, 2021:
2022 2021
Cash at banks and on hand 5,957 2,064
Restricted cash 618 1,328
Short-term deposits 205 203
Total 6,780$ 3,595$
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits
are made for varying periods of time between one day and three months, depending on the
immediate cash requirements of the Group, and earn interest at the respective short-term deposit
rates. The fair value of cash and short-term deposits is $5,957,000 as of December 31, 2022 (2021
- $2,064,000).
Restricted cash includes the casino’s bankroll, hopper loads, and a certificate of deposit that renews
monthly and yields interest of 1.5% per year that is required by the gaming authorities in Nicaragua.
The Group classifies the casino bankroll as restricted, as these balances are required to operate the
business, thus these funds cannot be used to pay the obligations of the Group. The fair value of
restricted cash is $823,000 at December 31, 2022 (2021 - $1,531,000).
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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87
16. TRADE AND OTHER PAYABLES
2022 2021
Trade and other payables (Non-current)
Trade and other payables
32 32
Other liabilities
197 162
Deferred Income
14 21
Total trade and other payables (non-current)
243$ 215$
Trade and other payables (current)
Trade and other payables
3,684 2,999
Other accrued liabilities
2,509 2,414
Total trade and other payables (current)
6,193$ 5,413$
Current - trade payables are non-interest bearing and are normally settled on 30-to-90-day terms.
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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88
17. BORROWINGS
Borrowings consist of loans payable detailed as follows:
Schedule of principal repayments
2023 2024 2025 2026 2027 Thereafter
Unamortized
premiums, discounts
& issuance costs
Total
(1)
Interest Rate
:
>10% 131$ -$ -$ -$ -$ -$ -$ 131$
(2)
8% to 9%
8,100
293
-
-
-
-
-
8,393
6% to 7% - - - - - - - -
<5% 533 - - - - - - 533
Total principal repayments 8,764$ 293$ -$ -$ -$ -$ -$ 9,057$
1. Floating rate loans are calculated as of the effective rate on December 31, 2022.
2023 2024 2025 2026 2027 Thereafter
Unamortized
premiums, discounts
& issuance costs
Total
Country:
Corporate
(2)
8,692$ -$ -$ -$ -$ -$ -$ 8,692$
Nicaragua 72 293 - - - - - 365
Peru - - - - - - - -
Total principal repayments 8,764$ 293$ -$ -$ -$ -$ -$ 9,057$
2. The Group's parent entity (Corporate) assumed outstanding debt balances of our Guatemala and Poland entities. The balances outstanding at December 31, 2022 for
Guatemala and Poland were $129,675 and $288,635 respectively.
Borrowing summary
2022 2021
Total borrowing 9,057 13,493
Less current portion of borrowings (8,764) (8,316)
Borrowing non-current 293$ 5,177$
The following table provides additional detail of additions, refinancing, repayments, and disposals
taking place during the year:
Additions Summary
Balance
Dec 31, 2021
(1)
Additions
Interest
Capitalization
Repayments
Unamortized
premiums,
discounts &
issuance costs
Balance
Dec 31, 2022
Loans with financial entities 5,446$ -$ -$ (5,081)$ -$ 365$
Loans with non-financial entities 8,055 - 637 - - 8,692
Total 13,501$ -$ 637$ (5,081)$ -$ 9,057$
(1) Does not include unamortized premiums, discounts & issuance costs of $8,000.
Thunder
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Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
Notes
Additions
There were no new loans for the year ended December 31, 2022.
Interest Capitalization
a. During the year ended December 31, 2016, the Group executed various amendments to
promissory notes with private lenders resulting in deferring principal and interest payments and
capitalizing any interest accrued during 2022. Accrued interest of $637,000 was capitalized
and added to outstanding principal balances of $7,109,000.
Repayments
a. During the year ended December 31, 2022, the Group repaid a total of $5,081,000 of loan
principal on loans with financial entities.
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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90
18. PROVISIONS
Current Non-Current Current Non-Current
2022 2022 2021 2021
Employee benefits
392$ 357$ 192$ 359$
Other
25 - 26 -
Litigation provisions
- 467 - 922
417$ 824$ 218$ 1,281$
Employee
benefits
Litigation Other Total
Balance at January 1, 2021
545$ 1,017$ 21$ 1,583$
Provisions recognized
300 - 90 390
Provisions utilized
(279)
-
(51)
(330)
Provisions released
-
-
(33)
(33)
Differences arising from foreign exchange
(15) (95) (1) (111)
Balance at December 31, 2021
551 922 26 1,499
Provisions recognized
591 - 62 653
Provisions utilized
(385)
(493)
(63)
(941)
Differences arising from foreign exchange
(8) 38 - 30
Balance at December 31, 2022
749$ 467$ 25$ 1,241$
Employee benefits
Current employee benefits are paid time off for vacations and sick time earned but not yet used by
the employee. Non-current employee benefits include severance pay, which is the cost associated
with the severance packages as described below:
The subsidiary employee provisions by country are as follows:
Nicaragua
The Nicaraguan Labor Code established a severance payment plan for employees in the event of
death, retirement or dismissal without just cause. This compensation is determined according to
employee length of service. The plan compiles a month of salary for each labor year (for the first
three labor years) and twenty days of salary after the fourth labor year, until the compensation
reaches a maximum of five months’ salary. Compensation cannot be less than one month’s salary
or more than five months’ salary.
The amount of $749,000 (2021- $551,000) includes $471,000 of retirement benefit obligations.
For determination of the retirement benefit obligations in 2022 and 2021, the following actuarial
assumptions were used:
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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91
2022 2021
Discount rates
7.87% and 8.01% 9.33% and 10.26%
Expected rate of salary increases
0.01 0.02
Staff turnover
5 and 7 years 5 and 8 years
The Group records a monthly provision as an expense to the respective period to cover any
severance payment reimbursement incurred by the Group to terminated employees under this plan.
As of December 31, 2022, the Group has recorded provisions amounting to $334,000 (2021 -
$110,000), which represents Management’s best estimate of the liability. This is an accrual under
Nicaraguan law and is not a pension scheme.
Additionally, the other countries in which the Group operates have various severance requirements
as described in Note 3. The severance requirements are classified as long term. The short-term
employee benefits are primarily accrued vacation payable to employees.
Litigation
Peru THLA tax cases
During the year ended December 31, 2016, THLA filed an appeal procedure of a Tax Court decision
(case file 5396-2012). The Tax Court held against THLA position that Intendencia Resolution
0150140010152 is unfounded. This Resolution involves SUNAT imposing a General Sales Tax
(IGV tax credit originated in the purchase of hotels) with a potential contingency in the amount of
S/. 3,245,168 plus interest of S/. 4,442,733 (US$849,520, interest US$1,163,019).
The same case contains matters related to Resolution no. 0120030026291 for the tax year 2007, in
which the tax authorities imposed an income tax of S/. 558,950 plus interest of S/. 703,176
(US$146,322, interest: US$184,077) due to a rejection of certain deductions in 2007 for interest
payments made to lenders/investors domiciled abroad on certain loans and investments. In
addition, the tax authorities imposed a fine in relation to this resolution in the amount of S/. 279,474
plus interest of S/. 402,870 (US$73,161, interest: US$105,463).
In 2022, the Company was served with a Resolution N° 11395-4-2021 in which the Tax Court has
confirmed that the above mentioned SUNAT’s resolutions related to 2007 income tax are already
“enforceable”. THLA is entitled to appeal the Tax Court Decision before the Judiciary. THLA is
considering all its options and have not made a decision concerning this appeal as of the date of the
publication of the annual report.
With respect to IGV, management believes it could generate a favorable result; and with reference
with the Income Tax, the chances of success are relatively less favorable. A provision has been
recognized for cases where the Group’s chances of success are relatively less favorable. The
provision recognized totaled S/. 1,900,746 (US$497,577), including tax, penalties and interest. As
of December 31, 2022 the 2007 tax cases have been paid in full and the provision totaling S/.
1,900,746 has been released.
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Likewise, there is another appeal procedure in a ruling by the tax Court (Tax Court File 15182-
2014), involving SUNAT resolutions 0220030035681-0220030035690 for the tax year 2008
related to withholding on payments made abroad. The tax assessment is made up of principal of
S/. 257,954 plus interest of S/. 317,825 (US$ 67,527, interest: US$83,200). In separate Resolutions
0220020013107-0220020013114, the tax authorities issued fines related to the prior mentioned
resolutions in the amount of S/.107,530 plus interest of S/.134,033 (US$28,149 interest:
US$35,087). A provision had been recognized in connection with the resolution above totaling S/.
843,741 (US$220,875) including tax, penalties and interest.
The appeal also refers to Resolution 0220030036535-0220030036541 for the tax year 2008 related
to payments in advance of the income tax of S/. 45,337 plus interest of S/. 49,585 (US$11,868,
interest: US$12,980). Resolutions 0220020013229-0220020013238 imposed fines related to the
prior mentioned resolutions of S/. 381,969 plus interest of S/. 456,403 (US$99,992, interest:
US$119,477). A provision has been recognized in connection with the resolution above totaling
S/. 940,923 (US$246,315) including tax, penalties and interest.
19. SHARE CAPITAL AND RESERVES
A majority of the Group’s shareholders voted in favor of continuing the Group’s charter from the
Yukon, Canada to the British Virgin Islands (“BVI”). The Group formally continued its corporate
charter into the BVI effective October 6, 2006 and filed “discontinuation documents” with the
Yukon Registrar. Holders of common shares are entitled to one vote for each share held. There are
no restrictions that limit the Group’s ability to pay dividends on its common stock. The Group has
not issued preferred shares. The Group’s common stock has no par value.
Number of
shares
Share capital
($USD in 000's)
Shares authorized
500,000,000 common shares without par value
500,000,000 preferred shares without par value
Shares issued
Balance as at December 31, 2020 30,914,077 111,757$
Share based payments - -
Balance as at December 31, 2021 30,914,077 111,757$
Share based payments - -
Balance as at December 31, 2022 30,914,077 111,757$
Options
The Group, through its Board of Directors and shareholders, adopted two Stock Option Plans, the
first on July 1, 1997, and the second on June 25, 2005. Both plans will continue separate and apart
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from one another. The Group has granted a number of stock options and entered into various
agreements of which up to no shares remain available for purchase pursuant to options granted
under these plans. All of the stock options issued under these plans are nontransferable and
terminate on the earlier of the expiry date or 30 days after the grantee ceases to be employed by the
Group.
Stock option plan I dated July 1, 1997 and Stock option plan II dated June 25, 2005
Options granted under these plans were awarded by the Board of Directors at its sole discretion to
select Directors and employees. The options granted to the option holder may be exercised in whole
or in part at any time, or from time-to-time during the exercise period. The options may lapse due
to time limitations, death or change in employment status. The price at which an option holder may
purchase a share upon the exercise of an option, shall be set forth in the option certificate, but not
less than the market value of the Group shares as of the award date. Option grants have ceased
under both plans as of November 19, 2007.
2007 Equity incentive plan dated November 20, 2007 (amended in August 2009)
The 2007 Equity Plan was amended in 2009 to authorize the Directors, at their discretion, to award
grants in an aggregate amount of up to 5% of the Company issued and outstanding shares. Our
2007 Equity Incentive Plan (the “2007 Equity Plan”) is designed to enable us and our affiliates to
obtain and retain the services of the types of employees, consultants and directors who will
contribute to our long-term success and to provide incentives that are linked directly to increases
in share value which will inure to the benefits of all of our shareholders. We have reserved up to
5% of our current issued and outstanding common shares, as of any given date, for the issuance of
shares, which may be awarded under such Equity Plan.
There are no outstanding options as of December 31, 2022.
Currency translation reserve
The translation reserve represents the foreign currency translation differences arising from the
translation of our subsidiary financial statements into United States dollars.
Retained earnings / (loss)
Retained earnings / (loss) are the accumulated retained profits and/or losses.
Share options reserve
The Group issues equity-settled share-based payments to certain employees and Directors. For all
share-based payment arrangements granted, an expense is recognized in profit or loss with a
corresponding credit to equity. The fair value of share options is expensed over the vesting period
of the options, based on an estimate of the number of shares that will eventually vest, and adjusted
for the effect of non-market-based vesting conditions. The corresponding credit is taken to the share
options reserve. The fair value is calculated using the Black-Scholes pricing model.
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20. EARNINGS PER SHARE
The following weighted average numbers of shares were used for computation of earnings per
share:
2022
2021
Shares used in computation of basic loss per share
(000's)
30,914 30,914
Shares used in computation of diluted loss per share
(000's)
30,914 30,914
Earnings / (loss) for the period attributable to the parent 5,311$ (632)$
Basic earnings / (loss) per share 0.17 (0.02)
Diluted earnings / (loss) per share 0.17 (0.02 )
Basic earnings per share is calculated by dividing the net gain for the year by the weighted average
shares used in the computation of basic earnings per share. Diluted earnings per share is calculated
by dividing the net gain for the year by the weighted average shares used in the computation of
diluted earnings per share.
21. RELATED PARTY TRANSACTIONS
2022 2021
Current Non-Current Current Non-Current
Due from related parties
Nicaraguan Partners -$ 42$ -$ 42$
Costa Rican Joint Venture 2,085 - 2,038 -
Trans actions with officers - 391 - 381
2,085$ 433$ 2,038$ 423$
Due to related parties
Nicaraguan Partners 208$
-$
219$
-$
Trans action with officers 1,453
-
1,767
-
1,661$ -$ 1,986$ -$
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Due from related parties
Receivables from joint ventures and related party receivables
The Group charges management, marketing, administration and royalty fees to its subsidiaries and
joint ventures. The income and expenses associated with management fees between subsidiaries
have been eliminated in their entirety in these consolidated financial statements. The related party
receivable represents amounts due from the Group’s partners in its non-wholly owned subsidiaries.
All receivables are non-interest bearing and are due on demand by the Group. The Group has not
provided for an allowance against these amounts as these amounts are deemed collectible by the
Group.
Included in due from related parties is $2,085,000 (2021 – $2,038,000) due from our Costa Rica
joint ventures which are accounted for under the equity method, these receivables are non-interest
bearing and are due on demand by the Group. Balances will be settled upon the sale of certain real
estate in Costa Rica. Additionally, $42,000 (2021 – $42,000) is due from a shareholder in the
Nicaraguan operation for their portion of the loan attributed to the purchase of the majority interest
in Nicaragua in October 2004.
