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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011.

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

to

.

Commission file number: 000-28731

SUNVESTA, INC.

(Exact name of registrant as specified in its charter)

Florida

98-0211356

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

Seestrasse 97, Oberrieden, Switzerland CH-8942

(Address of principal executive offices)    (Zip Code)

011 41 43 388 40 60

(Registrant’s telephone number, including area code)

n/a

(Former name, former address and former fiscal year, if changed since last report)

Indicate  by  check  mark  whether  the  registrant  (1)  has  filed  all  reports  required  to  be  filed  by  Section  13  or

15(d)  of  the  Securities  Exchange  Act  of  1934  during  the  preceding  12  months  (or  for  such  shorter  period  that

the  registrant  was  required  to  file  such  reports),  and  (2)  has  been  subject  to  such  filing  requirements  for  the

past 90 days. Yes o   No þ

Indicate  by  check  mark  whether  the  registrant  has  submitted  electronically  and  posted  on  its  corporate  Web

site, if any,  every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation

S-T  (§232.405  of  this  chapter)  during  the  preceding  12  months  (or  for  such  shorter  period  that  the  registrant

was required to submit and post such files). Yes þNo o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated

filer,  or  a  smaller  reporting  company.  See  the  definitions  of  “large  accelerated  filer,”  “accelerated  filer”  and

“smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer o  Smaller reporting company þ

Indicate  by  check  mark  whether  the  registrant  is  a  shell  company  (as  defined  in  Rule  12b-2  of  the  Exchange

Act). Yes o  No þ

Indicate  the  number  of  shares  outstanding  of  each  of  the  issuer’s  classes  of  common  stock,  as  of  the  latest

practicable  date.  The  number  of  shares  outstanding  of  the  issuer’s  common  stock,  $0.01  par  value  (the  only

class of voting stock), at January 10, 2013, was 54,092,186.

1



TABLE OF CONTENTS

PART 1- FINANCIAL INFORMATION

Item1.

Financial Statements:

3

Consolidated Balance Sheets as of September 30, 2011 (Unaudited)  and December

4

31, 2010 (audited)

Unaudited  Consolidated Statements of Operations and Comprehensive Loss for the

5

three and nine months ended September 30, 2011 and September 30, 2010 and

cumulative amounts

Unaudited  Consolidated Statements of Cash Flows for the nine months ended

6

September 30, 2011 and September 30, 2010 and cumulative amounts

Notes to Unaudited  Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of

23

Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

31

Item 4.

Controls and Procedures

32

PART II-OTHER INFORMATION

Item 1.

Legal Proceedings

33

Item 1A.

Risk Factors

33

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

33

Item 3.

Defaults Upon Senior Securities

33

Item 4.

(Removed and Reserved)

33

Item 5.

Other Information

33

Item 6.

Exhibits

33

Signatures

34

Index to Exhibits

35

2



PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

As used herein, the terms “SunVesta,” “we,” “our,” and “us” refer to SunVesta, Inc., a Florida

corporation, and its predecessors and subsidiaries, unless otherwise indicated. In the opinion of

management, the accompanying unaudited, consolidated financial statements included in this Form 10-Q

reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of

the results of operations for the periods presented. The results of operations for the periods presented are

not necessarily indicative of the results to be expected for the full year.

3



SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

September 30, 2011

December 31, 2010

Assets

_

(Unaudited)_   _

Current assets

Cash and cash equivalents

$

513,841

44,018

Other assets

8,019

9,421

Receivables from related parties

1,232,233

-

Total current assets

1,754,093

53,439

Non-current assets

Property and equipment - net

10,905,000

9,321,976

Debt issuance cost - net

1,096,587

291,288

Down payment for property & equipment

735,032

-

Total non-current assets

12,736,619

9,613,264

Total assets

$

14,490,712

9,666,703

Liabilities and stockholders' equity

Current liabilities

Accounts payable

$

710,339

914,420

Accrued expenses

795,534

65,824

Notes payable to third parties

-

551,155

Notes payable to related parties

308,031

811,246

Total current liabilities

1,813,904

2,342,645

Non-current liabilities

EUR-Bond

8,638,615

265,273

CHF-Bond

101,394

-

Notes payable to related parties

1,099,969

-

Pension liabilities

40,755

-

Total non-current liabilities

9,880,733

265,273

Total liabilities

$

11,694,637

2,607,918

Stockholders' equity

Preferred stock, $0.01 par value;

50,000,000 share authorized

no shares issued and outstanding

-

-

Common stock, $0.01 par value;

200,000,000 shares authorized;

54,092,186 shares issued and outstanding

540,922

540,922

Additional paid-in capital

18,728,391

18,728,391

Accumulated other comprehensive loss

(285,534)

(59,452)

Retained earnings prior to development stage

1,602

1,602

Deficit accumulated during the development stage

(16,165,551)

(12,128,923)

Treasury stock, 157,220 and 157,220 shares

(23,755)

(23,755)

Total stockholders' equity

2,796,075

7,058,785

Total liabilities and stockholders' equity

$

14,490,712

9,666,703

The accompanying notes are an integral part of these consolidated financial statements.

4



SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Three months

Three months

Nine months

Nine months

Cumulative*

ended

ended

ended

ended

Amounts

September 30,

September 30,

September 30,     September 30,

2011

2010

2011

2010

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Revenues

Revenues, net

$

-

-

-

-

-

Cost of revenues

-

-

-

-

-

Gross profit

-

-

-

-

-

Operating expenses

General and administrative

expenses

1,063,241

307,650

3,424,541

705,510

11,904,243

Marketing

16,148

1,405

133,602

14,660

465,812

Total operating expenses

1,079,389

309,055

3,558,143

720,170

12,370,055

Loss from operations

(1,079,389)

(309,055)

(3,558,143)

(720,170)

(12,370,055)

Other income / - expenses

Loss on disposals of assets

-

-

-

-

(3,258)

Loss on sale of investments

-

-

-

-

(1,137,158)

Loss on extinguishment of debt

-

-

-

(258,882)

(1,806,758)

Interest income

1,326

-

1,326

-

68,207

Interest expense

(115,677)

(8,406)

(200,243)

(27,725)

(716,495)

Amortization of debt issuance

cost and commissions

(94,402)

-

(214,974)

-

(214,974)

Exchange differences

200,477

-

(64,594)

-

(64,594)

Other income / - expenses

-

-

-

-

79,534

Total other income / - expenses

(8,276)

(8,406)

(478,485)

(286,607)

(3,795,496)

Loss before income taxes

(1,087,665)

(317,461)

(4,036,628)

(1,006,777)

(16,165,551)

Income taxes

-

-

-

-

-

Net loss

$

(1,087,665)

(317,461)

(4,036,628)

(1,006,777)

(16,165,551)

Comprehensive loss:

Foreign currency translation

(455,282)

(128,267)

(226,082)

(56,619)

(264,534)

Comprehensive loss

$

(1,542,947)

(445,728)

(4,262,710)

(1,063,396)

(16,430,085)

Loss per common share

Basic and diluted

$

(0.02)

(0.01)

(0.07)

(0.02)

Weighted average common

shares

Basic and diluted

54,092,186

54,092,186

54,092,186

54,092,186

* Cumulative: January 1, 2005 (date of inception) to September 30, 2011

The accompanying notes are an integral part of these consolidated financial statements.