Included in due from related parties are loans to officers for $391,000 (2021 - $381,000). The
amounts due from officers is as follows: Albert Atallah $248,000 ($225,000 plus $23,000 accrued
interest); Peter LeSar $143,000 ($125,000 plus accrued interest $18,000).
Due to related parties
Payable to joint ventures and related party payables
Included in due to related parties are amounts due to the Group’s Nicaraguan partners $208,000
(2021 – $219,000) for their portion of the accrued, but not yet paid management fees from the
Nicaraguan entity.
Included in due to related parties are accrued wages owed to the Groups’ officers and directors
totaling $1,453,000 (2021 – $1,767,000). The amounts owed are as follows: Salomon Guggenheim
545,000 (2021 - $612,000); Peter LeSar $507,000 (2021 - $550,000); Albert Atallah $400,000
(2021 - $419,000). There are $1,000 (2021 - $186,000) owed to directors as of December 31, 2022.
Transaction with Officers and Directors included within borrowings
Salomon Guggenheim, who previous to the middle of 2013 only held the roles of Director and
advisor to the Group, is a director and not a beneficial owner in a company called India Ltd. The
Group has been loaned various amounts by India Ltd. Please see Officer related party in the table
below for amount due and interest paid to India Ltd. during 2022 and 2021.
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2022 2021
Amount due Interest paid Amount due Interest paid
Country
Officer related party Corporate 1,372 - 1,259 -
Total 1,372$ -$ 1,259$ -$
22. OBLIGATIONS UNDER OPERATING LEASES, FINANCE LEASES
AND HIRE PURCHASE CONTRACTS
Obligations under finance leases and hire purchase contracts
The Groups Nicaragua subsidiary has leases for four casino properties and related parking areas,
two residential properties. The lease liabilities are secured by the related underlying assets. As at
December 31, 2022, future minimum lease payments under leases and hire purchase contracts of
the Group are as follows:
Future commitments due
December 31, 2022
Future commitments due
December 31, 2021
Minimun Lease
Payments
Present value
Minimun Lease
Payments
Present value
Not longer than one year 1,353$ 877$ 1,223$ 633$
After one year but not more than five years 3,567 2,558 4,268 2,854
After five years 867 684 1,503 1,192
Sub total 5,787 4,119 6,994 4,679
Present value of minimum lease payments 5,787$ 4,119$ 6,994$ 4,679$
Obligations under leases and hire purchase
contracts current
(877)$ (633)$
Obligations under leases and hire purchase
contracts non-current
3,242$ 4,046$
Assets held under finance leases and hire purchase contracts as of December 31, 2022 and
December 31, 2021:
2022
2021
Cost Amortized cost Cost Amortized cost
Right-of-use assets 4,822 2,729 4,964 3,261
Total 4,822$ 2,729$ 4,964$ 3,261$
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23. COMMITMENTS AND CONTINGENCIES
As at December 31, 2022, principal payments required under the terms of the loan agreements and
their liabilities in each for the next five years are as follows:
Year ending December 31:
2023
8,764$
2024
293
2025
-
2026
-
2027
-
Thereafter
-
Subtotal
9,057
Less: Debt issuance costs
-
9,057$
Set out below is an overview of our ongoing contingencies, many of which are as a result of
regulatory uncertainty. An estimate of the financial effect of each contingency is disclosed unless
a reasonable estimate of the financial effect cannot be made.
a. Peru tax controversies
Sun Nippon Company S.A.C. - “coin-in case”:
In October of 2017, the Group announced the sale of certain operation in Peru including those
held by a company named Sun Nippon Company, S.A.C. “SNC”. As part of the sale of those
operations, the purchaser agreed that irrespective of the transfer of the SNC Shares,
Thunderbird will have the right to continue with the defense of certain tax refund case (the
“Sun Nippon Coin In Case”), initiated by SNC before the Peruvian Judicial Court of Justice,
against a decision of the Peruvian Administrative Tax Court of January 2016. The Parties
agreed that if SNC, under a final decision of the Judiciary receives any monetary refund
together with any additional compensation for interests, and/or any reimbursement of costs and
expenses incurred in relation to the same, the Buyer will be obliged to pay to Thunderbird
within thirty (30) calendar days following its receipt by SNC, an amount equal to the sum so
received by SNC deducting any applicable withholdings, taxes, commissions, charges, cost,
or similar that may affect the transfer of such proceeds from SNC to the corresponding Buyer
and from such Buyer to Sellers, and/or any other deductions that may apply by Law.
The background of the case is as follows: On or about January 18, 2016, the Peruvian
Administrative Tax Court (commonly known as the Tribunal Fiscal in Spanish) served a
negative ruling against the Group’s Peruvian subsidiary operation. The ruling is dated
December 28, 2015 and covers a tax matter commonly known as the “2006 coin-in case”
(hereafter “the December 28, 2016 coin in ruling”. The basis of the negative ruling keyed in on
whether “revenue” should be based on “net win” or on “coin in “as it relates to pre-payment of
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income tax. After the issuance of “the December 28, 2015 “coin-in ruling”, Management
learned that SUNAT had issued a report dated and executed on December 24, 2015 defining
“revenue” for purposes of the relevant tax issues (hereafter “the SUNAT Report”). This
SUNAT report was released to the public on February 18, 2016 and is in reply to a March 18,
2015 letter of the “Sociedad Nacional De Juegos De Azar (SONAJA)” in which SONAJA
sought clarification from SUNAT on the definition of “revenue” in the “2006 coin-in case”
(hereafter the “SONAJA Petition”). The SONAJA Petition sought an opinion from SUNAT to
the effect that the pre-payment of income tax should be based on “net win” and not on “coin-
in”. The SUNAT report opines that the pre-payment of income tax should be based on “net
win” and not on “coin-in”. According to the Group’s tax counsel, this SUNAT report is 100%
legally binding on SUNAT, meaning that SUNAT will no longer audit and oppose the
calculation of revenue based on “coin-in” as it relates to the pre-payment of income tax. The
clear conclusion by the outside counsel is that SUNAT recognizes the “net win” as base for the
calculation of the income tax.
Unfortunately, in spite of the February 18, 2016 SUNAT report, Management must continue
its appeal of the Tribunal resolutions in the SNC 2006 coin-in case. SNC has filed its appeal
on March 23, 2016, in this matter to the judicial court in which it could review the entire tax
case on a “de novo” basis, meaning that SNC will have the opportunity to present its case in
full and most likely prevail on appeal in its position. One significant and material factor in the
Tribunal negative ruling is that the tribunal did not take into account the main defenses that
SNC presented but chose to ignore those defenses. While the Appeal was pending, SNC
proceeded to pay the entire tax liability and is now seeking a refund of all taxes paid, in case
SNC prevail on its case. On April 28, 2017, the 1st instance Court gave a decision in favor of
SNC. Both SUNAT and the Tribunal Fiscal have appealed the decision before the Superior
st
Tribunal. On October 18, 2017, the Superior Tribunal confirmed the decision of the 1
Instance
Court in favor of SNC. On November 22, 2017, both SUNAT and the Tribunal Fiscal filed a
so-called cassation writ before the Supreme Court, last and definitive instance. However,
SUNAT has withdrawn its cassation writ, meaning SUNAT is no longer appealing or otherwise
challenging the Lower Court’s decision in favor of SNC. The Tax Court has not filed a
withdrawal. And now, on September 6, 2021 the Supreme Court has served a formal resolution
that Tribunal Fiscal’s cassation writ has been formally accepted, meaning that that the Supreme
Court would analyze the substance of the matter and eventually issue the definitive resolution
(in third and last instance). As part of the Judicial procedure, a hearing took place on March
31, 2022, in which the Parties had the opportunity to expose to the judges their positions in a
verbal matter. On June 2022, the Supreme Court (third and last Judiciary instance) served the
ruling through which it recognized that SUNAT´s assessment (confirmed by the Tax Court)
was groundless. As stated above, at the time the Peru operations were sold the Group and the
Purchaser agreed that if SNC, under a final decision of the Judiciary receives any monetary
refund together with any additional compensation for interests, and/or any reimbursement of
costs and expenses incurred in relation to the same, the Buyer will be obliged to pay to
Thunderbird within thirty (30) calendar days following its receipt by SNC, an amount equal to
the sum so received by SNC deducting any applicable withholdings, taxes, commissions,
charges, cost, or similar that may affect the transfer of such proceeds from SNC to the
corresponding Buyer and from such Buyer to Sellers, and/or any other deductions that may
apply by Law. During the year ended December 31, 2022, SNC received an approximate of
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US$ 1,642,713 as monetary refund as detailed in Note 5 and was remitted to the Group as had
been agreed.
Thunderbird Hoteles Las Americas, S.A. – Tax issues: In the latter part of 2011, the Group’s
wholly owned Peruvian subsidiary, Thunderbird Hoteles Las Americas, S.A. (“THLA”),
received the following resolutions issued by the Peruvian tax authority, Superintendencia
Nacional de Administración Tributaria (“SUNAT”), in relation to various major tax issues
(*note: all interest mentioned in the following description have been calculated up to
September 30, 2020).
By Resolution no. 0120030026291 for the tax year 2007 the tax authorities imposed an income
tax of S/. 558,950 plus interest of S/. 703,176 (amounts in US$139,807, interests: US$184,077)
due to a rejection of certain deductions in 2007 for interest payments made to lenders/investors
domiciled abroad on certain loans and investments. In addition, the tax authorities imposed a
fine in relation to this resolution in the amount of S/. 279,474 plus interest of S/. 402,870
(amounts in US$73,161, interest: US$105,463).
In another Resolution no. 0120020018846 for the tax year 2007 the tax authorities denied
certain tax credits in favor of THLA related to IGV of the purchase of the hotels for an amount
of S/. 3,245,168 plus interest of S/. 4,442,733 (amounts in US$849,520, interest
US$1,163,019).
On November 21, 2011, THLA filed an administrative appeal with respect to the resolutions
no. 0120030026291 and no. 0120020018846 On March 23, 2012, THLA was notified through
a SUNAT resolution that the tax authority confirmed the resolutions as described herein.
THLA thereafter filed an appeal on April 12, 2012.
The tax authorities issued another “Resolution of Intendance no. 0150140010152” which
involves both of the 2007 prior mentioned tax assessments related to IGV (Resolution
0120020018846) and Income Tax (Resolution 0120030026291). On October 12, 2019 a
hearing took place before the Tax Court, which is the second and last administrative challenge
in regards to this matter.
In Relation with the income tax resolution, THLA has recently been served with the Resolution
N° 11395-4-2021 through which the Tax Court has confirmed SUNAT’s decision. A provision
was made for this case in where the Group’s chances of success were low. The provision
recognized totaled S/. 1,900,746 (US$497,577), including tax, penalties and interest. As of
December 31, 2022, the assessed amounts were duly paid by THLA.
In relation with the IGV Resolution N° 11395-4-2021, the Tax Court has ruled that it has no
legal grounds.
In respect to all of these resolutions issued by the tax authorities, Management intends to
vigorously defend its position at all administrative and judicial levels. The Group is not
responsible for payment until the administrative and judicial process decisions are final with
no further rights of appeal. However, interest on these resolutions continues to accrue while
the administrative and judicial process is completed and a final decision is rendered. As a result
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of the on-going uncertainty over the potential outcome of this matter no provision has been
recorded.
On a separate matter, the company has filed an appeal procedure in a ruling by the Tax Court
(Tax Court File 15182-2014), related to Resolutions 0220030035681-0220030035690 for the
tax year 2008 referred to withholdings of payments made abroad in a total principal amount of
S/. 257,954 plus interest in a total of S/. 317,825 (amounts in US$ 67,527, interest: US$83,200).
In separate Resolutions 0220020013107-0220020013114 the tax authorities issued fines
related to the prior mentioned resolutions in the amount of S/.107,530 plus interest in a total of
S/.134,033 (amounts in US$28,149 interest: US$35,087). A provision has been recognized in
connection with the resolution above totaling S/. 843,741 (US$220,875) including tax,
penalties and interest.
The appeal also refers to Resolution 0220030036535-0220030036541 for the tax year 2008
related to payments in advance of the income tax for a total amount of S/. 45,337 plus interest
in a total of S/. 49,585 (amounts in US$11,868, interest: US$12,980). Resolutions
0220020013229-0220020013238 imposed fines related to the prior mentioned resolutions for
the amount in total of S/. 381,969 plus interest in a total of S/. 456,403 (amounts in US$99,992,
interest: US$119,477). Through Resolution N° 7826-11-2022 (served on November 18, 2022)
the Tax Court has solved the tax proceeding related to 2008 Income Tax. The Tax Court has
confirmed the tax debt related to (i) Income Tax Retained in 2008 for interest on loans from
related parties; (ii) payments on account of Income Tax for the year 2008 and (iii) income tax
for 2008 (deduction of interest not recorded in the accounts). A provision was made in
connection with the above resolution for a total of S/. 940,923 (US$246,315) including tax,
penalties and interest. The relevant tax debt assessed in this case was duly paid in Q1 2023.
Through Intendancy Resolution 0250140020952, SUNAT issued a 2013 IGV assessed tax debt
amounting S/. 1,013,295.00. This tax debt was originated as a consequence of SUNAT’s 2007
IGV assessment which The Tax Court already confirmed as null, revoking it. Through
resolution 11390-4-2019 the Tax Court has ruled that the result of this procedure depends on
the result of 2007 process, which has been already declared in favor of the Company.
Considering that the Tax Court has already dismissed 2007 IGV tax assessment (resolution
11395-4-2021), it is more than likely that the 2013 tax debt will be also revoked.
Thunderbird Hoteles Las Americas, S.A. – “Alcabala” (Property Transfer Tax) process: On
September 25, 2007, THLA received a notification in connection with a resolution issued by
the Tax Administration Service (SUNAT) demanding payment of US$ 522,824.68 (S/.
1,969,742) for a property transfer tax resulting from the purchase of the land and the building
located at Alcanfores 475, Miraflores. SUNAT asserted that THLA wrongly calculated the tax
on the first-time sale of such property (sold by La Caja Militar to THLA).