5



SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

January 1 to

January 1 to

September 30,

September 30,

Cumulative *

2011

2010

Amounts

(Unaudited)

(Unaudited)

(Unaudited)

Cash flows from operating activities

Net loss

$

(4,036,628)

(1,006,777)

(16,165,551)

Adjustments to reconcile net loss to net cash

Depreciation and amortization

16,749

753

289,494

Amortization of debt issuance cost and commissions

214,974

-

222,673

Unrealized exchange differences

64,594

-

64,594

Stock compensation expense

-

-

107,269

Loss on securities acquired as deposit on stock

-

-

1,008,324

Loss on disposal of assets

-

-

3,258

Loss on extinguishment of debt

-

258,882

1,806,758

Increase in pension fund commitments

40,755

-

40,755

- Increase / decrease in:

Other current assets

1,402

(7,502)

(8,848)

Accounts payable

(204,081)

74,244

1,246,155

Accrued expenses

729,710

85,183

1,115,264

Net cash used in operating activities

(3,172,525)

(595,217)

(10,269,855)

Cash flows from investing activities

Proceeds from securities available-for-sale

-

-

1,740,381

Increase in receivables from related parties

(1,232,233)

(1,232,233)

Purchase of property and equipment

(1,657,319)

(14,032)

(11,462,805)

Down payments on purchase of investment

(684,118)

-

(684,118)

Other non-current assets

(50,914)

1,863

(50,914 )

Net cash used in investing activities

(3,624,584)

(12,169)

(11,689,689)

Cash flows from financing activities

Net proceeds from deposit on stock

-

-

3,664,417

Proceeds from stock issuance

-

-

300,000

Proceeds from notes payable related parties

1,374,997

651,927

12,353,129

Repayment of notes payable related parties

(778,243)

(778,243)

Advances from third parties

-

-

700,000

Decrease in note payable

(551,155)

-

(714,819)

Proceeds from bond issuance, net of commissions

8,458,959

-

8,724,232

Payment for debt issuance costs

(1,019,273)

-

(1,040,943)

Purchase of treasury stock

-

(11,555)

(23,755)

Net cash provided by financing activities

7,485,285

640,372

23,184,018

Effect of exchange rate changes

(218,353)

(93,973)

(711,188)

Net increase / - decrease in cash

469,823

(60,987)

513,286

Cash, beginning of period

44,018

73,945

555

Cash, end of period

$

513,841

12,958

513,841

Additional information

Interest paid

84,000

-

Income taxes paid

-

-

*Cumulative amounts: From January 1, 2005 (inception date) to September 30, 2011

The accompanying notes are an integral part of these consolidated financial statements.

6



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

1.

CORPORATE INFORMATION

On August 27, 2007, SunVesta, Inc. (SunVesta) acquired SunVesta Holding AG (SunVesta AG)

(collectively the Company).  SunVesta AG has three wholly-owned subsidiaries: SunVesta

Projects and Management AG, a Swiss company; Rich Land Investments Limitada, a Costa Rican

company (Rich Land); and SunVesta Costa Rica Limitada, a Costa Rican company.

In January 2005 (date of inception of development stage), the Company changed its business

focus to the development of private equity financial products, whose funds will be invested

primarily in the hospitality and related industry. The Company has not materialized any revenues

yet and is therefore a “development stage company”.

These consolidated financial statements are prepared in US Dollars ($) on the basis of generally

accepted accounting principles in the United States of America (US GAAP).

The accompanying unaudited consolidated financial statements have been prepared by

management in accordance with the instructions in Form 10-Q and, therefore, do not include all

information and footnotes required by generally accepted accounting principles and should,

therefore, be read in conjunction with the Company’s Form 10-K, for the year ended December

31, 2010, filed with the Securities and Exchange Commission.  These statements do include all

normal recurring adjustments which the Company believes necessary for a fair presentation of the

statements.  The interim results of operations are not necessarily indicative of the results to be

expected for the full year ended December 31, 2011.

Except as indicated in the notes below, there have been no other material changes in the

information disclosed in the notes to the financial statements included in the Company’s Form

10-K for the year ended December 31, 2010, filed with the Securities and Exchange

Commission.  Therefore, those footnotes are included herein by reference.

7



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

2.

SIGNIFICANT ACCOUNTING POLICIES

Interest capitalization

Interest expense is capitalized on the carrying value of the construction in progress during the

construction period, in accordance with ASC 835-20 ("capitalization and interest"). With respect

to the construction in progress the Company capitalized $51,000 and $0 of interest expense

during the nine months period ended September 30, 2011 and September 30, 2010.

EUR and CHF bonds

Non-current liabilities comprise of bonds payable in EUR () and CHF, which bear fixed interest

rates. The EUR bonds and CHF bonds are carried at nominal value.

Issuance costs and placement provisions are capitalized and amortized over the term of the bond,

based on the “effective interest method”.

The amortization expense is reflected in amortization of debt issuance cost

Pension Plan

The Company maintains a pension plan covering all employees in Switzerland; it is considered a

defined benefit plan and accounted in accordance with ASC 715 ("compensation - retirement

benefits"). This model allocates pension costs over the service period of employees in the plan.

The underlying principle is that employees render services rateably over this period, and

therefore, the income statement effects of pensions should follow a similar pattern.  ASC 715

requires recognition of the funded status, or difference between the fair value of plan assets and

the projected benefit obligations of the pension plan on the balance sheet, with a corresponding

adjustment to accumulate other comprehensive income. If the projected benefit obligation

exceeds the fair value of plan assets, then that difference or unfunded status represents the

pension liability.

The Company records a net periodic pension cost in the statement of operations. The liabilities

and annual income or expense of the pension plan is determined using methodologies that involve

several actuarial assumptions, the most significant of which are the discount rate and the long-

term rate of asset return (based on the market-related value of assets). The fair values of plan

assets are determined based on prevailing market prices.

8



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

2.

SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, receivables from

related parties, accounts payable, note payables and bonds. The fair value of these financial

instruments approximate their carrying value due to the short maturities of these instruments,

unless otherwise noted.

ASC 820 (Fair Value Measurements) establishes a three-tier fair value hierarchy, which

prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as

observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than

quoted prices in active markets that are either directly or indirectly observable; and Level 3,

defined as unobservable inputs in which little or no market data exists, therefore requiring an

entity to develop its own assumptions.

New accounting standards

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards

Update ("ASU") 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve

Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,

which results in a consistent definition of fair value and common requirements for measurement

of and disclosure about fair value between accounting principles generally accepted in the United

States and IFRS. ASU 2011-04 is effective for interim and annual periods beginning after

December 15, 2011. The Company expects the adoption of this standard will have no significant

impact on the Company's consolidated financial statements and related disclosures.

In June 2011, the FASB issued amendments to Topic 220, Comprehensive Income, in this

Update, an entity has the option to present the total of comprehensive income, the components of

net income, and the components of other comprehensive income either in a single continuous

statement of comprehensive income or in two separate but consecutive statements. In both

choices, an entity is required to present each component of net income along with total net

income, each component of other comprehensive income along with a total for other

comprehensive income, and a total amount for comprehensive income. This Update eliminates

the option to present the components of other comprehensive income as part of the statement of

changes in stockholders' equity. The amendments in this Update do not change the items that

must be reported in other comprehensive income or when an item of other comprehensive income

must be reclassified to net income. Effective for annual periods beginning after December 15,

2011. The Company expects the adoption of this standard will have no significant impact on the

Company's consolidated financial statements and related disclosures.

9



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

3.

GOING CONCERN

The Company is currently working on building a hotel in the Papagayo Gulf Tourism Project area

of Guanacaste, Costa Rica.

The project is expected to open in the fourth quarter of 2014. Until the completion of the project,

the following expenditures are estimated to be incurred:

$1,000

a.     Gross project cost

195,000

b.    Less: Proceeds from sale of villas

-24,000

c.     Net project cost

171,000

d.    Overhead expenses

21,000

e.     Less: Recuperated in gross project cost

-12,000

f      Total, excluding other potential projects

180,000

Sixty percent (60%) of “Net project cost” is expected to be financed by traditional mortgage

loans, for which negotiations have been initiated. The remaining forty percent (40%) of “Net

project cost”, as well as “non-recuperated overhead expenses” and the cost of prospective “other

projects” are expected to be financed by four of the Company’s principal shareholders or

principal lenders to the project, i.e.:

a.

Zypam Ltd., shareholder

b.

Mr. Hans Rigendinger, shareholder and board member of SunVesta AG

c.

Mr. Max Rössler, majority shareholder of Aires International Investment, Inc.

(also refer to Note 16)

d.

Mr. Josef Mettler, shareholder, director and chief executive officer

Subsequent to September 30, 2011, those individuals detailed above signed a Guaranty

Agreement. (Refer to Note 16.) Management therefore believes that available funds are sufficient

to finance cash flows for the twelve months subsequent to September 30, 2011 and the filing date

though future anticipated cash outflows for investing activities will continue to depend on the

availability of financing and can be adjusted as necessary.

10



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

4.

PROPERTY & EQUIPMENT

September 30, 2011

December 31, 2010

Unaudited

Audited

Land

7,000,000

7,000,000

IT equipment

185,846

185,846

Other equipment and furniture

29,979

29,979

Leasehold improvements

66,617

66,617

Construction in progress

3,905,000

2,311,276

Gross

11,187,442

9,593,718

Less: Accumulated depreciation

(282,442)

(271,742)

Net

10,905,000

9,321,976

5.

CONSTRUCTION IN PROCESS

The Company possesses a concession for a piece of land (~84’000 m2), i.e. a right to build a

hotel and apartments in the “Papagayo Gulf Tourism Project”, Guanacaste, Costa Rica, which

was acquired for $7 million and recorded as land in property and equipment.

The concession is a right to use the property for a specific purpose over a term of 20 years, which

term thereafter can be renewed at no further cost, if the Company is up to date with its obligations

as stipulated by the Cota Rican government and if no significant change in government policies

takes place. The current concession expires in June 2022.

The construction in process amount that was spent as of September 30, 2011 is attributed

primarily to architectural work related to the hotel and apartments.

6.

NOTE PAYABLE TO THIRD PARTIES

The Company’s note payable was to Bruesa Construccione S.A. (Bruesa), a Spanish construction

contractor.  The note was repayable in Euros and was collateralized by a 10% interest in Rich

Land and bore interest at 6%. The note payable balance sheet amounts of $551,155 for December

31, 2010 included related accrued interest of approximately $59,000. As of June 17, 2011 the

amount due was paid in full and Bruesa’s interest in Rich Land was returned to the Company.

11



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

7.

RECEIVABLES FROM AND NOTES PAYABLE TO RELATED PARTIES

Receivables

Payables

September 30,

December 31,

September 30,

December 31

2011

2010

2011

2010

01     Hans Rigendinger

-

-

275,028

-

02     Adrian Oehler

-

-

39,409

31,887

03     Zypam Ltd

1,232,233

-

-

685,621

04     Sportiva

-

-

-

83,000

05     Aires International

-

-

1,099,969

0

Total excluding

interest

1,232,233

-

1,408,000

800,508

Accrued interest

-

-

-

10,738

Total

1,232,233

-

1,408,000

811,246

of which non-current

-

-

1,099,969

-

Related party

Capacity

Interest

Repayment

Security

Rate

Terms

01    Hans Rigendinger

Shareholder

NA

Dec 30, 2011

None

02    Adrian Oehler

Shareholder

3.00%

None

None

03    Zypam Ltd

Shareholder

None

N/A

None

04    Sportiva

An entity owned by a

3.00%

None

None

Company board member

05    Aires International

See below

12



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

7.

RECEIVABLES FROM AND NOTES PAYABLE TO RELATED PARTIES - CONTINUED

Line of Credit agreement with Aires International Investments, Inc.

On July 27, 2011, SunVesta signed a loan agreement with Aires International Investments Inc., a

company owned by a board member of SunVesta AG, which includes the following major

conditions:

The lender grants SunVesta a terminable, interest bearing and non-secured loan in

the maximum amount of CHF 6 million.

The loan is to be paid out in various portions between September 23, 2011, and

December 9, 2011, optionally not later than February 29, 2012 with the option to

exercise a conversion option.

In principle, the loan will become due on September 30, 2015. This is also the

latest point in time, when the lender can exercise his conversion option.

The interest rate is 7.25 % and interest is due on September 30 each year.

Provided that the entire amount of CHF 6 Million is paid in, the lender has the right to convert

this amount into 10% of the shares of Rich Land Investments Ltda. This conversion option is

valid until 30 September 2015.

As the conversion option is contingent upon payment of the entire amount of CHF 6 million and

this contingency was not resolved as of September 30, 2011, the loan was valued at fair value,

which equals face value.

The loan agreement was amended subsequent to year end. Refer to Note 16.

The fair values of the notes payable to Aires International Investments, Inc. is classified as level 3

fair value. The fair values of the note were determined by discounting cash flow projections

discounted at the respective interest rates of 7.25%. Hence, the carrying value approximates fair

value.

13



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

8.

RELATED PARTY TRANSACTIONS

Debt Settlement Agreements

During the year ending December 31, 2010 the Company concluded certain debt settlement

agreements. The issuances of shares of the Company were recorded at fair value in the year ended

December 31, 2010 and the difference between the carrying value of the payables and the fair

value was recorded as loss on extinguishment of debt in the statement of operations for the year

ended December 31, 2010.The details are as follows:

a.    A “Debt Settlement Agreement”, whereby a payable by SunVesta AG to Zypam Ltd. in the

amount of $900,000 has been settled by the issuance of 13,846,154 shares of the Company.

b.    A “Debt Settlement Agreement”, whereby a payable by SunVesta AG to H. Rigendinger in

the amount of $49,990 has been settled by the issuance of 769,076 shares of the Company.

9.

NON-CURRENT LIABILITIES

SunVesta AG has a bond outstanding with the following major conditions.

Description

EUR () bond

CHF bond

[sunvesta10qfinal002.gif]

Issuer:

SunVesta AG

SunVesta AG

[sunvesta10qfinal004.gif]

Type of securities:

Bond in accordance with Swiss law  Bond in accordance with Swiss law

[sunvesta10qfinal002.gif]

Approval by SunVesta AG BOD    May 12, 2010

June 3, 2011

[sunvesta10qfinal002.gif]

Volume:

Up to 25,000,000

Up to CHF 15,000,000

[sunvesta10qfinal002.gif]

Units:

1‘000

CHF 50,000

[sunvesta10qfinal002.gif]

Offering period:

11/10/2010 – 04/30/2011

09/01/2011 – 02/28/2012

[sunvesta10qfinal002.gif]

Due date:

November 30, 2013

August 31, 2015

[sunvesta10qfinal002.gif]

Issuance price:

100 %

100%

[sunvesta10qfinal002.gif]

Issuance day::

December 1, 2010

September 1, 2011

[sunvesta10qfinal002.gif]

Interest rate:

8.25% p.a.

7.25% p.a.

[sunvesta10qfinal002.gif]

Interest due dates:

November 30 of each year,

August 31 of each year,

the first time 30 November 2011

the first time August 31, 2012

[sunvesta10qfinal002.gif]

Applicable law:

Swiss

Swiss

[sunvesta10qfinal006.gif]

[sunvesta10qfinal008.gif]

[sunvesta10qfinal010.gif]

14



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

9.

NON-CURRENT LIABILITIES - CONTINUED

The nominal amounts have changed as follows:

EUR-

CHF

EUR-

CHF

Bond

Bond

Bond

Bond

2011

2011

2010

2010

$

$

$

$

Balances January 1

265,273

-

-

-

Cash inflows

8,606,797

108,870

265,273

-

Foreign currency adjustments

(18,813)

1,030

-

-

Sub-total (Fair value)

8,853,257

109,900

265,273

-

Commissions paid to bondholders

(248,196)

(8,512)

-

-

Amortization of such commissions

33,554

6

-

-

Balance September 30, 2011 (Carrying value)      8,638,615

101,394

265,273

-

The fair values of the bonds payable are classified as level 3 fair value. The fair values of the

bonds have been determined by discounting cash flow projections discounted at the respective

interest rates of 8.25% for EUR bonds and 7.25% for CHF bonds. Hence, the carrying values

approximate fair value.

10.

PENSION PLAN

The Company maintains a pension plan covering all employees in Switzerland; it is considered a

defined benefit plan and accounted in accordance with ASC 715 ("compensation - retirement

benefits"). This model allocates pension costs over the service period of employees in the plan.