On October 24, 2007, THLA filed an appeal against the resolution issued by SUNAT. THLA
asserts that it had paid the corresponding property transfer tax for the land, as well as the VAT
for a part of the building. THLA argues that the property transfer tax was not paid for part of
the building as the sale of such part of the building was a first-time sale performed by the
contractor and was exempt from tax. On October 17, 2014, the Tax Court ruled that the
resolution issued by the SUNAT was void as it had not been properly supported (such
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resolution did not specify the reasons why the SUNAT considered that the total of the transfer
was subject to property transfer tax).
On March 12, 2015, SUNAT issued a new resolution in respect of the same issues, but provided
no additional evidentiary support for its position. SUNAT’s new resolution (Resolution Nº 045-
012-00073684), demanded the payment of the property transfer tax for the same land and the
same building for a total of S/. 1,052,993 (including interests and penalties). THLA argued
once again that the resolution issued by SUNAT lacks the proper supporting documentation.
SUNAT claims that THLA must pay the property transfer tax but does not explain the legal
basis supporting such standpoint.
On April 13, 2015, THLA filed its opposition against Resolution Nº 045-012-00073684
asserting that THLA was not required to pay any property transfer tax and requesting that the
new resolution be declared void as it lacked proper support. Such claim is currently under
review. THLA contends that it is probable that the Tax Court, for a second time, will declare
such resolution to be void. The opposition writ is pending a ruling by the Municipal
Administration (1st administrative instance). Should the opposition writ be rejected, THLA is
entitled to file an appeal writ before the Tax Court (second administrative instance).
b. Costa Rica tax controversies
By way of background, the income tax in Costa Rica is collected by the General Income Tax
Office. The Group previously owned various Costa Rica subsidiaries including, Thunderbird
Gran Entretenimiento, S.A. (“TGE”), and Grupo Thunderbird de Costa Rica, S.A. (“GTCR”).
On February 27, 2015, the Group sold its entire economic interest and management rights in
its Costa Rican operations (of which the Group had approximately a 50% share) to CIRSA
International Gaming Corporation (“CIRSA”), for a net price (gross price less debt payoff less
working capital adjustments) of approximately $8.1 million. The $8.1 million net amount
received was also net of approximately $192 thousand contingent tax liability paid by the group
to the Costa Rica tax authority to cover GTCR contested tax liability and for the approximate
$3.088 million TGE contested tax liability paid to the Costa Rica tax authority. These contested
tax liabilities are fully described below. These payments to the Costa Rican tax authority were
required to be paid as a condition to closing the sale of the Group’s interest in the Costa Rica
operation. The payment made by the Group and its partner was made without prejudice or
admission of liability and therefore, does not alter the Group’s position of taking a provision
for these contingent taxes in 2014.
Following the sale of the Costa Rica operations, and as part of the Group’s commitment on the
sale of the operations, TGE continued to be engaged in a certain tax procedure while GTCR
ended up settling its tax controversy through an amnesty procedure. In addition, the Group’s
50% ownership in King Lion Network is engaged in a tax controversy as described below. The
following sections describe the current status/outcome of these three tax controversies:
(i) TGE received a proposed income tax assessment in Q1-2012 of $600 thousand for the tax
year ended December 31, 2009, and a proposed tax assessment of $800 thousand for the
tax year ended December 31, 2010. Additional gaming taxes of $200 thousand were
assessed for each tax year ended December 31, 2009 and 2010. The assessments for both
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tax years were related to certain expenses which were deemed to be non-allowable
deductions by the General Income Tax Office and for the imputation of interest income on
intercompany advance balances. These matters were appealed to the Tribunal Fiscal
Administrative (“TFA”) during Q3 and Q4 of 2012. On January 16, 2013, the Group was
advised that the Administrator Tribunal Appeal was denied in regards to the TGE tax
matter. The Group filed a lawsuit at the Court level in August 2014 to revoke the tax
assessment. In February 2015, the Group paid the tax authorities $3.088 million on the
alleged tax liability. The payment to the Costa Rican tax authority was required to be paid
as a condition to closing the sale of the Group’s interest in Costa Rica to CIRSA, as
described below. The payment made by the Group was made without prejudice or
admission of liability. The preliminary hearing of the case was heard in June 2015 and the
Administrative file is being reviewed by the Court. A trial date was set for June 2018. The
Group continues with the judicial procedure and its claim to revoke the tax assessment so
TGE could recover a portion of the payment over time. In relation to this, Cirsa Gran
Entretenimiento de Costa Rica, S.A. (formerly TGE) filed an administrative procedure
against the Tax Authority before the Administrative Court contested the legality of certain
Administrative Resolutions of the Direction of Great National Tax Payers of Costa Rica
and the Fiscal Tribunal. There was a hearing on this case in June 2018. The Administrative
Court rendered a judgment (number 62-2018-VIII) against TGE on July 12, 2018. TGE
filed an appeal on August 7, 2018 in the First Chamber of the Supreme Court in respect of
the only remaining issue for this controversy case, which is the legal fees to be charged
against the taxpayer TGE for failing to prevail in the lawsuit. The legal fees are
approximately $310,000 and the tax appeal is pending.
(ii) GTCR received a proposed tax assessment in the approximate amount of $340 thousand
for the tax year ending December 31, 2011, related to certain expenses which were deemed
to be non-allowable deductions by the General Income Tax Office and for the imputation
of interest income on intercompany advance balances. A penalty resolution is still pending
to be released by the TFA, which comprises an amount equal to 25% of the tax assessment
or $113 thousand. The Tax counsel for GTCR advises that the exposure on taxes and
penalties is significantly less than the proposed assessment. The amount of the non-
allowable expenses was 36,960,675 colones or USD$61,280. The GTCR objections were
not resolved, but under a recent change to Costa Rica tax law, (Tax Law number 9635
taxpayers may take advantage of a tax amnesty, in which the principal could be paid
without interest with a 60% reduction of the fine. GTCR filed for the tax amnesty and
closed the tax inspection procedure for the year 2011. The amounts paid were 11,088,202
colones (USD$18,384) in principal, and 1,108,820 colones (USD$1,838) for the fine.
(iii) The Costa Rica Tax authorities have assessed a tax against King Lion Network for the tax
year 2011 for approximately 17.2 million colones (or $30 thousand) representing tax and
interests due the non-recognition of the interests paid for the purchase of the shares related
to the Tres Rios Project. The Company presented the appeal to this assessment on time
and the case remains pending.
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c. Costa Rica-CIRSA Escrow claim
In a related matter to the San Diego Federal District Court action, in February 2015, the Group
had previously consummated Stock Purchase Agreement (SPA) in which CIRSA acquired the
shares of Grupo Thunderbird De Costa Rica from Thunderbird Resorts Inc. (TRI) and Angular
Investments S.A. The SPA provided that a certain portion of the monies to be paid by CIRSA
to TRI/Angular were to be held in escrow pursuant to the SPA. In February 2015, CIRSA
delivered $2,125,000, to the Escrow Agent (the “Escrow Amount”) in accordance with the
terms and conditions of the SPA. The Escrow Agreement provided for a claims procedure by
which certain claims could be made by third parties/tax authorities, vendors to be paid from
the Escrow. In December 2017 and in March 2018, ZIMMER AND FOX as employees of
GTCR filed certain claims against CIRS, GTCR and TRI. TRI position is that ZIMMER AND
FOX are now claiming in bad faith that they are is entitled to a series of labor rights. The SPA
and all related documents support the fact that ZIMMER AND FOX as a "seller shareholder"
waived and released any and all claims, rights, etc. that he may have had, including social
benefits under Costa Rica law. TRI believe ZIMMER AND FOX have waived all his claims
and therefore their labor claim is without merit. Based on our information and belief, ZIMMER
intended to file this labor complaint in response to TRI’s actions against him wherein TRI had
filed the aforementioned lawsuit against ZIMMER in the Federal District Court of San Diego,
California, Zimmer’s bad faith as he is attempting to retaliate against TRI for the actions that
TRI has taken against him in the USA litigation. TRI believes that ZIMMER’s claim is without
merit and ultimately the labor tribunal made a ruling that ZIMMER’S claims against GTCR
was without merit. In fact, the Costa Rica labor tribunal already ruled against Zimmer.
Therefore, TRI disputed each of the claims that CIRSA made against the Escrow. The general
basis for disputing each of CIRSA’s claims, as well as, any claim that Thunderbird Resorts Inc.
violated the Stock Purchase Agreement dated February 25, 2015 are completely without basis
in law or in fact. Neither ZIMMER AND FOX are entitled to any payment as set forth in each
of their respective labor cases. Moreover, TRI position in respect of the issues raised by CIRSA
and so-called breach of the SPA is that TRI is not jointly and severally liable with Angular,
Zimmer and Fox. The Fox claim which has not been served on TRI but only against CIRSA
was filed as a way to place pressure on Thunderbird to help Zimmer in his claim. In addition,
Fox will lose his claim based on the claim being barred as the statute of limitations will
foreclose Fox from succeeding in the courts.
In relation to the Murray Jo Zimmer case, a ruling was issued by the Labor Judge of the 1st
judicial circuit of San Jose on October 8, 2018, in which the Labor Judge declared that the
lawsuit filed by Jo Zimmer against Grupo Cirsa de Costa Rica had no legal basis and issued an
order against Zimmer to pay the costs and expenses of the judicial process. Murray Jo Zimmer
appealed ruling No. 2080 on October 12, 2018. In June 2022, the 2nd Tribunal of the Supreme
Court ruled the Resolution 2022-001356, which is final and non-appealable, confirming the
prior decisions against the plaintiff Murray Jo Zimmer.
In relation to the Michael Fox case, TRI was not served with this labor lawsuit, but in the aim
of affording evidence and facts to the procedure, it filed voluntarily its response to the labor
claim before the 2nd Labor Court of San Jose, Costa Rica. A hearing for this case scheduled
for November 2020, which was suspended on account of the Court’s request to amend certain
evidence previously received. New hearing date was appointed on October 4th, 2022, but it
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was suspended due the requirement of a professional translator for the plaintiff. Currently both
parties are awaiting a new hearing date to be appointed by the Labor Court.
In March of 2020, MMG Bank Corporation notified CIRSA, Thunderbird Resorts Inc. and
Angular Investments S.A. that MMG Bank Corporation intended to make a disbursement of
$532,906 to Thunder Resorts Inc. and to Angular Investments S.A. pursuant to that certain
Escrow Agreement dated February 25, 2015. CIRSA filed an objection to release of escrow
proceeds on the basis that CIRSA’S objection is based on three sets of factors:(1) Labor Law
Suit/controversy filed by Murray Jo Zimmer and Michael G. Fox (sometimes collectively
referred to as “ZIMMER AND FOX”) against Grupo Cirsa De Costa Rica S.A. in which
ZIMMER AND FOX are seeking an estimated seven million dollars; (2) Certain Labor claims
filed by “other employees of CIRSA”; (3) Certain Tax Claims filed by the Costa Rica tax
administration against companies sold by Thunderbird Resorts Inc. to CIRSA Thunderbird
Resorts Inc. disputed each of the claims that CIRSA. The general basis for disputing each of
CIRSA’s claims as well as any claim that Thunderbird Resorts Inc. violated the Stock Purchase
Agreement dated February 25, 2015 are completely without basis in law or in fact. Moreover,
TRI’s position in respect of the issues raised by CIRSA and so called breach of the SPA is that
TRI’s is not jointly and severally liable with Angular, Zimmer and Fox and demanded that the
escrow proceeds ought to be disbursed solely to Thunderbird. MMG Bank continues to hold
the escrow proceeds and has not disbursed any part of the aforementioned $532,906.
d. Canadian tax controversy
Thunderbird Gaming, Inc. (“TGI”), a wholly-owned subsidiary of the Group that has been
inactive since 1996, received notification of a reassessment from the Canada Revenue Agency
(“CRA”) with respect to a transfer of assets in 1996 in relation to the California Indian gaming
business previously operated by TGI. Specifically, this reassessment stems from a transfer of
assets which CRA contends was undervalued. The reassessment is in the amount of Canadian
dollar (“CDN”) $380 thousand (US $381 thousand at December 31, 2010).
TGI submitted applications to CRA utilizing its net operating loss (“NOL”) in a manner that
reduced the actual tax liability to zero and is taking the position that the valuation of assets was
accurate in order to preserve its NOL. By taking this position, TGI believes it avoids the
imposition of interest on tax, which is the subject of the reassessment.
Further, TGI filed a fairness application with the appropriate Canadian taxing authority
requesting a complete abatement of the alleged interest imposed on the alleged tax liability.
In this filing, management alleges that TGI received unconscionable and egregious treatment
from CRA in addition to experiencing excessive delays in the reassessment process. TGI also
filed an appeal of CRA’s assessment with the tax courts in Canada in which TGI will attempt
to establish that the underlying tax liability should never have been assessed.
The fairness application was rejected and in March 2007, TGI abandoned further appeal to the
tax courts in Canada.
Although the Group believes CRA’s case is without merit, the liability is contained within an
insolvent subsidiary and consequently, even though TGI is responsible for the liability, the
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Group’s parent and subsidiaries have no exposure to the TGI liability. The Group does not
expect that CRA will collect the judgment as TGI is insolvent and therefore there is no accrual
in these consolidated financial statements related to this reassessment.
e. Guatemala Tax cases
The Superintendencia de Administración Tributaria-SAT (the Guatemalan tax authority) is
attempting to open up Thunderbird de Guatemala, S.A. to a tax audit for 2009 and 2010, which
the Group has been challenging. On March 20, 2017, Thunderbird de Guatemala was notified
of decisions made by the Second Tribunal of Accounts and Controversies, which has decided
over a Recusal Appeal, conceded to be in favor of Thunderbird de Guatemala and an Appeal
for Reversal related to certain documents that the Tax Authority is requesting for the tax years
2008 and 2009 and the company considered time-barred. The Tribunal alleged that the matter
as discussed, related to whether the delivery of certain documents, were or were not legally
required under a statute of limitations. With this decision made, Thunderbird de Guatemala
defense is prepared to present its arguments and challenge the main matter of this case in
relation to the statute of limitations of the Tax Years 2008 and 2009.
In January 2021, the Company was notified that the Court ruled against Thunderbird de
Guatemala in this 2009 tax case. The Company strongly believes in its arguments; specifically,
that the case is time barred. The Company filed an “Amparo” in January of 2021 to continue
defending its position before the Supreme Court and awaits the Court ruling. The writ of
Amparo is generally described as a remedy available to any person whose right to life, liberty
and security is violated or threatened with violation by an unlawful act or omission of a public
official or employee, or of a private individual or entity. Court took knowledge of the Amparo
in June 2021.