The underlying principle is that employees render services rateably over this period, and

therefore, the income statement effects of pensions should follow a similar pattern.  ASC 715

requires recognition of the funded status, or difference between the fair value of plan assets and

the projected benefit obligations of the pension plan on the balance sheet, with a corresponding

adjustment to accumulated other comprehensive income. If the projected benefit obligation

exceeds the fair value of plan assets, then that difference or unfunded status represents the

pension liability.

The Company records a net periodic pension cost in the statement of operations. The liabilities

and annual income or expense of the pension plan is determined using methodologies that involve

several actuarial assumptions, the most significant of which are the discount rate and the long-

term rate of asset return (based on the market-related value of assets). The fair values of plan

assets are determined based on prevailing market prices.

Actuarial valuation

The actuarial valuation was carried out the first time as of December 31, 2011 and simultaneously

as of September 30, 2011. No previous valuations were done because management concluded that

the failure did not materially impact the financial statements as of December 31, 2010.

15



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

10.

PENSION PLAN - CONTINUED

Net periodic pension cost has been included in the Company’s results as follows:

Nine months ended

Nine months ended

September 30, 2011

September 30, 2010

$

$

(unaudited)

(unaudited)

Pension Expense

Current service cost

76,150

-

Past service cost

-

-

Interest cost

(2,315)

-

Expected return on assets

(2,075)

-

Employee contributions

(30,492)

-

Net periodic pension cost

41,268

During  the  periods  ended  September  30,  2011  and  September  30,  2010  the  Company  made  cash

contributions of $30,000 and $0, respectively, to its defined benefit pension plan.

The expected future cash flows to be paid by the Company in respect of employer contributions

to the pension plan for the year ended December 31, 2011 are $0.

11.

AGREEMENT TO PURCHASE NEIGHBORING PIECE OF LAND

In 2010 SunVesta AG concluded a sale and purchase agreement with a company called DIA S.A.

(“DIA”), being domiciled in San José, Costa Rica. The purpose of the agreement is to acquire a

contigious parcel of land consisting of approximately 120,000 square meters with direct

beachaccess by purchasing 100% of the shares of Altos del Risco S.A. from DIA. The total

purchase consideration is $12.5 million. Upon payment of the entire amount, ownership of Altos

del Risco S.A. will be transferred to SunVesta AG. As at September 30, 2011 and December 31,

2010, $0.735 million and $0 has been paid, respectively.

The sixth addendum dated November 12, 2012, stipulates that:

$8.5 million has already been paid

$4.0 million has still to be paid

The current contractual situation does not call for any penalties. The purchase of the neighbouring

piece of land is expected to be completed during the 1st quarter of 2013.

16



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

12.

FUTURE LEASE COMMITMENTS

Since January 1, 2010 the Company has had a sub-rental agreement for its Swiss office with a

related party called “Sportiva”. The annual sub-rental expense is approx. $80,000. The sub-rental

agreement is concluded for an undetermined period of time, however, there is a verbal agreement

to maintain the agreement at least until December 31, 2013.

13.

RELATIONSHIP WITH WIMBERLY ALLISON TONG & GOO (“WTAG”)

Legal proceedings were initiated by Wimberley Allison Tong & Goo (WATG) against SunVesta

Projects and Management AG on November 6, 2008 in the Superior Court of the State of

California, County of Orange. The claim was based on an alleged failure to satisfy the terms of a

promissory note executed in exchange for certain design services rendered in connection with the

El Cielo Hideaway Eco Resort and Spa. The claim sought approximately $355,000 plus accrued

interest in addition to legal fees incurred in prosecuting the suit. The Company engaged legal

counsel and paid $100,000 in 2009 to Wimberley Allison Tong & Goo against the amount due.

In 2010, WATG engaged a debt collector for the remaining amount of approximately $255,000

plus accrued interest and legal fees. The Company returned to settlement negotiations and agreed

to settle the outstanding amount, without interest or legal fees, in equal instalments due on April

30, May 31, June 30, and July 31, 2010. This agreement was then extended to August 31, 2010.

As of March 31, 2011, the Company has paid approximately $195,000, leaving a remaining

balance due of approximately $60,000 as of that date. As of May 26, 2011, the Company

finalized the settlement and paid the remaining balance due.

14.

WING FIELD CORPORATION INC.

On August 31, 2009 the Company concluded a development agreement with WingField

Corporation Inc. (“WingField”), which included various services to be provided by WingField. A

major item was the procurement of a management contract for the management of the planned

resort in Guanacaste, Costa Rica. (Refer to Note 16.)

15.

MANGEMENT AGREEMENT WITH MELIÁ HOTELS & RESORTS

In March 2011 the Company concluded a management agreement with Sol Meliá, S.A. for the

management of the planned resort in Guanacaste, Costa Rica. This agreement includes clause that

provides that if the Company is unable to conclude the purchase of the property described in Note

11 by November 30, 2011, a penalty of $1,000,000 would become due to Sol Meliá, S.A. In

2012, the maturity date of this penalty has been extended to June 30, 2012.

The Company is yet to conclude the purchase of the property described in Note 11 and is

presently negotiating with Sol Meliá, S.A.  to include an addendum to the management agreement

that would circumvent this penalty.

17



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

16.

SUBSEQUENT EVENTS

Management has evaluated subsequent events after the balance sheet date, through the issuance of

the financial statements, for appropriate accounting and disclosure. The Company has determined

that there were no such events that warrant disclosure or recognition in the financial statements,

except for the below:

EUR Bond Offering

The Company initiated a EUR bond offering on December 1, 2010 of up to 25,000,000 in units

of 1,000 that bear 8.25 % interest per annum payable each November 30 over the term of the

bonds due November 30, 2013.

A cumulative amount of 10.9 million ($13,900,000) has been realized by the Company from the

initial date up to the date of this filing.

CHF Bond Offering

The Company initiated a CHF bond offering on September 1, 2011 of up to CHF 15,000,000 in

units of CHF 50,000 that bear 7.25 % interest per annum payable each August 31 over the term of

the bonds due August 31, 2015.

A cumulative amount of CHF 5.5 million ($5,800,000) has been realized by the Company from

the initial date up to the date of this filing.

WingField Corporation

The development agreement with WingField included a detail of certain services to be provided

by WingField one of which was to procure a management contract for the operation of the

planned resort. The management agreement with Sol Meliá, S.A. in the first quarter of 2011

satisfied this item. The Company has since decided to build up its own internal project

organisation and consequently reached an agreement with Wingfield in October 2011 to terminate

the development agreement by paying a flat remuneration of $2,500,000, including a “finders

fee”.

18



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

16.

SUBSEQUENT EVENTS - CONTINUED

Intention to purchase two additional concession properties in Polo Papagayo, Guanacaste

On April 20, 2012, the Company entered into an agreement to purchase two additional concession

properties located at Polo Papagayo, Guanacaste, with a total surface of approximately 230,000

square   meters for a price of $22,895,806, whereof fifty percent is to be paid in cash and the other

fifty percent in ten percent equity of La Punta (the concession properties in Polo Papagayo) and

five percent in equity of Paradisus (the hotel currently under construction), both located in Costa

Rica. The payment schedule is as follows:

$0.5 million is required as a cash payment by May 16, 2012

$5.0 million is required as a cash payment by August 31, 2012

$5.698 million is required as a cash payment by January 31, 2013

Equity is required to be transferred upon final payment

If the Company elects not to proceed with the purchase, the purchaser is in default and will lose

its funds on deposit.

On November 13, 2012 the above agreement was amended as follows:

The total purchase price was changed to $17.2 million with no equity payment. The terms and

conditions of the cash payment are yet to be defined. Furthermore, all payments by the Company

to date and in the future are refundable.

Subsequent to signing the agreements, the Company paid down-payments on the purchase of the

properties of approximately $1,400,000.

19



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

16.