In November 2019, the third economic court issued a resolution against the arguments of
Thunderbird de Guatemala in a case related to 2009 tax period for an approximate amount of
$100 thousand. An Administrative Cassation Appeal has been filed in July 2021 before the
Third Economic Court alleging that the judge omitted some of the arguments and facts
presented by Thunderbird de Guatemala. On July 20, 2022, Thunderbird de Guatemala was
served with the Supreme Court Resolution 01002-2021-00644, in which was decided to
maintain the prior decisions against the Company interests. At this instance, no further
challenges are available. A provision has been recognized for an approximate amount of
US$109,000 as described in Note 5.
f. San Diego Federal District Court
In June of 2015, Thunderbird Resorts filed a lawsuit in the Federal District Court, San Diego,
against defendants Murray Jo Zimmer (“Zimmer”), Angular Investments Corp. (“Angular”),
Mitzim Properties, Inc. (“Mitzim Properties”) Taloma Zulu, S.A., (“Taloma Zulu”) Jack R.
Mitchell, (“Mitchell”). The lawsuit alleges breach of fiduciary duty against Zimmer, Angular
and Mitchell; breach of contract against defendant Mitchell; aiding and abetting, breach of
fiduciary duty against Taloma Zulu and Mitzim Properties; fraud Civil RICO 18 U.S.C. § 1961,
conversion constructive trust and an accounting against defendants Zimmer, Angular and
Taloma Zulu.
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The basis of the various claims and allegations in the lawsuit stem from the following: In 2002,
Thunderbird partnered with Angular to operate casinos and related businesses in Costa Rica.
Grupo Thunderbird de Costa Rica, S.A. (“GTCR”) was formed by Thunderbird and Angular,
who agreed to split all profits from GTCR on an equal, “50/50” basis. Angular’s principal,
defendant Zimmer, became Thunderbird’s “country manager” for its operations in Costa Rica.
Between July 2007 and September 2014, Zimmer caused GTCR to pay over $2 million to
defendant Taloma Zulu. Zimmer reported to Thunderbird’s management that these amounts
were being paid for legal and consulting expenses for GTCR to operate in Costa Rica. Upon
further investigation, Thunderbird now believes and alleges that Zimmer and Mitchell caused
Thunderbird’s 50% share of the amounts paid to Taloma Zulu to be diverted, misappropriated,
embezzled, and/or converted for defendants’ own improper, personal uses. Thunderbird
Resorts is seeking the following relief: awarding Thunderbird the damages it has sustained by
reason of Mitchell, Zimmer et al conduct, and interest thereon as provided by law; awarding
Thunderbird exemplary and/or punitive damages on account of defendants’ willful, wanton,
malicious, and/or oppressive conduct; awarding Thunderbird its costs of suit incurred therein.
Thunderbird Resorts is also seeking the imposition of a constructive trust in favor of
Thunderbird, and against defendants, of the benefits improperly received by defendants and an
order commanding defendants to return to Thunderbird the funds they improperly received by
way of their wrongful conduct. So far, Thunderbird Resorts was successful in having the court
order approximately $420 thousand of the defendants’ funds to be sequestered in the Federal
District Court bank account pending resolution of the case.
In March of 2017, Thunderbird Resorts Inc. obtained a default judgment in the approximate
amount of $659 thousand against co-defendants Angular Investments S.A. and Taloma Zulu.
Simultaneously with Thunderbird Resorts Inc. filing of the San Diego Federal District Court
case, Jack R. Mitchell (“Mitchell”), a former employee of Thunderbird, brought an arbitration
claim in Hong Kong under the International Court of Arbitration of the International Chamber
of Commerce against Thunderbird. The amount claimed is not less than $518 thousand. By
way of background, in September 2012, Thunderbird Resorts entered into a settlement with
Mitchell, following his termination from the company. Part of that settlement included a
payment to Mitchell of approximately $1.8 million to be paid in installments over the course
of several years. On or about May 2015, Thunderbird Resorts claimed that Mitchell was in
default of his settlement agreement and stopped payment on the settlement amount. Mitchell
instituted arbitration proceedings in Hong Kong pursuant to the terms of the settlement
agreement.
On September 27, 2017 the International Court of Arbitration of the International Chamber of
Commerce approved its award against Thunderbird Resorts Inc. in the approximate amount of
$518 thousand plus attorney’s fees and costs of approximately $220 thousand. Thunderbird
Resorts intends to pursue all legal challenges to the award including motions for
reconsideration, appeals and challenges to the award.
Thunderbird Resorts made several request to the Arbitrator that the decision in this matter be
delayed pending submittal of further evidence from the related matter Thunderbird Resorts Inc.
vs. Jo Murray Zimmer, Jack R. Mitchell, Angular Investments, S.A, Taloma Zulu, Mitzim case
no. 15CV1304 JAH BGS filed in the United States District Court for the Southern District of
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California in which Mitchell and his co-defendants are being sued for approximately $1.28
million plus punitive damages which may rise to the level of three times the actual damages.
In May of 2017 Jack Mitchell filed a motion to have the claims made against him submitted to
arbitration in Hong Kong alleging that is the proper forum for Thunderbird Resorts claim. In
addition, Angular Investments S.A. filed a motion to set aside the $659 thousand default
judgment. The Court also granted Thunderbird leave to file additional pleadings showing
default damages above $657,975, and Thunderbird submitted additional pleadings showing
damages and interest totaling $825,125. In addition to Angular’s motion to set aside the default
judgment, Angular also filed a motion to dismiss for lack of jurisdiction.
In March 30, 2018, San Diego Federal District Court Judge Houston issued an Order Granting
Defendant Jack Mitchell’s Motion to Compel Arbitration which states in part that:
“The action is STAYED as to Defendant Mitchell until such arbitration has been held in
accordance with the terms of the agreement as set forth by this order. The parties shall file a
joint status report regarding the progression of Arbitration proceedings no later than
September 28, 2018. The Court addressed the issue of Thunderbird’s counterclaims, which
Thunderbird contended should hav
e been adjudicated by the U.S. Federal District Court,
on pages 6, 7 and 8 of the Order. The Court’s Order states, in relevant part: The Court must
next determine whether the parties intended to arbitrate the issue of waiver. The question of
whether the remaining five causes of action have been waived as to Mitchell u nd er the Release
and Waiver provision (Clause 3.2) of the Settlement Agreement is also a “dispute[], claim[],
[or] controvers[y] between the parties arising out of th[e] Release [and Settlement]
Agreement.” The parties expressly agreed to arbitrate this issue. Therefore, it is for the
arbitrator to decide which claims, or portions thereof, have or have not been waived, based on
the alleged dates of Defendant’s conduct. Accordingly, the Court GRANTS Defendant’s Motion
to Compel Arbitration whether Plaintiff waived its First, Third, Fourth, Fifth, and Sixth causes
of action, or any portion thereof, against Mitchell upon execution of the Settlement Agreement.
(Order, pg. 7:1-10.) Section 9.49 of the Arbitration Award dated September 26, 2017 outlined
the Tribunal’s Findings, stating In pertinent part: “The Claimant [Mitchell] was not in breach
of the Settlement Agreement.” Although the findings are decisive on the issues raised by
Plaintiff in its Eighth Cause of Action for Breach of Contract, the Tribunal made no findings
as to the issue of waiver. Not having Plaintiff’s counterclaims before it, the Arbitrator declined
to make findings as to the proper interpretation of the release and waiver clause in paragraph
3.2 of the Settlement Agreement, stating:By reason of the Tribuna’'s findings in paragraphs
[9.46] and [9.48] that the Claimant has not breached clauses 5 and 6 of the Settlement
Agreement and was not in breach of the Settlement Agreement (paragraph 9.49[1]), it does not
need to make a finding as to the proper construction of the release in clause 3.2 of the
Settlement Agreement as no issue of the Claimant being entitled to rely on Clause 3.2 of the
Settlement Agreement arises. Jack Ray Mitchell v. Thunderbird Resorts Inc., Int’l Ct. of Arb.
Of the Int’l. Chamber of Commerce, Case No. 21243/CYK/PTA, Ch. 9, ¶ 9.50 (2017) (Rooney,
Arb.). In light of this Court’s order granting Defendant’s Motion to Compel Arbitration as to
the issue of waiver and all remaining claims Plaintiff chooses to pursue in arbitration, the
Court finds Defendant Mitchell’s request to domesticate and enter the Arbitration Award
against Plaintiff premature” (Order, pgs. 7:23-8:13.)
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The Court granted Mitchell’s motion to compel arbitration on TRI claims against Mitchell. TRI
Complaint against Mitchell included claims for Breach of contract Fraud, RICO violations. The
Court “stayed/froze” the various causes of action as to Mitchell, including the RICO claim, and
ordered the parties back to Arbitration to resolve those issues and the other causes of action
against Mitchell. Essentially, The Court opined that if TRI wishes to pursue these claims
against Mitchell then it must pursue them as counter-claims in the ICC Hong Kong arbitration.
The Court agreed with Mitchell that all of the claims should be arbitrated in Hong Kong.
Therefore, TRI’s position is that Mitchell’s arbitration award is not final.
The Court ruled in favor of Thunderbird and against MITZIM on its motion to quash writ of
attachment. Thunderbird Resorts is diligently prosecuting its claims against MITZIM and
estimates that its monetary value of its claim against MITZIM, is $1,282,454.
On September 27, 2018 Thunderbird Resorts Inc. filed an arbitration claim in the approximate
amount of $1 million against Mitchell with the ICC in Hong Kong. Mitchell in turn filed a
“counter-claim” against Thunderbird in the same proceeding in Hong Kong. In October of
2019, the sole arbitrator in this proceeding ruled that Thunderbird Resorts Inc. claim was barred
by the doctrine of “res judicata”. Thunderbird Resorts Inc. thereafter filed a Petition for
reconsideration of the arbitrators ruling taking the position that application of the doctrine of
“res judicata” is without basis in law and in fact. The ICC has sought additional fees from the
parties to the arbitration. Mitchell has refused to pay any fees and Thunderbird refused to pay
Mitchell’s share.
On September 28, 2018 the Court ruled in favor of Zimmer’s Motion to Dismiss for Lack of
Jurisdiction. In addition, the Court ruled in favor of Angular’s motion to set aside the default
judgment and motion to dismiss for lack of jurisdiction.
On January 13, 2019, Jack Ray Mitchell through lawyers in Costa Rica, filed a request of
enforcement of an arbitration award dated January 25, 2018 which he received in his favor
against Thunderbird Resorts, Inc. The request of enforcement was made in Costa Rica against
King Lion Network, subsidiary of Thunderbird Resorts. Inc. and the company was notified on
January 24, 2019. King Lion Network filed its response and defense for this case on February
8t
1s
h, 2019. On January 22, 2021, the
t Supreme Court of Costa Rica in a review of the request
1s
1s
made, appoints the
t Instance Civil Tribunal of the
t Circuit of San Jose to initiate the
procedure, recognizing the existence of the arbitral award and asking Mitchell to demonstrate
the ownership of King Lion Network in that Court, since this entity was not part of the Hong
Kong Arbitration.
On March 19, 2019 the court ruled on Thunderbird Resorts Inc. application for default
judgment against Taloma Zulu, S.A. as the Court entered default judgment in in favor of
Thunderbird Resorts, Inc., in the amount of $407,643.
In September 2019, Thunderbird Resorts Inc. filed a civil claim before the Tribunal Courts in
San Jose, Costa Rica against Murray Jo Zmmer, Angular Investments Corp and Taloma Zulu
S.A., for payments made from the Costa Rica operation owned by Thunderbird Resorts and
Angular Investments, to several entities without the authorization of Thunderbird Resorts, Inc.
The claimed amount is approximately ½ of the amount that Zimmer wired without
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authorization, which corresponds to Thunderbird funds in the approximate amount of
$837,090. In October, 2019, The Second Civil Court of the First Judicial Circuit issued a
notification to the defendants giving them thirty days to answer regarding the facts of the claim.
This case is in its initial phase.
On the Thunderbird vs. Mitchell arbitration claim, in December 2019, the ICC placed a demand
on the Parties to pay the additional fees failing which the arbitration would be considered
withdrawn. The ICC advised the parties that a final award in the matter would be issued in
late April 2020 but no final award has been submitted as of the date of the filing of this Annual
Report. Thunderbird Resorts Inc. is also awaiting the ICC ruling on its Petition for
Reconsideration of the arbitrators ruling on the issue of “res judicata”.
In September of 2020, Mitchell and Mitzim filed a Motion in the Federal District Court lawsuit
for an Order Dismissing the San Diego federal District Court lawsuit for Lack of Standing on
alleging that Thunderbird Resorts Inc. “TRI” filed the lawsuit based on extraterritorial activities
that took place in Costa Rica and barred by Costa Rica law placing Mitchell and MITZIM to
exorbitant expense and inconvenience. TRI opposed the motion on the basis that the motion
and/or objection based on lack of standing is not jurisdictional and thus is waivable. Mitzim
waived this defense by waiting over five years to raise this objection, and only first did so after
the close of fact discovery. Moreover, even if the motion was timely (it is not), the substantive
argument lacks merit, as Thunderbird properly brings its claims in its direct, individual
capacity. It need not bring these claims in a derivative capacity. Thunderbird is, and always has
been, the proper real party in interest in this lawsuit. Accordingly, Thunderbird requested that
this Court deny Mitzim’s untimely and meritless motion in its entirety. On December 21, 2022,
the Court ruled on the aforedescribed motion by denying MITZIM request to dismiss the case
. The Court found that in light of the evidence of record demonstrating MITZIM knew or
should have known of a meritorious Rule 17) objection. Specifically, MITZIM (a) failure to
bring their claim until more than five years into the litigation, despite being on notice of the
potentially meritorious defense based upon notice provided in the original complaint, the
Court’s March 29, 2018, order, and buttressed by Defendant Mitchell’s own admissions, and
(b) continued substantive litigation of the case for years after such notice of potentially
meritorious defense constitutes waiver. The Court and the parties are is now poised to proceed
to trial which is more likely to occur sometime in 2023.
g. The Group’s entry and exit from the India market
The Group entered the India market in 2008 by initiating a hotel project in Daman, India, which
is located just north of Maharashtra State whose capital is Mumbai (formerly Bombay). The
project known as “Thunderbird Resorts – Daman” has faced both regulatory delays outside the
Group’s control, as well as cost overruns in construction and pre-operating interest / expense
due to the delays which ultimately caused the Group to exit the India market in April 2015.
The entire history of the entry and exit as well as settlements with various parties is fully
described in previously filed financial statements. All settlements have been completely
satisfied with the exception of the settlement with Maravege. In that regard, The Group entered
into a revised settlement with Maravege on the basis described in the section on “Subsequent
events” as the revised settlement was entered into after December 31, 2022.
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24. RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group is exposed to market risk through its use of financial instruments and specifically to
currency risk, interest rate risk and credit risk, which result from both its operating and investing
activities. The Group’s risk management is coordinated at its headquarters, in close cooperation
with the Board of Directors, and focuses on actively securing the Group’s short to medium term
cash flows by minimizing the exposure to financial markets. Long term financial investments are
managed to generate lasting returns.
The Group does not actively engage in the trading of financial assets for speculative purposes nor
does it write options. The most significant financial risks to which the Group is exposed to are
described below.
Foreign currency sensitivity
Most of the Group’s transactions are carried out in the functional currency where the operations
reside. Exposures to currency exchange rates arise from the Group’s loans payable, intercompany
payables and cash balances, which are primarily denominated in US-dollars.
To mitigate the Group’s exposure to foreign currency risk, non-functional currency cash flows are
monitored. Generally, where the amounts to be paid for purchases completed in US-dollars versus
the functional currency the financing of the purchase is short term; therefore, a decision is made to
either finance the equipment or to pay in cash depending on the current value of the US-dollar
compared to the functional currency.
US-dollar currency denominated financial assets and liabilities in entities whose functional
currency is not US-dollar are as follows:
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US-dollar amounts
2022 2021
Nominal amounts Country
Financial assets
Nicaragua
1,358 1,072$
Peru
2,234 608
Financial liabilities
Nicaragua
(1,236) (1,143)
Peru
- (131)
Short term exposure
2,356$ 406$
Financial liabilities
Nicaragua
(293) (389)
Peru
- (4,419)
Long term exposure
(293)$ (4,808)$
The following table illustrates the sensitivity of the net income (loss) for the year and equity in
regards to the Group’s financial assets and financial liabilities and the US-dollar exchange rates.
It assumes a percentage change of the US-dollar against the other currencies for the year ended at
December 31, 2022 and 2021. These percentages have been determined based on the average
market volatility in exchange rates in the previous 12 months. If the US-dollar had weakened
against the functional currencies according to the percentages below then this would have had the
following impact on net income and equity:
2022
2021
Percentage
change
Net effect on
income
Net effect on
equity
Percentage
change
Net effect on
income
Net effect on
equity
Country
Costa Rica
6.04% 6$ 152$ 2.36% (3)$ 51$
Nicaragua
0.04% 0 1 0.01% - 1
Peru
132.45% (16,102) (71,114) 8.40% (40) 1,253
Total
(16,096)$ (70,960)$ (43)$ 1,305$
If the US-dollar had strengthened against the functional currencies according to the percentages
below then this would have had the following impact on net income and equity:
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2022
2021
Percentage
change
Net effect on
income
Net effect on
equity
Percentage
change
Net effect on
income
Net effect on
equity
Country
Costa Rica
6.04% (6)$ (135)$ 2.36% 3$ (49)$
Nicaragua
0.04% (1) (1) 0.01% - -
Peru
132.45% (2,248) (9,928) 8.40% 34 (1,060)
Total
(2,255)$ (10,063)$ 37$ (1,109)$
Interest rate sensitivity
The Group’s policy is to minimize interest rate cash flow risk exposures on long-term financing.
Longer-term are therefore usually at fixed rates. At December 31, 2022, the Group is exposed to
changes in borrowings market interest rates through some of its bank borrowings of approximately
$364,925 as of December 31, 2022 (2021 - $453,781), which are subject to variable interest rates.
As in the previous year, all other financial assets and liabilities have fixed rates. The impact on
profit or loss of a reasonably possible change in interest rates of +/- .23% as of December 31, 2022
(2021 - +/- .76%) with effect from the beginning of the year, would be an increase of $853 (2021 -
$3,471) or a decrease of $853 (2021 - $3,471). These changes in interest rates are considered to be
reasonably possible based on observation of current market conditions.
The calculations are based on the Group’s financial instruments held at each statement of financial
position date. All other variables are held constant.
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25. FINANCIAL INSTRUMENT BY CATEGORY
Loans, receivables
and other finacial
assets
Group
December 31, 2022
Assets as per statement of financial position
Trade and other receivable
3,810$
Other financial assets
112
Cash and cash equivalents
6,780
Total
10,702$
Loans, receivables
and other finacial
assets
Liabilities as per statement of financial position
Borrowings
13,176$
Trade and other payables
7,854
Other financial liabilities
529
Total
21,559$
Loans, receivables
and other finacial
assets
Group
December 31, 2021
Assets as per statement of financial position
Trade and other receivable
3,745$
Other financial assets
118
Cash and cash equivalents
3,595
Total
7,458$
Other financial
liabilities
Liabilities as per statement of financial position
Borrowings
18,172$
Trade and other payables
7,399
Other financial liabilities
504
Total
26,075$
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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26. FINANCIAL INSTRUMENTS
Credit risk analysis:
The Group continuously monitors defaults of customers and other counter parties, identified either
individually or by group, and incorporates this information into its credit risk controls. Where
available at reasonable cost, external credit rating and/or reports on customers and other
counterparties are obtained and used. The Group’s policy is to deal only with creditworthy
counterparties.
The Group’s Management considers that all financial assets that are not impaired for each of the
reporting dates under review are of good credit quality, including those that are past due.
In respect of trade and other receivables, the Group is not exposed to any significant credit risk
exposure to any single counterparty or any group of counterparties having similar characteristics.
The credit risk for liquid funds and other short-term financial assets is considered negligible, since
the counterparties are reputable banks with high quality external credit ratings.
Liquidity risk analysis:
The Group measures its liquidity needs by:
• Monitoring short-term obligations on a country-by-country and global, consolidated basis, with
short-term inflows and outflows forecasted for the financial year, updated weekly.
• Monitoring long-term, scheduled debt servicing payments.
• Rolling forward 5-year cash flow models each month based on the financial results year-to-date
through the previous month.
The Group has the capacity to manage liquidity with a number of different tools at its disposal,
including:
• Raising of debt or equity capital at both the operations and Group levels.
• Selling of non-strategic assets.
• Restructuring or deferral of unsecured lenders.
• Restructuring of salaries of key personnel.
• Deferral or aging of accounts payables.
• Cost management programs at both the operations and Group levels.
Based on the information available today and the liquidity tools at its disposal, Management
anticipates that the Group can meet its liquidity needs over the next 12 months primarily from
operational cash flows as set out in Note 2.
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
As at December 31, 2022, the table set below shows the Group’s liabilities maturities per year:
2023
2024
2025
2026
2027
Thereafter
Total
Long-term bank loans 113$ 316$ -$ -$ -$ -$ 429$
Finance lease obligations 1,353 1,124 988 800 655 867 5,787
Loans with non-financial entities
9,579 - - - - - 9,579
Trade and other payables 4,286 - - - - - 4,286
Due to related parties
1,661
-
-
-
-
-
1,661
Total 16,992$ 1,440$ 988$ 800$ 655$ 867$ 21,742$
This compares to the maturity of the Group’s financial liabilities in the previous reporting period
as stated below:
2022
2023
2024
2025
2026
Thereafter
Total
Long-term bank loans 4,469$ 688$ 914$ 821$ 768$ 3,516$ 11,176$
Finance lease obligations 1,223 1,302 1,138 1,008 820 1,503 6,994
Convertible debt notes 5,617 - - - - - 5,617
Trade and other payables 3,506 - - - - - 3,506
Due to related parties
1,986
-
-
-
-
-
1,986
Total 16,801$ 1,990$ 2,052$ 1,829$ 1,588$ 5,019$ 29,279$
Fair value measurement methods:
The methods and valuation techniques used for the purposes of measuring fair value are unchanged
from the previous reporting period. Measurement methods for financial assets and liabilities
accounted for at amortized cost are described below.
The carrying amount of trade and other receivables, cash and cash equivalents, and trade and other
payables is considered a reasonable approximation of fair value. The fair value of borrowings has
been estimated at amortized cost.
Financial assets at FVTPL:
Financial assets at FVTPL include holding in a diversified investment fund with most of the
positions in gold and listed equity securities. The Group accounts for the investment at FVTPL and
did not make the irrevocable election to account for it at FVOCI. The fair value was $112,000 as
of December 31, 2022 (2021 - $118,000).
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Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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27. CAPITAL MANAGEMENT POLICIES AND PROCEDURES
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as
a going concern in order to provide returns for shareholders and benefits for other stakeholders and
to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may issue new shares or sell assets to
reduce debt. Consistent with others in the industry, the Group monitors capital on the basis of its
leverage ratio. This ratio is calculated as net debt divided by EBITDA.
2022 2021
The leverage ratios at December 31, 2022 and 2021 were as follows:
Total borrowings and finance lease obligations (Note 17 and 22)
13,176$ 18,180$
Less: Cash and cash equivalents and Restricted cash
(6,780) (3,595)
Less: Accrued interest
(529) (504)
Less: unamortized debt issuance cost
- (8)
Net Debt
5,867$ 14,073$
Operating loss from continuing operations before other gain and loss items
2,431 2,129
Add: Depreciation and amortization
1,192 1,620
EBITDA
3,623$ 3,749$
Leverage ratio
1.62 3.75
28. INVESTMENT IN JOINT VENTURE
The Group has a material joint venture in a Costa Rican company, King Lion Network, S.A.
(“KLN”).
Name of the joint venture
Country of
incorporation and
principal place of
business
Principal activity
Proportion of ownership
held by the Group
2022 2021
King Lion Network, S.A.
Costa Rica Land Company 50% 50%
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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The investments in the Costa Rica joint venture is accounted for using the equity method in
accordance with IAS 28.
A reconciliation of the financial information above to the carrying amount of the investment in the
Group’s Costa Rica joint venture is set out below:
2022 2021
Current assets 8,520$ 7,948$
Total assets
8,520 7,948
Current liabilities (4,155) (4,060)
Total liabilities
(4,155) (4,060)
Total net assets 4,365 3,888
Proportion of ownership interest held by Group 50% 50%
Carrying amount of investment in joint venture
2,183 1,944
Financial statements for the Group’s Costa Rica joint venture is as follows:
2022 2021
Profit / (loss) for the period
186 (268)
Proportion of ownership interest held by Group 50% 50%
Group's share of loss for the period $ 93 $ (134)
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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29. PRINCIPAL SUBSIDIARIES
The Group owns directly or indirectly the following companies. The principal operations are
carried out in the country of registration; all subsidiaries have a December 31 year-end. The Group
comprises a large number of companies and it is not practical to list all of them below. This list
therefore includes those companies which the Directors consider principally affect the results or
financial position of the Group.
The following is a table of our organizational structure of material subsidiaries, including our
effective record ownership structure as of December 31, 2022:
Name of subsidiary
Jurisdiction
of formation
Effective
ownership interest
Thunderbird Entertainment, S.A, Panama 100%
Thunderbird Greeley, Inc. California 100%
Total Gaming, Inc. California 100%
Thunderbird Hoteles Las Americas S.A. Peru 100%
Buena Esperanza Limitada S.A. Nicaragua 55.9 % (indirect)
Camino Real (BVI) Investments Ltd. British Virgin Islands 100%
International Thunderbird (BVI) Ltd. British Virgin Islands 100%
International Thunderbird Brazil (BVI) Ltd. British Virgin Islands 100%
The Group includes a subsidiary, Buena Esperanza Limitada, S.A. (“BELSA”), with material non-
controlling interest (“NCI”):
Name
Country of
incorporation and
principal place of
business
Principal
activity
Proportion of ownership
held by the NCI
2022 2021
Buena Ezperanza Limitada, S.A. ("BELSA")
Nicaragua Gaming 44.10% 44.10%
Dividends of $962,000 were paid to the NCI of BELSA during the year 2022 and $845,000 in 2021.
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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Summarized financial information for BELSA, before intragroup eliminations, is set out below:
(in thousands)
BELSA
2022 2021
Non-current assets
7,143$ 7,725$
Current assets
2,635 2,449
Total assets
9,778 10,174
Non-current liabilities
(3,928) (4,831)
Current liabilities
(3,426) (2,684)
Total liabilities
(7,354) (7,515)
Equity attributable to the owners of the parent
677 431
Non-controlling interest
1,747 2,228
(in thousands)
BELSA
2022 2021
Revenue
13,461$ 12,222$
Profit / (Loss) for the year attributable to the owners of the
parent
609 449
Profit / (Loss) for the year attributable to NCI
481 355
Profit / (Loss) for the year
1,090
804
Other comprehensive income for the year attributable to the
owners of the parent
50 72
Other comprehensive income for the year for the year
attributable to NCI
0 4
Other comprehensive income for the year
50
76
BELSA
2022 2021
Net cash from operating activities
$ 3,057
$ 3,803
Net cash used in investing activities
(527)
(180)
Net cash (used in) from financing activities
(2,419)
(3,092)
Effect of foreign exchange adjustment
(42)
(236)
Chapter 7: 2022 Consolidated Financial Statements & Report of the Independent Auditors
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30. SUBSEQUENT EVENTS
These are the material events to disclose from December 31, 2022 through the release of this
2022 Annual Report.
Over the course of 2023 year-to-date, the Group has negotiated new loan conditions with a number
of its unsecured lenders. In total thus far, unsecured debt negotiations have led to a reduction on
unsecured debt balances in excess of $1.3 million and a reduction of forecasted future interest
payments in excess of $500K from either debt payoff or the elimination of interest payments on
continuing balances. During recent years, employees have accumulated net loan balances to the
Group of approximately $1 million, which the Group has also now paid off.