SUBSEQUENT EVENTS – CONTINUED

Advisory Services Agreements

In order to raise the necessary funds for the completion of the project, various advisory service

agreements have been concluded, both in Europe as well as Central America. In addition, a

European rating agency has been engaged in order to receive a rating. While the basic cost for the

advisory services are not significant, the actual funding will be accompanied by costs (finders’

fees), which are in the area of 3% in the best case and 12% in the worst case.

Amendments to Line of Credit Agreement with Aires International Investment, Inc.

An addendum to the existing line of credit agreement with Aires as described in note 7 was

signed on May 11, 2012 that includes the following clauses:

    The line of credit amount was increased by CHF 4,000,000 to a total amount of CHF

10,000,000. The additional CHF 4,000,000 to be paid in installments through the end of

July 2012.

    Should the entire amount of CHF 10,000,000  be drawn down, Aires will have the right

to convert the entire line of credit of CHF 10,000,000 into a 20% holding of the capital of

the Company.

    The conversion right granted in the original contract to convert the balance of the line of

credit into a 10% ownership interest in Rich Land was cancelled.

    The entire amount of CHF 10,000,000 is subordinated in favor of other creditors.

A letter agreement signed by Aires on June 21, 2012, agreed to increase the line of credit  by

CHF 2,000,000 to a total amount of CHF 12,000,000.

The Company and Aires are currently negotiating a revised conversion option to replace the one

stated above. The major contemplated change is that Aires International will convert its

receivable at the time of conversion of into 20% of the preferred shares of shares of the Company,

at a price and with preferential rights yet to be determined.

As of November 15, 2012 the Company has borrowed CHF11.8 million ($12,500,000) from the

Aires line of credit.

Tax Liability Contingency

During April 2012, the Company was advised by the Internal Revenue Service (IRS) of aggregate

penalties amounting to $140,000 in connection with its failure to file certain tax    returns for the

years ended 2008, 2009 and 2010. The Company is in correspondence with the IRS in order to

seek an abatement of the penalties.

20



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

16.

SUBSEQUENT EVENTS – CONTINUED

Guaranty Agreement

On July 16, 2012, certain principal shareholders of the Company or principal lenders to the

project entered into a guaranty agreement in favour of SunVesta AG. The purpose of the

guarantee is to ensure that until such time as financing is secured for the entire project that they

will act as a guarantor to creditors to the extent of the project’s ongoing capital requirements. The

guaranty agreement requires that within 30 days of receiving a demand notice, the guarantors are

required to pay to SunVesta AG that amount required for ongoing capital requirements, until such

time as financing of the project is secured. The guaranty may not be terminated until such time as

SunVesta AG has secured financing for the completion of the project.

Hotel Project Atlanta

During the third quarter 2012 the Company entered into an agreement to purchase a hotel and

entertainment complex in Atlanta, Georgia (United States of America).

The entire purchase amount of $26 million for the assets has no firm financing commitment.

Additionally, approximately an additional $18 million for renovations would need to be invested

in the hotel and entertainment complex. The Company is in negotiations with various parties to

finalize a financing package for this project and is confident that it will be able to procure such

financing.

Nonwithstanding all other factors, the Company may terminate this agreement, within a due

dilligence period, if it is not satisfied with the property after an examination of the assets.

The agreement includes a non-refundable deposit of $250,000.

21



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

17.

RESTATEMENT

During the three month period ended September 30, 2011 the Company reversed previous interest

expense of $217,750 relating to the fact that the Company initially intended to pay interest

starting from the EUR bond offering date (Dec 1, 2010) as opposed to the bond issuance dates.

However, during the three month period ended September 30, 2011, the Company's board of

directors changed the policy and hence reversed the interest accrued for the period from bond

offering date to the respective bond issuance dates.

The Company decided to record for this retrospectively an error since there was no contractual

obligation to pay interest from the bond issuance date to begin with. There is no effect on the nine

month period ended September 30, 2011. However, the individual three months period ended

June 30, 2011 is impacted as follows:

Three months period

Three months period

Three months period

ended June 30, 2011

ended June 30, 2011

ended June 30, 2011

As previously

Adjustment

As restated

reported

Interest expense

$ (268,690)

$ 217,750

$ (50,940)

Net loss

$ (2,689,085)

$ 217,750

$ (2,471,335)

Basic and diluted loss

$ (0.05)

$ (0.01)

$ (0.04)

per share

The Company determined that the effect is immaterial to the three months period ended June 30,

2011 and hence decided not to file an amendment of the form 10-Q for the respective period as

filed on December 18, 2012.

22



ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other

parts of this quarterly report contain forward-looking statements that involve risks and uncertainties.

Forward-looking statements can be identified by words such as “anticipates,” “expects,” “believes,”

“plans,” “predicts,” and similar terms. Forward-looking statements are not guarantees of future

performance and our actual results may differ significantly from the results discussed in the forward-

looking statements. Factors that might cause such differences include but are not limited to those

discussed in the subsection entitled Forward-Looking Statements and Factors That May Affect Future

Results and Financial Condition below. The following discussion should be read in conjunction with our

financial statements and notes hereto included in this report. All information presented herein is based on

our three and nine month periods ended September 30, 2011. Our fiscal year end is December 31.

Discussion and Analysis

Business Overview

SunVesta is in the process of developing high-end luxury hotels and resorts in emerging tourist

destinations. We are initially concentrating on offering luxury hotel products located in attractive, top-

class coastal vacation destinations in countries such as Costa Rica, Vietnam, and Turkey that are fast

emerging as popular tourist destinations. Our initial real estate development, to be constructed on 20.5

hectares of prime land located in Guanacaste Province, Costa Rica is the Paradisus Papagayo Bay, a five

star luxury hotel scheduled to open in November 2014 subject to requisite financing.

We have entered into a management agreement, through our wholly owned subsidiary Rich Land

Investments, Limitada (“Rich Land”) with Sol Meliá, S.A. (“Sol Meliá”) to assist us in the planning,

design, construction, furnishing and management of the Paradisus Papagayo Bay. “Paradisus” is Sol

Meliá’s five star all-inclusive luxury hotel brand represented in the Dominican Republic and Mexico.

Paradisus Papagayo Bay’s initial specifications are to be as follows:

    Eco-luxury all-inclusive resort;

    381-keys;

    Direct beach access;

    Five restaurants and five bars;

    Yhi Spa and Health Club;

    Paradisus’ adults-only “Royal Service” level of accommodations;

    Paradisus’ “Family Concierge” program; and

    19,000 square feet of meeting facilities with the business traveler in mind.

Our Paradisus Papagayo Bay development is intended to replace Paradisus Resorts’ former Paradisus

Playa Conchal in Guanacaste, Costa Rica which property was operated by Sol Meliá until April 30, 2011.

Our project is part of Sol Meliá master expansion plan, which includes the opening of two resorts in Playa

del Carmen, Mexico in November of 2011. Sol Meliá aims to solidify Paradisus Resorts as a leader in the

luxury all-inclusive market segment with the new properties in Playa del Carman and our own Paradisus

Papagayo Bay project.

23



Our plan of operation over the next thirty three months is to complete the Paradisus Payagyo Bay project

which will require a total investment of approximately $180 million. We expect to realize a minimum of

$20,000,000 in new funding over the next twelve months, though our actual financing requirements may

be adjusted to suit that amount realized, and an additional $140,000,000 in funding by the time the

development is completed. New funding over the next twelve months is expected to be raised from debt

financing through bonds and a fixed line of credit.

SunVesta Holding AG (“SunVesta AG”), our wholly owned subsidiary, is in the process of issuing fixed-

income Euro denominated bonds up to an aggregate amount of 25,000,000 and fixed income CHF

denominated bonds up to an aggregate amount of CHF 15,000,000 to fund the initial development of the

Paradisus Payagyo Bay project. The Euro bonds are unsecured, have a three year term, bear interest at

8.25% per annum payable each November 30 over the term due November 30, 2013. SunVesta AG

raised, net of commissions paid,  $8,358,601 in the nine months ended September 30, 2011, for a total of

approximately $13,900,000 as of the date of this filing, in connection with the Euro bond offering.  The

CHF bonds, first offered on September 1, 2011, are unsecured, have a three year term, bear interest at

7.25% per annum payable each August 31 over the term due August 31, 2015. SunVesta AG raised, net of

commissions paid, $100,358 in the nine months ended September 30, 2011, for a total of approximately

$5,800,000 as of the date of this filing in connection with the CHF bond offering.