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Chapter 8: Risk Factors
Chapter 8:
Risk Factors
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Chapter 8: Risk Factors
Summary of Risk Factors: Prospective investors in Thunderbird Resorts Inc. should consider the risks
described below associated with our business. Our business, financial condition and results of operations
could be materially and adversely affected by any of these risks. Although we believe that the risks set
forth below are our material risks, they are not the only risks we face. Additional risks not presently known
to us or that we currently deem immaterial may also have an effect on us and the value of our common
shares. An investment in our Group may not be suitable for all recipients of our Annual Report.
Risks Associated with our Business: The gaming and hospitality industries and the markets in which we
compete are highly competitive, and we expect competition to intensify. If our competitors operate more
successfully than us, if their properties are enhanced or expanded, if their properties offer gaming, lodging,
entertainment or other experiences that are perceived to be of better quality and/or value than ours, or if
additional gaming or hospitality facilities are established in and around locations in which we conduct
business, we may lose market share. In particular, the expansion of casino gaming (especially major market-
style gaming) by our competitors in or near any geographic area from which we attract or expect to attract
a significant number of our patrons could have a material adverse effect on our business, financial condition
and results of operations. Our competitors vary considerably by their size, quality of facilities, number of
operations, number of gaming tables and slot machines, brand identities, marketing and growth strategies,
financial strength and capabilities, level of amenities, management talent and geographic diversity, and
many of our competitors have significantly greater resources than we do. Many international hotel
companies are present in the markets where we have hospitality properties. Likewise, many casino
operators are present in the markets where we have casinos and other gaming and entertainment venues.
We also compete with other non-gaming resorts and vacation areas, and with various other entertainment
businesses. We expect that competition in our existing markets will intensify. The expansion of existing
casino and video entertainment properties and the increase in the number of such properties in many of our
markets, as well as the aggressive marketing strategies of many of our competitors, have increased the
competitive pressures on our operations. If we cannot effectively compete in a market, it will have a material
adverse effect on our business, financial position, or results of operations. Unfavorable changes in general
economic conditions, including recession or economic slowdown, or higher fuel or other transportation
costs, may reduce disposable income of casino and hotel patrons, or result in fewer patrons visiting casinos
or hotels, as well as reduced play levels. As our properties are located in Central and South America, we
would be especially affected by economic downturns affecting those regions; however, economic
difficulties in other regions may affect our expansion plans, as well as our ability to raise capital. In addition
to general economic and business risks, our gaming and hospitality operations are affected by a number of
factors beyond our control, including: downturn or loss in popularity of the gaming industry in general, and
table and slot games in particular; the relative popularity of entertainment alternatives to casino gaming;
the growth and number of legalized gaming jurisdictions; local conditions in key gaming markets, including
seasonal and weather-related factors; increases in taxes or fees; the level of new casino construction and
renovation schedules of existing casinos; competitive conditions in the gaming industry and in particular
gaming markets; decreases in the level of demand for rooms and related services; over-building (cyclical
and otherwise) in the hotel industry; restrictive changes in zoning and similar land use laws and regulations,
or in health, safety and environmental laws, rules and regulations; the inability to obtain property and
liability insurance fully to protect against all losses or to obtain such insurance at reasonable rates; changes
in travel patterns; changes in operating costs, including energy, labor costs (including minimum wage
increases and unionization), workers’ compensation and health-care related costs and insurance; changes
in desirability of our existing markets’ geographic regions; and inflation-driven cost increases that cannot
be fully offset with revenue increases.
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Chapter 8: Risk Factors
Any of these risks could have a material adverse effect on our business, financial position, or results of
operations.
Development Risks: The development and construction of hotels, casinos and other gaming and
entertainment venues, and the expansion of existing properties, are susceptible to delays, cost overruns and
other uncertainties, any of which could have an adverse effect on our business, financial condition, and
results of operations. Our business strategy may contemplate future development and construction of
casinos and other gaming and entertainment venues, as well as the expansion of our existing properties. All
such projects are susceptible to various risks and uncertainties.
Our failure to complete any new development or expansion project as planned, on schedule and within
budget, could have a material, adverse effect on our business, financial condition, and results of operations.
In addition, once a project is completed, we cannot assure you that we will be able to manage that project
on a profitable basis or to attract a sufficient number of guests, gaming customers and other visitors to make
it profitable.
Mergers & Acquisitions: Any future mergers and acquisitions could prove difficult to integrate, disrupt our
business, dilute shareholder value, and strain our resources. As part of our business strategy, we intend to
continue to seek to acquire businesses and properties that we believe could complement or expand our
business or otherwise offer growth opportunities. Any future acquisitions will involve numerous risks,
including: difficulties in integrating operations, technologies, services, accounting and personnel;
difficulties in supporting and transitioning customers of our acquired companies to our technology
platforms and business processes; diversion of financial and management resources from existing
operations; difficulties in obtaining regulatory approvals and permits for the acquisition; and the inability
to generate sufficient revenues to offset acquisition or investment costs.
Acquisitions also frequently result in recording of goodwill and other intangible assets, which are subject
to potential impairments in the future that could have a material, adverse effect on our operating results.
Furthermore, the costs of integrating acquired businesses (including restructuring charges associated with
the acquisitions, as well as other acquisition costs, such as accounting, legal and investment banking fees)
could significantly impact our operating results. Although we perform diligence on the businesses we
purchase, in light of the circumstances of each transaction, an unavoidable level of risk remains regarding
the actual condition of these businesses. We may not be able to ascertain the value or understand the
potential liabilities of the acquired businesses and their operations until we assume operating control of the
assets and operations of these businesses. Once we acquire a business, we are faced with risks, including
the following: the possibility that we have acquired substantial undisclosed liabilities; the need for further
regulatory approvals; the risks of entering markets in which we have limited or no prior experience; and
the possibility that we may be unable to recruit additional managers with the necessary skills to supplement
the management of the acquired businesses.
If we are unsuccessful in overcoming these risks, our business, financial condition, or results of operations
could be materially and adversely affected.
Risks to Cash Flow and Access to Capital: Our cash flow from operations and available credit may not be
sufficient to meet our planned capital requirements and, as a result, we could be dependent upon future
financing, which may not be available on acceptable terms, or at all. Our businesses are, and our planned
growth and expansions may be, capital-intensive. Historically, we have not generated sufficient cash flow
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Chapter 8: Risk Factors
from operations to satisfy our capital requirements and have relied on debt and equity financing
arrangements to satisfy such requirements. Should such financing arrangements be required but unavailable
in the future, this will pose a significant risk to our ability to execute on our growth and expansion strategy,
as well as to our cash requirements. There can be no assurance that future financing arrangements will be
available on acceptable terms, or at all. We may not be able to obtain additional capital to fund currently
planned projects or to take advantage of future opportunities or respond to changing demands of customers
and competitors. Our planned projects and acquisitions that we may develop in the future will require
significant capital. Although we intend to finance any such projects or acquisitions partially with debt
financing, we do not have any financing commitments for all planned project debt financing and the
financing commitments available to us are subject to a number of conditions, which may not be met. We
may not be able to obtain any such financing on reasonable terms, or at all. The failure to obtain such
financing could adversely affect our ability to construct any particular project, or reduce the profitability of
such project. In addition, the failure to obtain such financing could result in potentially dilutive issuances
of equity securities, guarantees of third party-debt, the incurrence of contingent liabilities and, an increase
in amortization expenses related to goodwill and other intangible assets, any of which could have a material,
adverse effect on our business, financial condition, or results of operations. Furthermore, an increase in the
general levels of interest rates, or those rates available to us, would make it more expensive to finance our
operations and proposed investments. Increases in interest rates could also make it more difficult to locate
and consummate investments that meet our profitability requirements. In addition, we will be required to
repay borrowings from time to time, which may require such borrowings to be refinanced. Many factors,
including circumstances beyond our control, such as changes in interest rates, conditions in the banking
market and general economic conditions, may make it difficult for us to obtain such new financing on
attractive terms or even at all.
Market Risks: Our business is international; accordingly, it is subject to political and economic risks. We
own and operate, and may develop, own and operate, hotels, casinos and other gaming and entertainment
venues in Central America and South America. Our existing and planned business, as well as our results
of operations and financial condition, may be materially and adversely affected by significant political,
social, and economic developments in these areas of the world and by changes in policies of the applicable
governments or changes in laws and regulations or the interpretations thereof. Our current operations are
also exposed to the risk of changes in laws and policies that govern operations of gaming companies. Tax
laws and regulations may also be subject to amendment or different interpretation and implementation,
thereby adversely affecting our profitability after tax. These changes may have a material, adverse effect
on our business, financial position, or results of operations. The general economic conditions and policies
in these countries could also have a significant impact on our financial prospects. Any slowdown in
economic growth could reduce the number of visitors to our hotel and casino operations or the amount of
money these visitors are willing to spend. International operations, generally, are subject to various political
and other risks, including, among other things: war or civil unrest, expropriation and nationalization; costs
to comply with laws of multiple jurisdictions; changes in a specific country’s or region’s political or
economic conditions; tariffs and other trade protection measures; currency fluctuations; import or export
licensing requirements; changes in tax laws; political or economic instability in local or international
markets; difficulty in staffing and managing widespread operations; changing labor regulations; restrictions
on our ability to own or operate subsidiaries, make investments or acquire new businesses in these
jurisdictions; and restrictions on our ability to repatriate dividends from our subsidiaries.
Government Regulatory Risk: We are subject to extensive governmental regulation. The gaming industry
is highly regulated and we must maintain our licenses, registrations, approvals and permits in order to
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Chapter 8: Risk Factors
continue our gaming operations. Our gaming operations are subject to extensive regulation under the laws,
rules and regulations of the jurisdiction where they are located. These laws, rules and regulations often
concern the responsibility, financial stability, and character of the owners, managers, and persons with
financial interests in the gaming operations. Certain jurisdictions empower their regulators to investigate
participation by licensees in gaming outside of their jurisdiction and require access to, and periodic reports
concerning, the gaming activities. Violations of laws in one jurisdiction could result in disciplinary action
in other jurisdictions. Regulatory authorities often have broad powers with respect to the licensing of
gaming operations and may revoke, suspend, condition or limit our gaming or other licenses, impose
substantial fines, and take other actions, any one of which could have a material adverse effect on our
business, financial condition, and results of operations. We also are responsible for the acts and conduct of
our employees on the premises. Substantial fines or forfeiture of assets for violations of gaming laws or
regulations may be levied against us, our subsidiaries, and the persons involved. We must periodically apply
to renew our gaming licenses. We cannot assure you that we will be able to obtain such renewals. In
addition, if we expand our gaming operations in the jurisdictions in which we currently operate or into new
jurisdictions, we will have to meet suitability requirements and obtain additional licenses, registrations,
permits and approvals from gaming authorities in these jurisdictions. The approval process can be time-
consuming and costly and there is no assurance that we will be successful. In addition, regulatory authorities
in certain jurisdictions must approve, in advance, any restrictions on transfers of, agreements not to
encumber, or pledges of equity securities issued by an entity that is registered as an intermediary company
with such jurisdiction, or holds a gaming license. If these restrictions are not approved in advance, they will
be invalid. Although we believe that our organizational structure and operations are in compliance with all
applicable laws and regulations where we operate, these laws and regulations are complex and a court or
an administrative or regulatory body may in the future render an interpretation of these laws and regulations,
or issue new regulations that differ from our interpretation, which could have a material adverse effect on
business, financial condition, or results of operations. From time to time, legislators and special interest
groups have proposed legislation that would expand, restrict, or prevent gaming operations in the
jurisdictions in which we operate. In addition, from time to time, certain anti-gaming groups propose
referenda that, if adopted, would limit our ability to continue to operate in those jurisdictions in which such
referenda are adopted. Any expansion of permitted gaming or any restriction on, or prohibition of, our
gaming operations could have a material, adverse effect on our operating results. From time to time,
country, state and local governments have considered increasing the taxes on gaming revenues or profits.
We cannot assure you that such increases will not be imposed in the future. Any such increases could have
a material, adverse effect on our business, financial condition, or results of operations. In addition to gaming
regulations, we are subject to various other federal, state, and local laws and regulations. These laws and
regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages,
environmental matters, employees, currency transactions, taxation, zoning and building codes, and
marketing and advertising. Such laws and regulations could change or could be interpreted differently in
the future, or new laws and regulations could be enacted. Material changes, new laws or regulations, or
material differences in interpretations by courts or governmental authorities could have a material, adverse
effect on our business, financial condition, and results of operations. We cannot assure you that we will be
able to comply with, or conduct business in accordance with, applicable regulations.
Public Opinion Risk: The gaming industry is sensitive to declines in the public acceptance of gaming.
Public opinion can negatively affect the gaming industry and our future performance. If there is a decline
in public acceptance of gaming, this may affect our ability to do business in some markets, either through
unfavorable legislation affecting the introduction of gaming into emerging markets, or through legislative
and regulatory changes in existing gaming markets which may adversely affect our ability to continue to
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Chapter 8: Risk Factors
own and operate our gaming operations in those jurisdictions, or through resulting reduced casino
patronage. We cannot assure you that the level of support for legalized gaming or the public use of leisure
money in gaming activities will not decline.
Risks to Shareholders: Certain holders of our common shares are subject to certain requirements of the
gaming laws of some jurisdictions in which we are licensed. In such a situation it is possible that the
regulators would require significant information about that shareholder and its assets and operations and, if
the regulators were to determine that that shareholder is unsuitable, it could revoke our gaming license
unless that shareholder divested some or all of its common shares.
Risks to Pledged Shares and/or Assets: If we default under certain agreements, we could forfeit our pledged
equity interest in certain subsidiaries and/or certain assets.
Risks of Local Investors: We own many of our properties through entities that are partly owned by local
companies or individuals. Accordingly, maintaining good personal and professional relationships with our
local partners is critical to our proposed and future operations. Changes in management of our local partners,
changes in policies to which our local partners are subject, or other factors that may lead to the deterioration
of our relationship with a local partner may have a material adverse effect on our business, financial
position, or results of operations. Our joint venture investments involve risks, such as the possibility that
the local partner might become bankrupt or not have the financial resources to meet its obligations, or may
have economic or business interests or goals that are inconsistent with our business interests or goals, or be
in a position to take action contrary to our instructions or requests or contrary to our policies or objectives.