SunVesta AG entered into a line of credit agreement with Aires International Investment, Inc. (“Aires”)

on July 27, 2011 allowing it to borrow up to CHF 6,000,000 by February 29, 2012. The line of credit

bears interest at 7.25% and was secured by 10% of the stock of Rich Land. Interest payments are due

September 30 of each year with the line of credit maturing on September 30, 2015. Prior to maturity, if

the maximum credit limit was borrowed, Aires had the option to convert the balance of the line of credit

into a 10% ownership interest in Rich Land.

Subsequent to the period of this report, on May 11, 2012, the parties to the Aires line of credit agreement

executed an addendum to the existing line of credit agreement that includes the following clauses:

    The line of credit amount was increased by CHF 4,000,000 to a total amount of CHF 10,000,000.

    The additional CHF 4,000,000 to be paid in installments through the end of July 2012.

    Should the entire amount of CHF 10,000,000  be drawn down, Aires will have the right to convert

the entire line of credit of CHF 10,000,000 into a 20% holding of the capital of SunVesta.

    The conversion right granted in the original contract to convert the balance of the line of credit

into a 10% ownership interest in Rich Land was cancelled.

    The entire amount of CHF 10,000,000 is subordinated in favor of other creditors.

Subsequent to the period of this report, on June 21, 2012, pursuant to a letter agreement, Aires agreed to

increase the line of credit by CHF 2,000,000 to a total amount of CHF 12,000,000.

SunVesta AG and Aires are currently in the process of negotiating a revised conversion option to replace

the existing option to convert CHF 10,000,000 into a 20% holding in the capital of SunVesta. The major

contemplated change is that Aires will convert its receivable at the time of conversion into 20% of the

preferred shares of SunVesta, at a price and with preferential rights yet to be determined.

As of the date of this filing SunVesta AG had borrowed CHF11.8 million ($12,500,000) from the Aires

line of credit.

The remaining amounts required to develop the Paradisus Papagayo Bay to completion is anticipated to

be in the form of a traditional construction loan and equity.

24



Subsequent to the period of this report, on April 20, 2012, SunVesta AG entered into an agreement to

purchase two additional concession properties located at Polo Papagayo, Guanacaste, with a total surface

of approximately 230,000 square meters for a price of $22,895,806, whereof fifty percent was to be paid

in cash and the other fifty percent in ten percent equity of La Punta (the concession properties in Polo

Papagayo on which the project will be located) and five percent in equity of Paradisus Payagyo Bay. The

payment schedule was as follows:

$0.5 million is required as a cash payment by May 16, 2012

$5.0 million is required as a cash payment by August 31, 2012

$5.698 million is required as a cash payment by January 31, 2013

Equity is required to be transferred upon final payment

Should SunVesta AG elect not to proceed with the purchases, such election would constitute a default

which would cause it to lose its funds on deposit.

Subsequent to the period of this report, on November 13, 2012, the purchase agreement for additional

concession properties in Polo Papagayo was amended to decrease the total cash purchase price to $17.2

million and delete the equity component for both the concession properties and the hotel and resort

property. The terms and conditions of the cash payment are yet to be defined. Furthermore, all payments

by SunVesta AG to date and in the future are refundable. SunVesta AG has paid down-payments on the

purchase of the properties of approximately $1,400,000 as of the date of this report.

Subsequent to the period of this report, during the third quarter 2012, SunVesta entered into an agreement

to purchase a hotel and entertainment complex in Atlanta, Georgia, U.S.A. The entire purchase amount of

$26 million for the assets has no firm financing commitment. Additionally, approximately an additional

$18 million for renovations would need to be invested in the hotel and entertainment complex. SunVesta

is in negotiations with various parties to finalize a financing package for this project and is confident that

it will be able to procure such financing. Nonwithstanding all other factors, SunVesta may terminate this

agreement, within a due dilligence period, if it is not satisfied with the property after an examination of

the assets. The agreement includes a non-refundable deposit of $250,000.

Timeline

Our expected timeline for developing the Paradisus Papagayo Bay is as follows:

    Complete revisions of architectural plans which will incorporate Sol Meliá requirements in the 4th

quarter of 2012;

    Receive traditional construction loan in the 1st quarter of 2013;

    Receive final building permits in 1st quarter of 2013;

    Begin construction in the 1st quarter of 2013; and

    Complete construction work in the 4th quarter of 2014.

25



Results of Operations

During the nine month period ended September 30, 2011, our operations were focused on (i) entering into

agreements with Sol Meliá to assist us in the planning, design, construction, furnishing and management

of the Paradisus Papagayo Bay; (ii) revision of architectural plans to incorporate Sol Meliá requirements

for the development; (iii) arranging a line of credit with Aires; and (iv) pursuing SunVesta AG’s bond

offerings in Europe.

SunVesta has been funded since inception from equity placements, debt financing and by shareholders or

partners in the form of loans. Substantially, all of the capital raised to date has been allocated to the

development of our property the Paradisus Papagayo Bay in Costa Rica as a five star destination resort

including the purchase of the land and general and administrative costs.

Comprehensive Losses

For the period from the date of inception of development stage on January 1, 2005, until September 30,

2011, SunVesta has incurred comprehensive losses of $16,430,085.

Comprehensive losses for the three months ended September 30, 2011 were $1,542,947 as compared to

$445,728 for the three months ended September 30, 2010. The increase in comprehensive losses over the

comparative three month periods can be primarily attributed to the increase in general and administration

expenses to $1,063,241 in the three month period ended September 30, 2011, from $307,650 in the three

month period ended September 30, 2010, of which a significant component were finder’s fees associated

with the management contract with Sol Melià. Other contributing factors to the increase in comprehensive

losses include the increase in marketing costs to $16,148 in the three month period ended September 30,

2011, from $1,405 in the three month period ended September 30, 2010, which expense is associated with

the Paradisus Papagayo Bay development, the increase in interest expenses on outstanding debt to

$115,677 in the three month period ended September 30, 2011, from $8,406 in the three month period

ended September 30, 2010, which expense can be primarily attributed to debt associated with the bond

offerings , the non-cash amortization of debt issuance costs to $94,402 in the three months ended

September 30, 2011, from $0 in the three month period ended September 30, 2010, which expense is

connected to the bond offerings, and the increase in loss on foreign currency translation to $455,282 in

the three month period ended September 30, 2011, from $128,267  in the three month period ended

September 30, 2010 relating to the volatility between Swiss Francs and US Dollars The increases in

losses over the comparative nine month periods were offset by the gain on exchange differences of

$200,477 in the three month period ended September 30, 2011, from $0 in the three month period ended

September 30, 2010, which gain can be attributed to volatility in the respective values of Swiss Francs

and Euros and interest income of $1,326 in the three month period ended September 30, 2011, from $0 in

the three month period ended September 30, 2010, which gain is from funds held as deposits.

26



Comprehensive losses for the nine months ended September 30, 2011 were $4,262,710 as compared to

$1,063,396 for the nine months ended September 30, 2010. The increase in comprehensive losses over the

comparative periods can primarily be attributed to the increase in general and administrative expenses to

$3,424,541 in the nine month period ended September 30, 2011, from $705,510 in the nine month period

ended September 30, 2010, of which significant components were finders’ fees and advisory services.

Other contributing factors to the increase in comprehensive losses include the increase in marketing costs

to $133,602 in the nine month period ended September 30, 2011, from $14,660 in the nine month period

ended September 30, 2010, which expense is associated with the Paradisus Papagayo Bay development,

the increase in interest expenses on outstanding debt to $200,243 in the nine month period ended

September 30, 2011 from $27,725 in the nine month period ended September 30, 2010, which expense

can be primarily attributed to debt associated with the bond offerings, the non-cash amortization of debt

to $214,974 in the nine month period ended September 30, 2011, from $0 in the nine month period ended

September 30, 2010, which expense is connected to the bond offerings, the increase in the loss on

exchange differences to $64,594 in the nine month period ended September 30, 2011, from $0 in the nine

month period ended September 30, 2010, which expense can be attributed to volatility in the respective

values of Swiss Francs and Euros, and the increase in loss on foreign currency translation to $226,082 in

the nine month period ended September 30, 2011, from $56,619 in the nine month period ended

September 30, 2010 relating to the volatility between Swiss Francs and US Dollars The increases in

losses over the comparative nine month periods were offset by interest income of $1,326 in the nine

month period ended September 30, 2011, from $0 in the nine month period ended September 30, 2010,

which gain is from funds held as deposits. We did not generate revenue during this period and expect to

continue to incur losses through the year ended December 31, 2011.

Income Tax Expense (Benefit)

SunVesta has a prospective income tax benefit resulting from a net operating loss carry-forward and start

up costs that will offset future operating profits.

Capital Expenditures

SunVesta expended a significant amount on capital expenditures for the period from January 1, 2005 to

September 30, 2011, in connection with the purchase of land that includes a hotel concession in Costa

Rica and expects to incur future cash outflows on capital expenditure as discussed in the "Liquidity and

Capital Resources" and the "Going Concern" paragraphs below.

Liquidity and Capital Resources

SunVesta has been in the development stage since inception and has experienced significant changes in

liquidity, capital resources, and stockholders’ equity.

As of September 30, 2011, we had a working capital deficit of $59,811. We had current assets of

$1,754,093 and total assets of $14,490,712. Our current assets consisted of $513,841 in cash, $1,232,233

in receivables from related parties and $8,019  in other assets. Our total assets consisted of current assets,

property and equipment of $10,905,000, net debt issuance costs of $1,096,587, and down payments for

property and equipment of $735,032. We had current liabilities of $1,813,903 and total liabilities of

$11,694,637. Our current liabilities consisted of $710,339 in accounts payable, $795,534 in accrued

expenses, and $308,031 in related party payables. Our total liabilities consisted of current liabilities and

long term debt of $8,740,000 associated with SunVesta AG’s bond offerings, $1,099,969 in notes payable

to related parties and $40,755 in pension liabilities. Total stockholders’ equity in SunVesta was

$2,796,075  at September 30, 2011.

27



For the period from January 1, 2005 to September 30, 2011, our net cash used in development stage

activities was $10,269,855. Net cash used in development stage activities for the nine months ended

September 30, 2011, was $3,172,525  as compared to $595,217 for the nine months ended September 30,

2010. Net cash used in development stage activities in the current nine month period ended September 30,

2011, includes a number of items that are book expense items which do not affect the total amount

relative to actual cash used including pension fund commitments, depreciation, amortization of debt

issuance cost and unrealized exchange difference. Actual cash items used, that are not income statement

related items such as general and administrative expenses, include accrued expenses offset by other

current assets and accounts payable. Net cash used in development stage activities for the prior nine

month period ended September 30, 2010, also includes a number of items that are book expense items

which do not affect the total amount relative to actual cash used including depreciation and loss on

extinguishment of debt. Actual items used that are not income statement related items include accrued

expenses and other assets offset by accounts payable. We expect to continue to generate negative cash

flow in development stage activities until such time as net losses transition to net income which transition

is not anticipated until we complete the Paradisus Papagayo Bay project.

For the period from January 1, 2005 to September 30, 2011, our net cash used in investing activities was

$11,689,689. Net cash used in investing activities for the nine month period ended September 30, 2011,

was $3,624,584as compared to $12,169 for the nine month period ended September 30, 2010. Net cash

used in investing activities in the current nine month period ended September 30, 2011, can be attributed

to the increase in receivables from related parties the purchase of property and equipment, down

payments against the purchase of properties and the procurement of other non-current assets. Net cash

used in investing activities in the prior nine month period ended September 30, 2010, can be attributed to

the purchase of property and equipment offset by net cash provided by the disposition of other non-

current assets. We expect to continue to generate negative cash flow in investing activities in future

periods while we develop the Paradisus Papagayo Bay and look to other investment opportunities.

For the period January 1, 2005 to September 30, 2011 our net cash provided by financing activities was

$23,184,018. Net cash provided by financing activities for the nine month period ended September 30,

2011, was $7,485,285 as compared to $640,372 for the nine month period ended September 30, 2010.

Net cash provided by financing activities in the current period ended September 30, 2011, can be

attributed to proceeds from SunVesta AG’s bond issuance and notes payable related parties, offset by net

cash used in financing activities forproceeds paid on a note payable to both related and third parties and

debt issuance costs. Net cash provided by financing activities in the prior nine month period ended

September 30, 2010, can be attributed to proceeds from notes payable to related parties offset by net cash

used in financing activities for the purchase of treasury stock. We expect to continue to generate net cash

flow provided by financing activities in future periods from SunVesta AG’s bond offering and the credit

line with Aires.

28



Management believes that our current assets in addition to the equity financing efforts and a line of credit

are sufficient for us to conduct operations over the next twelve months. Current debt financing efforts

consist of bond offerings in progress and a credit line commitment agreed with Aires that permits us to

draw capital as necessary to meet ongoing operational requirements. SunVesta has, as of the date of this

filing, realized $19,700,000 through its Euro and CHF bond offerings and drawn down $12,500,000

against the line of credit with Aires. However, such amounts are not sufficient to ensure the completion of

the Paradisus Papagayo Bay project which completion will require a total investment of approximately

$180 million. Net costs associated with completing the project are projected to be approximately

$171,000,000. Management expects that sixty percent (60%) of the net project cost will be financed by

traditional mortgage loans, for which negotiations have been initiated. The remaining forty percent (40%)

of net project costs, as well as non-recuperated overhead expenses are expected to be financed by four of

our principal shareholders or principal lenders to the project. Subsequent to period end, these individuals

entered into a guaranty agreement with SunVesta AG by which they agreed to guarantee the availability

of capital to develop the project until such time as financing for the completion of the Paradisus Papagayo

Bay project is secured, which objective is yet to be accomplished. Management believes that debt or

equity placements, lines of credit, traditional construction loans and the guaranty in place will provide the

financing requisite to completing the project.  Despite these measures, no commitments outside of the

guaranty are in place to secure the requisite financing.  Should sufficient financing efforts fail to

materialize, SunVesta will be unable to complete the Paradisus Papagayo Bay project.

We have a line of credit in place with Aires against which SunVesta AG has borrowed CHF 1,099,969 as

of September 30, 2011, and CHF 11,000,000 as of the date of this filing and may borrow up to an

additional CHF 200,000.  Otherwise, we had no lines of credit or other bank financing arrangements as of

September 30, 2011.

We have commitments to DIA, S.A and other third parties as of September 30, 2011, in connection with

the purchase of property parcels made part of the development amounting to $11.8 million and certain

commitments to the Costa Rican government for water and development rights as well as certain

commitments for the planning and construction of the resort project.

We maintain a defined benefit plan that covers all of our Swiss employees though we have no contractual

commitment with our sole officer and director.

We have no current plans for significant purchases or sales of plant or equipment, except in connection

with the planned construction of the Paradisus Papagayo Bay.

We have no current plans to make any changes in the number of our employees.

Future Financings

We will continue to rely on debt or equity sales of our shares of common stock to fund our business

operations. Unfortunately, there is no assurance that we will be able to secure the financing requisite to

fund our business.

Off-Balance Sheet Arrangements

As of September 30, 2011, we had no significant off-balance sheet arrangements that have or are

reasonably likely to have a current or future effect on our financial condition, changes in financial

condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources

that are material to stockholders.

29



Going Concern

SunVesta intends to build a hotel in the Papagayo Gulf Tourism Project area of Guanacaste, Costa Rica.

The total net investment is estimated to be approximately $180 million.