Our local partners often have shared control over, or certain veto rights with respect to, the operation of the
local facilities. Therefore, we may be unable to take certain actions without the approval of our local
partners. Disputes between us and local partners may result in litigation or arbitration that would increase
our expenses and prevent our officers, directors, and employees from focusing their time and efforts on our
business. Consequently, actions or disputes with local partners might result in subjecting properties owned
by the partnership or joint venture to additional risk. In addition, we may in certain circumstances be liable
for the actions of our local partners. We may not be able to find acceptable local partners, or enter into
acceptable arrangements with local partners, which could limit our ability to expand into new markets. Our
business strategy contemplates forming and maintaining relationships with local partners. We cannot assure
you that we will be able to identify the best local partners or maintain our relationships with existing local
partners, or enter into new arrangements with other local partners on acceptable terms, or at all. The failure
to maintain or establish such relationships could have a material adverse effect on our business, financial
position, or results of operations. In addition, the terms of our local partner agreements are influenced by
contract terms offered by our competitors, among other things. We cannot assure you that any of our current
arrangements with our local partners will continue, or that we will be able to renew our local partnerships,
or enter into new local partnerships, on terms that are as favorable to us as those that exist today. Conflicts
may arise between us and our local partners, such as conflicts concerning joint venture governance or
economics, or the distribution or reinvestment of profits. Any such disagreement between us and a local
partner could result in one or more of the following, each of which could harm our reputation or have a
material, adverse effect on our business, financial position, or results of operations: unwillingness on the
part of a local partner to (i) pay us amounts or render us services we believe are due to us under our
arrangement; (ii) to keep us informed regarding the progress of its development and community relationship
activities; or (iii) early termination or non-renewal of the relationship.
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Chapter 8: Risk Factors
Risks of Losing Key Personnel: Our ability to maintain our competitive position is dependent, to a large
degree on the services of our senior management team. However, we cannot assure you that any of these
individuals will remain with us, or that we would be able to attract and hire suitable replacements in the
event of any such loss of services. The death or loss of the services of any of our senior managers or the
inability to attract and retain additional senior management personnel could have a material, adverse effect
on our business, including our ability to raise additional capital.
Tax Risk: We may be subject to certain tax liabilities in connection with our operations. See Note 23 to the
Financial Statements.
Litigation Risk: We may be involved in legal and tax claims from time to time. Some of the litigation claims
may not be covered under our insurance policies or our insurance carriers may seek to deny coverage. As
a result, we might be required to incur significant legal fees, which may have a material adverse impact on
our financial position. In addition, because we cannot predict the outcome of any action, it is possible that,
as a result of current and/or future litigation, we will be subject to adverse judgments or settlements that
could significantly reduce our earnings or result in losses. Please see Notes 18 and 23 of the financial
statements for a description of our current material litigation.
Acts of God: Our properties may be affected by acts of God, such as natural disasters, particularly in
locations where we own and/or operate significant properties. Some types of losses, such as those from
earthquake, hurricane, terrorism, and environmental hazards, may be either uninsurable or too expensive to
justify insuring against. Should an uninsured loss or a loss in excess of insured limits occur, we could lose
all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from
the property. In that event, we might nevertheless remain obligated for any mortgage debt or other financial
obligations related to the property. Similarly, war (including the potential for war), political unrest, other
forms of civil strife, terrorist activity (including threats of terrorist activity), epidemics (such as SARS and
bird flu), travel-related accidents, as well as geopolitical uncertainty and international conflict, which
impact domestic and international travel, may cause our results to differ materially from anticipated results.
In addition, inadequate preparedness, contingency planning, or recovery capability in relation to a major
incident or crisis may prevent operational continuity and consequently impact our business, financial
position, or results of operations. Although we have all-risk property insurance for our properties covering
damage caused by a casualty loss (such as fire and natural disasters), each such policy has certain
exclusions. Our level of insurance coverage for our properties may not be adequate to cover all losses in
the event of a major casualty. In addition, certain casualty events, such as labor strikes, nuclear events, acts
of war, loss of income due to cancellation of room reservations, or conventions due to fear of terrorism,
deterioration or corrosion, insect or animal damage and pollution, might not be covered at all under our
policies. Therefore, certain acts could expose us to heavy, uninsured losses. In addition, although we
currently have certain insurance coverage for occurrences of terrorist acts and certain losses that could result
from these acts, our terrorism coverage is subject to the same risks and deficiencies as those described
above for our all-risk property coverage. The lack of sufficient insurance for these types of acts could expose
us to heavy losses in the event that any damages occur, directly or indirectly, as a result of terrorist attacks,
which could have a significant negative impact on our operations. In addition to the damage caused to our
property by a casualty loss (such as fire, natural disasters, acts of war or terrorism), we may suffer disruption
of our business as a result of these events, or be subject to claims by third parties injured or harmed. While
we carry business interruption insurance and general liability insurance, such insurance may not be adequate
to cover all losses in such event. We renew our insurance policies on an annual basis. The cost of coverage
may become so high that we may need to further reduce our policy limits or agree to certain exclusions
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from our coverage. Among other potential future adverse changes, in the future we may elect to not, or
may not be able to, obtain any coverage for losses due to acts of terrorism.
Management Risks: We derive our revenue from operations located in multiple countries and expect to
further expand our business. As a result of long distances, different cultures, management and language
differences, our operations pose risks to our business. These factors make it more challenging to manage
and administer a dispersed business and increase the resources necessary to operate under several different
regulatory and legislative regimes.
Technology Risks: We use sophisticated information technologies and systems that are interconnected
through the Internet. Any disaster, disruption or other impairment in our technology capabilities could harm
our business. Our information technology system is vulnerable to damage or interruption from: earthquakes,
fires, typhoons, floods, and other natural disasters; power losses, computer systems failures, internet, and
telecommunications or data network failures, operator negligence, improper operation by or supervision of
employees, physical and electronic losses of data, and similar events; and computer viruses, penetration by
individuals seeking to disrupt operations or misappropriate information, and other breaches of security. We
rely on our systems to perform functions critical to our ability to operate, including our central reservation
systems. Accordingly, an extended interruption in system’s functions could significantly curtail, directly
and indirectly, our ability to conduct our business and generate revenue. In addition, if a breach of security
were to occur, it could cause interruptions in our communications and loss or theft of data. To the extent
our activities involve the storage and transmission of information, such as credit card numbers, security
breaches could damage our reputation and expose us to a risk of loss or litigation, and possible liability.
Our insurance policies might not be sufficient to reimburse us for losses caused by such security breaches.
Further, the development and maintenance of these technologies may require significant capital. There can
be no assurance that as various systems and technologies become outdated or new technology is required
we will be able to replace or introduce them as quickly as our competition, or within budgeted costs and
timeframes for such technology. Further, there can be no assurance that we will achieve the benefits that
may have been anticipated from any new technology or system.
Demand Risks: Our properties must offer themes, products and services that appeal to potential customers.
We may not anticipate or react quickly enough to any significant changes in customer preferences, such as
jackpot fatigue (declining play levels on smaller jackpots) or the emergence of a popular gaming option
provided by our competitors, or hotel amenities supplied by our competitors. In addition, general changes
in consumer behavior, such as redirection of entertainment dollars to other venues or reduced travel activity,
could materially affect our business, financial position and results of operations.
Fraud Risks: We incorporate security features into the design of our gaming operations designed to prevent
us and our patrons from being defrauded. However, we cannot assure you that such security features will
continue to be effective in the future. If our security systems fail to prevent fraud, our business, financial
position, or results of operations could be adversely affected and our brand could suffer.
Marketing & Promotions Risks: We intend to promote the brands that we own and operate to differentiate
ourselves from our competitors and to build goodwill with our customers. These promotional efforts may
require substantial expenditures on our part. However, our efforts may be unsuccessful and these brands
may not provide the competitive advantage that we anticipate, in which case we would not realize the
expected benefits from our expenditures related to our brands.
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Chapter 8: Risk Factors
Holding Company Risks: We are a holding company with no material business operations of our own. Our
only significant asset is the capital stock of our subsidiaries and joint ventures. We conduct virtually all of
our business operations through our direct and indirect subsidiaries, and joint ventures. Accordingly, our
only material sources of cash are dividends and distributions with respect to our ownership interests in our
subsidiaries and joint ventures and management fees paid to us by certain of our joint ventures, all of which
are dependent on the earnings and cash flow generated by the operating properties owned by our
subsidiaries and joint ventures. Our subsidiaries and joint ventures might not generate sufficient earnings
and cash flow to pay dividends or distributions in the future. In addition, our subsidiaries’ and joint
ventures’ debt instruments and other agreements may from time to time limit or prohibit certain payment
of dividends or other distributions to us.
Risks Associated with Real Estate: Our business strategy contemplates our ownership of significant
amounts of real estate, which investments are subject to varying degrees of risk. Real estate values are
affected by a variety of other factors, such as governmental regulations and applicable laws (including real
estate, zoning, tax and eminent domain laws), interest rate levels, and the availability of financing. For
example, existing or new real estate, zoning or tax laws can make it more expensive and/or time consuming
to develop real estate or expand, modify or renovate hotels. Governments can, under eminent domain laws,
take real estate, sometimes for less compensation than the owner believes the estate is worth. When
prevailing interest rates increase, the expense of acquiring, developing, expanding or renovating real estate
increases, and values decrease as it becomes more difficult to sell estates because the number of potential
buyers decreases. Similarly, as financing becomes less available, it becomes more difficult both to acquire
real estate and, because of the diminished number of potential buyers, to sell real estate. Any of these
factors could have a material, adverse impact on our business, financial position, or results of operations.
Ownership of real estate also exposes us to potential environmental liabilities. Environmental laws,
ordinances and regulations of various governments regulate our properties and could make us liable for the
costs of removing or cleaning up hazardous or toxic substances on, under, or in estates we currently own
or operate, or that we previously owned or operated. These laws could impose liability without regard to
whether we knew of, or were responsible for, the presence of hazardous or toxic substances. The presence
of hazardous or toxic substances, or the failure to properly clean up such substances when present, could
jeopardize our ability to develop, use, sell or rent the real estate or to borrow using the real estate as
collateral. Other laws, ordinances and regulations could require us to manage, abate or remove lead or
asbestos containing materials. Similarly, the operation and closure of storage tanks are often regulated by
foreign laws. Certain laws, ordinances and regulations, particularly those governing the management or
preservation of wetlands, coastal zones and threatened or endangered species, could limit our ability to
develop, use, sell or rent our real estate. Because real estate investments are relatively illiquid, our ability
to promptly sell one or more properties in response to changing economic, financial, and investment
conditions may be limited. The real estate market is affected by many factors that are beyond our control,
including:
•
adverse changes in international, national, regional, and local economic and market conditions;
•
changes in interest rates and in the availability, cost, and terms of debt financing;
•
changes in governmental laws and regulations, fiscal policies and zoning ordinances, and the related
costs of compliance with laws and regulations, fiscal policies, and ordinances;
•
the ongoing need for capital improvements, particularly in older structures;
•
changes in operating expenses; and
•
civil unrest, acts of God, including earthquakes, floods, and other natural disasters and acts of war or
terrorism, which may result in uninsured losses.
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We may decide to sell one or more of our properties in the future. We cannot predict whether we will be
able to sell any property for the price, or on the terms, set by us, or whether any price or other terms offered
by a prospective purchaser would be acceptable to us. We also, cannot predict the length of time needed to
find a willing purchaser and to close the sale of a property.
In addition, we may be required to expend funds to correct defects or to make improvements before a
property can be sold. We cannot assure you that we will have funds available to correct those defects or to
make those improvements.
Foreign Currency Risks: As of December 31, 2022, the Group owned operating assets in Peru and
Nicaragua and real estate assets in Costa Rica, Peru and Nicaragua. Therefore, certain of our expenses and
revenues are and will be denominated in local currencies. A significant amount of our debt is denominated
in dollars, and the costs associated with servicing and repaying such debt will be denominated in dollars.
Additionally, our financial information is, and in the future will be, prepared in dollars. Any target business
with which we pursue a business combination may denominate its financial information in a currency other
than the dollar or conduct operations in a currency other than the dollar. Our sales in a currency other than
dollars may subject us to currency translation risk. Exchange rate volatility could negatively impact our
revenues or increase our expenses incurred in connection with operating a target business. Currency rates
may fluctuate significantly over short periods of time for a number of reasons, including changes in interest
rates, intervention (or the failure to intervene) by local governments, central banks or supranational entities,
or by the imposition of currency controls or other political developments. We are exposed to market risks
from changes in foreign currency exchange rates, and any significant fluctuations in the exchange rates
between local currencies against the dollar may have a material adverse effect on our operating results.
Furthermore, the portion of our business conducted in other currencies could increase in the future, which
could expand our exposure to losses arising from currency fluctuations. We have not used any forward
contracts, futures, swaps, or currency borrowings to hedge our exposure to foreign currency risk.
Risks to Ground Leases: We hold certain of our properties through leasehold interests in the land underlying
the buildings and we may acquire additional properties in the future that are subject to similar ground leases.
As the lessee under a ground lease, we are exposed to the possibility of losing the property upon termination,
or an earlier breach by us, of the ground lease, which may have a material adverse effect on our business,
financial condition, results of operations, our ability to make distributions to our shareholders, and price of
our common shares.