The project is expected to open in the fourth quarter of 2014. Until the completion of the project, the

following expenditures are estimated to be incurred:

USD $1,000

a.     Gross project cost

195,000

b.    Less: Proceeds from sale of villas

-24,000

c.     Net project cost

171,000

d.    Overhead expenses

21,000

e.     Less: Recuperated in gross project cost

-12,000

f      Total, excluding other potential projects

180,000

Sixty percent (60%) of net project cost is expected to be financed by traditional mortgage loans, for which

negotiations have been initiated. The remaining forty percent (40%) of net project cost, as well as non-

recuperated overhead expenses and the cost of prospective “other projects” are expected to be financed by

the primary promoters of the project, i.e.:

a.

Zypam Ltd.

b.

Mr. Hans Rigendinger

c.

Mr. Max Rössler

d.

Mr. Josef Mettler

Management therefore believes that available funds are sufficient to finance cash flows for the next

twelve months though future anticipated cash outflows for investing activities will continue to depend on

the availability of financing and can be adjusted as necessary.

Subsequent to period end, certain principal shareholders of SunVesta or principal lenders to the project

entered into a guaranty agreement in favour of SunVesta AG. The purpose of the guarantee is to ensure

that until such time as financing is secured for the entire project that they will act as a guarantor to

creditors to the extent of the project’s ongoing capital requirements. The guaranty agreement requires that

within 30 days of receiving a demand notice, the guarantors are required to pay to SunVesta AG that

amount required for ongoing capital requirements, until such time as financing of the project is secured.

The guaranty may not be terminated until such time as SunVesta AG has secured financing for the

completion of the project.

Forward-Looking Statements and Factors That May Affect Future Results and Financial Condition

The statements contained in the section titled Management’s Discussion and Analysis of Financial

Condition and Results of Operations and elsewhere in this current report, with the exception of historical

facts, are forward-looking statements. We are ineligible to rely on the safe-harbor provision of the Private

Litigation Reform Act of 1995 for forward-looking statements made in this current report. Forward-

looking statements reflect our current expectations and beliefs regarding our future results of operations,

performance, and achievements. These statements are subject to risks and uncertainties and are based

upon assumptions and beliefs that may or may not materialize. These statements include, but are not

limited to, statements concerning:

30



   our anticipated financial performance and business plan;

   the sufficiency of existing capital resources;

   our ability to raise additional capital to fund cash requirements for future operations;

   uncertainties related to our future business prospects;

   our ability to generate revenues to fund future operations;

   the volatility of the stock market; and

   general economic conditions.

We wish to caution readers that our operating results are subject to various risks and uncertainties that

could cause our actual results to differ materially from those discussed or anticipated including the factors

set forth in the section entitled Risk Factors included elsewhere in this report. We also wish to advise

readers not to place any undue reliance on the forward-looking statements contained in this report, which

reflect our beliefs and expectations only as of the date of this report. We assume no obligation to update

or revise these forward-looking statements to reflect new events or circumstances or any changes in our

beliefs or expectations, other than as required by law.

Recent Accounting Pronouncements

Please see Note 2 to the accompanying consolidated financial statements for recent accounting

pronouncements.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

31



ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this quarterly report, an evaluation was carried out by SunVesta’s

management, with the participation of the chief executive officer and chief financial officer, of the

effectiveness of SunVesta’s disclosure controls and procedures (as defined in Rules 13a-15(e) under the

Securities Exchange Act of 1934 (“Exchange Act”)). Disclosure controls and procedures are designed to

ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is

recorded, processed, summarized, and reported within the time periods specified in the Commission’s

rules and forms, and that such information is accumulated and communicated to management, including

the chief executive officer and chief financial officer, to allow timely decisions regarding required

disclosures.

Based on that evaluation, SunVesta’s management concluded, as of the end of the period covered by this

report, that due to a lack of resources and US GAAP knowledge, SunVesta’s disclosure controls and

procedures were ineffective in recording, processing, summarizing, and reporting information required to

be disclosed, within the time periods specified in the Commission’s rules and forms, and such information

was not accumulated and communicated to management, including the chief executive officer and the

chief financial officer, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

During the period ended September 30, 2011, there has been no change in internal control over financial

reporting that has materially affected, or is reasonably likely to materially affect our internal control over

financial reporting.

32



PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

None.

ITEM 1A.

RISK FACTORS

Not required of smaller reporting companies.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.

DEFAULTS ON SENIOR SECURITIES

None.

ITEM 4.

REMOVED AND RESERVED

(Removed and reserved.)

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS

Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits on page

35 of this Form 10-Q, and are incorporated herein by this reference.

33



SIGNATURES

Pursuant  to  the  requirements  of  the  Securities  Exchange  Act  of  1934,  the  registrant  has  duly  caused  this

report to be signed on its behalf by the undersigned, thereunto duly authorized.

SunVesta, Inc.

Date

/s/ Josef Mettler

January 10, 2013

Josef Mettler

Chief Executive Officer, Chief Financial Officer

Principal Accounting Officer and Director

34



INDEX TO EXHIBITS

Exhibit

Description

3.1.1*

Articles of Incorporation (incorporated by reference from the Form 10-SB filed with the

Commission on December 31, 1999).

3.1.2*

Amended Articles of Incorporation (incorporated by reference from the Form 10-KSB filed with

the Commission on April 9, 2003).

3.1.3*

Amended Articles of Incorporation (incorporated by reference from the Form 10-QSB filed with

the Commission on November 17, 2003).

3.1.4*

Amended Articles of Incorporation (incorporated by reference from the Form 8-K filed with the

Commission on September 27, 2007).

3.2.1*

Bylaws (incorporated by reference from the Form 10-SB filed with the Commission on December

31, 1999).

3.2.2*

Amended Bylaws (incorporated by reference from the Form 10-QSB filed with the Commission

on November 17, 2003).

10.1*

Securities Exchange Agreement and Plan of Exchange dated June 18, 2007 between SunVesta and

SunVesta AG (formerly ZAG Holdings AG) (incorporated by reference from the Form 8-K filed

with the Commission on June 21, 2007).

10.2*

Purchase and Sale Agreement between ZAG Holding AG and Trust Rich Land Investments,

Mauricio Rivera Lang dated May 1, 2006 for the acquisition of Rich Land Investments Limitada.

10.3*

Debt Settlement Agreement dated September 29, 2008 with Zypam Ltd. (incorporated by

reference from the Form 10-Q filed with the Commission on November 13, 2008).

10.4*

Debt Settlement Agreement dated April 21, 2009 between SunVesta and Zypam, Ltd.

(incorporated by reference from the Form 8-K filed with the Commission on April 30, 2009).

10.5*

Debt Settlement Agreement dated March 1, 2010 between SunVesta and Zypam, Ltd.

(incorporated by reference from the Form 8-K filed with the Commission on March 10, 2010).

10.6*

Debt Settlement Agreement dated March 1, 2010 between SunVesta and Hans Rigendinger

(incorporated by reference from the Form 8-K filed with the Commission on March 10, 2010).

14*

Code of Ethics adopted March 1, 2004 (incorporated by reference from the 10-KSB filed with the

Commission on April 14, 2004).

21*

Subsidiaries of SunVesta (incorporated by reference from the 10-K filed with the Commission on

May 12, 2010).

31

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14

of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of

the Sarbanes-Oxley Act of 2002.

32

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.

Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101. INS

XBRL Instance Document

101. PRE

XBRL Taxonomy Extension Presentation Linkbase

101. LAB

XBRL Taxonomy Extension Label Linkbase

101. DEF

XBRL Taxonomy Extension Label Linkbase

101. CAL

XBRL Taxonomy Extension Label Linkbase

101. SCH

XBRL Taxonomy Extension Schema

*

Incorporated by reference to previous filings of SunVesta.

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed “furnished” and

not “filed” or part of a registration statement or prospectus for purposes of Section 11 or 12 of the

Securities Act of 1933, or deemed “furnished” and not “filed” for purposes of Section 18 of the

Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.

35



36