Risks Associated with our Common Shares: We may not be able to sustain a market for our shares, options
and warrants on Euronext Amsterdam, which would adversely affect the liquidity and price of our shares,
options and warrants. The price of the shares, options, and warrants after the admission to listing also can
vary due to general economic conditions and forecasts, our general business condition, and the release of
our financial reports. Although our current intention is to maintain a listing on Euronext Amsterdam, we
cannot assure you that we will always do so. In addition, an active trading market for our shares on Euronext
Amsterdam may not develop or, if developed, may not be maintained. You may be unable to sell your
shares unless a market can be established and maintained, and if we subsequently obtain another listing on
an exchange in addition to, or in lieu of, Euronext Amsterdam, the level of liquidity of your shares may
decline. In addition, because a large percentage of Euronext Amsterdam’s market capitalization and trading
volume is represented by a limited number of companies, fluctuations in the prices of those companies’
securities may have an effect on the market prices for the securities of other listed companies, including the
price of our shares. Euronext Amsterdam may delist our securities, which could limit the ability of our
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Chapter 8: Risk Factors
shareholders to make transactions in our securities and subject us to additional trading restrictions. Although
we have met the listing standards of Euronext Amsterdam on admission, and are currently listed and trading,
we cannot assure you that our securities will continue to be listed on Euronext Amsterdam as we might not
meet certain continued listing standards. If we are delisted, we may not be able to list on any other exchange
that provides sufficient liquidity. Even if an active trading market for our common shares develops, the
market price of those securities may be highly volatile and could be subject to wide fluctuations. In addition,
the trading volume in our common shares may fluctuate and cause significant price variations to occur. If
the market price of our common shares declines significantly, you may be unable to resell such common
shares at or above your purchase price, if at all. We cannot assure you that the market price of our common
shares will not fluctuate or decline significantly in the future. Some of the factors that could negatively
affect the price of our common shares or result in fluctuations in the price or trading volume of our common
shares include: variations in our quarterly operating results; failure to meet earnings estimates; publication
of research reports about us, other companies in our industry or the failure of securities analysts to cover
our shares in the future; additions or departures of key management personnel; adverse market reaction to
any indebtedness we may incur, or preferred or common shares we may issue in the future; changes in
market valuations of similar companies; announcements by us or our competitors of significant contracts,
acquisitions and dispositions; speculation in the press or investment community; changes or proposed
changes in laws or regulations affecting the hotel, casino or gaming industries, or enforcement of these laws
and regulations, or announcements relating to these m
atters;
general market, political and economic
conditions and local conditions in the markets in which our properties are located; and other risks identified
in this Annual Report.
Any market on which our common shares trade will from time-to-time experience extreme price and
volume fluctuations. These market fluctuations could result in extreme volatility in the trading price of our
common shares, which could cause a decline in the value of your investment. You should also be aware
that price volatility may be greater if the public float and trading volume of our common shares are low.
Risks from Options, and Promissory Notes Convertible into Common Stock: As of December 31, 2022, we
have existing options and promissory notes convertible into common shares. The potential issuance of
additional common shares on exercise of these options or the conversion of these promissory note into
shares could make us a less attractive investment, if exercise of the options and conversion of notes into
shares at prices below current market prices. If, and to the extent, these options are exercised or conversion
occur, shareholders may experience dilution to their holdings. As of April 2022, we have 30,914,077
common shares outstanding. See Chapter 7 for more detail on the unexercised option and promissory note
convertible into shares.
We do not anticipate paying any dividends on our common shares in the foreseeable future: We do not
expect to declare or pay any cash or other dividends in the foreseeable future on our common shares, as we
intend to use cash flow generated by operations to pay off our debt and expand our business. Our debt
arrangements may also restrict our ability to pay cash dividends on our common shares, and we may also
enter into credit agreements or other borrowing arrangements in the future that restrict our ability to declare
or pay cash dividends on our common shares.
Ownership in us may be diluted in the future: Your percentage ownership in us may be diluted in the future
because of equity awards that we expect will be granted over time to our directors, officers, and employees.
Additionally, our Board of Directors may issue common shares and preferred shares without shareholder
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Chapter 8: Risk Factors
approval, which may substantially dilute shareholder ownership interest and serve as an anti-takeover
measure.
Because the Group is a British Virgin Islands company, our shareholders’ rights may not be able to enforce
judgments against us: We are incorporated under the laws of the British Virgin Islands. As a result, it may
be difficult for investors to effect service of process upon us in other jurisdictions to enforce against us
judgments obtained in other jurisdictions, including judgments predicated upon the civil liability provisions
of the securities laws of other foreign jurisdictions. We have been advised by our British Virgin Islands
counsel that judgments predicated upon the civil liability provisions of the securities laws of other
jurisdictions may be difficult to enforce in British Virgin Islands courts and that there is doubt as to whether
British Virgin Islands courts will enter judgments in original actions brought in British Virgin Islands courts
predicated solely upon the civil liability provisions of the securities laws of other foreign jurisdictions.
Because the Group is a British Virgin Islands company, our shareholders’ rights may be less clearly
established as compared to the rights of shareholders of companies incorporated in other jurisdictions: Our
corporate affairs are governed by our Memorandum of Association and Articles of Association and by the
International Business Companies Act of the British Virgin Islands. Principles of law relating to such
matters as the validity of corporate procedures, the fiduciary duties of management and the rights of our
shareholders may differ from those that would apply if we were incorporated in another jurisdiction. The
rights of shareholders under British Virgin Islands law are not as clearly established as are the rights of
shareholders in many other jurisdictions. Thus, our shareholders may have more difficulty protecting their
interests in the face of actions by our Board of Directors than they would have as shareholders of a
corporation incorporated in another jurisdiction.
Our governing documents and British Virgin Islands law contain provisions that may have the effect of
delaying or preventing a change in control of us: Our Memorandum of Association authorizes our Board
of Directors to issue up to 500 million preferred shares and to determine the powers, preferences, privileges,
rights, including voting rights, qualifications, limitations and restrictions on those shares, without any
further vote or action by the shareholders. The rights of the holders of our common shares will be subject
to, and may be adversely affected by, the rights of the holders of any preferred shares that may be issued in
the future. The issuance of preferred shares could delay, deter or prevent a change in control and could
adversely affect the voting power or economic value of your shares. In addition, provisions of our governing
documents and British Virgin Islands law, together or separately, could discourage potential acquisition
proposals, delay or prevent a change in control, and limit the price that certain investors might be willing
to pay in the future for our common shares. Among other things, these provisions provide that: our Directors
may only be removed without cause by the vote of shareholders holding at least a two-thirds of our
outstanding common shares; and our shareholders may only call a special meeting by delivering to our
Board of Directors a request for a special meeting by shareholders holding 50% or more of our outstanding
common shares. Although we believe these provisions protect our shareholders from coercive or otherwise
unfair takeover tactics and thereby provide an opportunity to receive a higher bid by requiring potential
acquirers to negotiate with our Board of Directors, these provisions apply even if the offer may be
considered beneficial by some shareholders. Further, these provisions may discourage potential acquisition
proposals and may delay, deter, or prevent a change of control of our Group, including through unsolicited
transactions that some or all of our shareholders might consider to be desirable. As a result, efforts by our
shareholders to change our direction or our management may be unsuccessful.
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Chapter 8: Risk Factors
Future sales of securities could depress the price of our securities: Sales of a substantial number of shares
of our securities, or the perception that a large number of our securities will be sold could depress the market
price of our common shares. Our governing documents authorize us to issue up to 500,000,000 preferred
shares and 500,000,000 common shares.
We are subject to certain Canadian securities legislation, which may affect our shareholders: Our common
shares ceased to be listed on the CNSX, however, we are a “reporting issuer” subject to certain securities
laws of British Columbia, Ontario, and the Yukon Territory even though we elected to delist from the
CNSX. Among other things, those laws require any 10% holder of a reporting issuer to file reports
disclosing that holder’s direct or indirect beneficial ownership of, or control or direction over, securities of
the reporting issuer, and any changes in that ownership. If they acquire 10% or more of our outstanding
common shares, they will be required to file an “insider report form” within ten business days from the date
their ownership exceeded 10%, and then within ten business days after any trades or other changes in their
holdings of common shares. They would also be required to issue a press release and file a report every
time they acquire an additional 2% or more of our common shares. If they acquire 20% or more of our
outstanding common shares, they would be a “control person” of ours under those provincial securities
laws. As such, they would be deemed to be not only knowledgeable about our affairs, but they would be
deemed to have the ability, by virtue of their significant equity position, to direct our affairs. Thereafter,
any sale by them of common shares would be deemed under provincial law to be a distribution, requiring
the filing of an Annual Report and compliance with other securities disclosure laws. In addition, if a
shareholder acquires 20% or more of our common shares, they will be deemed under provincial securities
laws to have made a “take-over bid” and, accordingly, unless they can obtain an exemption, they would be
required to comply with detailed rules governing bids. 20% holders are also required to file insider reports
within three calendar days versus the normal ten-day requirement that applies to all other parties required
to file insider reports. They must also file personal information forms with the applicable securities
commissions and Canadian exchange where the shares are posted for trading. The provincial securities
commissions and the CNSX have the right to veto the individual or entity from remaining an insider or
control person if the individual or entity is deemed unsuitable to be involved in the Canadian public markets.
We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of
our common shares: At any time, the federal, state, local or foreign tax laws or regulations or the
administrative or judicial interpretations of those laws or regulations may be changed or amended. We
cannot predict when or if any new federal, state, local or foreign tax law, regulation or administrative or
judicial interpretation, or any amendment to any existing tax law, regulation or administrative or judicial
interpretation, will be adopted, promulgated or become effective and any such law, regulation or
interpretation may take effect retroactively. We and our shareholders could be adversely affected by any
such change in, or any new tax law, regulation or administrative or judicial interpretation.
We may be subject to certain tax liabilities in Canada in connection with our emigration from Canada and
continuing our charter under the laws of the British Virgin Islands: In 2006, we filed “discontinuation
documents” with the Yukon, Canada Registrar and continued our charter under the laws of the British
Virgin Islands. In connection with this change we could be subject to certain Canadian tax liabilities
associated with our deemed disposition of the assets and a deemed dividend calculated by us under
Canadian tax laws. We determined we had no tax charges associated with our emigration from Canada.
Although we believe the position we have taken in the submitted tax return was appropriate for determining
any potential tax liabilities, there is no assurance that the Canadian tax authorities will not challenge the
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Chapter 8: Risk Factors
position to calculate the potential tax liability, which could result in us being subject to additional Canadian
taxes.
ERISA plan risks may limit our potential investor base: The U.S. Employee Retirement Income Security
Act of 1974, as amended (“ERISA”) and Section 4975 of the U.S. Internal Revenue Code prohibit certain
transactions that involve (1) certain pension, profit-sharing, employee benefit, or retirement plans or
individual retirement accounts (as well as certain entities that hold assets of such arrangements as described
below) and (2) any person who is a “party-in-interest” or “disqualified person” with respect to such a plan.
Consequently, the fiduciary of a plan contemplating an investment in our common shares should consider
whether we, any other person associated with the issuance of our common shares or any of their affiliates
is or might become a “party-in-interest” or “disqualified person” with respect to the plan and, if so, whether
an exemption from such prohibited transaction rules is applicable. In addition, the Department of Labor
Plan Asset Regulations provide that, subject to certain exceptions, the assets of an entity in which a plan
holds an equity interest may be treated as assets of an investing plan, in which event the underlying assets
of such entity (and transactions involving such assets) would be subject to the prohibited transaction
provisions and we could be subject to the prudence and other fiduciary standards of ERISA, which could
materially and adversely affect our operations. We intend to take such steps so that we should qualify for
one or more of the exceptions available and, thereby, prevent our assets from being treated as assets of any
investing plan. However, there can be no assurance that we will be able to meet any of these exceptions.
Cautionary Note Concerning Forward Looking Statements: Various statements contained in this Annual
Report, including those that express a belief, expectation, or intention, as well as those that are not
statements of historical fact, are forward looking statements. We use words such as “believe,” “intend,”
“expect,” “anticipate,” “forecast,” “plan,” “may,” “will,” “could,” “should” and similar expressions to
identify forward looking statements. The forward looking statements in this Annual Report speak only as
of the date of this Annual Report and are expressly qualified in their entirety by these cautionary statements.
Factors or events that could cause our actual results to differ may emerge from time to time and it is not
possible to predict all of them. We disclaim any obligation to update these statements, and we caution our
shareholders not to rely on them unduly. Our shareholders are cautioned that any such forward looking
statements are not guarantees of future performance. Important factors that could cause actual results to
differ materially from those in the forward-looking statements include regional, national or global, political,
economic, business, competitive, market, and regulatory conditions as well as, but not limited to, the risk
factors described in this Section. These risks and others described under the heading “Risk Factors” are not
exhaustive.
IMPORTANT INFORMATION
This is Thunderbird Resorts Inc.’s 2022 Annual Report for the period ended December 31, 2022.
Thunderbird Resorts Inc. is a designated foreign issuer with respect to Canadian securities regulations and
this 2022 Annual Report is intended to comply with the rules and regulations for the Euronext Amsterdam
by Euronext Amsterdam, the regulated market of the Euronext Amsterdam N.V. and with Canadian
securities laws.
No person has been authorized to give any information or to make any representation other than those
contained in this 2022 Annual Report and, if given or made, such information or representations must not
be relied upon as having been authorized by us. This 2022 Annual Report does not constitute an offer to
sell or a solicitation of an offer to buy any securities. The delivery of this 2022 Annual Report shall not
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Chapter 8: Risk Factors
under any circumstances, create any implication that there has been no change in our affairs or that
information contained herein is correct as of any time subsequent to the date hereof.
Thunderbird Resorts Inc. accepts responsibility for the information contained in this 2022 Annual Report.
To the best of our knowledge and belief (having taken all reasonable care to ensure that such is the case),
the information contained in this 2022 Annual Report is in accordance with the facts and does not omit
anything likely to affect the import of such information.
The information included in this 2022 Annual Report reflects our position at the date of this Annual Report
and under no circumstances should the issue and distribution of this 2022 Annual Report after the date of
its publication be interpreted as implying that the information included herein will continue to be correct
and complete at any later date.
Thunderbird Resorts Inc. has adopted the U.S. Dollar (“USD”) as its reporting currency. As required by
EU regulation, Thunderbird Resorts Inc.’s interim financial statements have been prepared in accordance
with international financial reporting standards (“IFRS”) and interim financial statements IAS 34.
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Corporate Office
CORPORATE OFFICE
Apartado 0823-00514
Panama, Republic of Panama
Tel: (507) 223-1234
Fax: (507) 223-0864
DIRECTORS
Salomon Guggenheim, Zurich, Switzerland
Reto Stadelmann, Switzerland
Stephan Fitch, United Kingdom
AUDITOR
Baker Tilly Curacao
Snipweg 30
Willemstad
Curacao
OFFICERS
Salomon Guggenheim, President & CEO
Peter LeSar, Chief Financial Officer
Albert W. Atallah, General Counsel and Secretary
TRANSFER AGENT
Computershare
510 Burrard Street, 3
rd
Floor
Vancouver, BC V6C 3B9, Canada
CAPITALIZATION
Common shares issued: 30,914,077
(as of
April
30
, 202
2
)
REGISTERED AND RECORD OFFICE FOR
SERVICE IN BRITISH VIRGIN ISLANDS
SHARES LISTED
Euronext Amsterdam
Common Stock Symbol: TBIRD
WEBSITE
www.thunderbirdresorts.com