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EXCEL - IDEA: XBRL DOCUMENT - SUNVESTA, INC. | Financial_Report.xls |
EX-99 - SUNVESTA STOCK OPTION PLAN - SUNVESTA, INC. | exhibit99.htm |
EX-31 - SUNVESTA CERTIFICATION - SUNVESTA, INC. | exhibit31.htm |
EX-32 - SUNVESTA CERTIFICATION - SUNVESTA, INC. | exhibit32.htm |
EX-10.9 - EMPLOYMENT AGREEMENT - SUNVESTA, INC. | exhibit109.htm |
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 March 31, 2013.
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
(Registrants 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 þ No 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 issuers classes of common stock, as of the latest
practicable date. The number of shares outstanding of the issuers common stock, $0.01 par value (the only
class of voting stock), at October 10, 2013, was 75,541,600.
1
TABLE OF CONTENTS
PART 1- FINANCIAL INFORMATION
Item1.
3
Consolidated Balance Sheets as of March 31, 2013 (Unaudited) and December 31,
4
2012
Unaudited Consolidated Statements of Comprehensive Loss for the
5
three months ended March 31, 2013 and March 31, 2012 and cumulative amounts
Unaudited Consolidated Statements of Stockholders Equity (Deficit)
6
Unaudited Consolidated Statements of Cash Flows for the three months ended
7
March 31, 2013 and March 31, 2012 and cumulative amounts
Notes to Unaudited Consolidated Financial Statements
8
Managements Discussion and Analysis of Financial Condition and Results of
35
Operations
Quantitative and Qualitative Disclosures about Market Risk
45
Controls and Procedures
46
PART II-OTHER INFORMATION
Legal Proceedings
47
Risk Factors
47
Unregistered Sales of Equity Securities and Use of Proceeds
47
Defaults Upon Senior Securities
48
Mine Safety Disclosures
48
Other Information
48
Exhibits
48
49
50
2
PART I FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
As used herein, the terms Company, 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
March 31, 2013
December 31, 2012
(Unaudited)
Assets
Current assets
Cash and cash equivalents
$
178,990 $
260,520
Other assets
55,876
39,238
Receivable from related parties
290,971
-
Total current assets
525,837
299,758
Non-current assets
Property and equipment - net
30,610,366
16,799,540
Debt issuance costs - net
1,464,576
1,649,216
Down payment for property and equipment
1,869,836
10,320,144
Restricted cash
980,327
241,500
Total non-current assets
34,925,105
29,010,400
Total assets
$
35,450,942
29,310,158
Liabilities and stockholders' equity (deficit)
Current liabilities
Accounts payable
1,638,571
827,102
Accrued expenses
2,175,163
3,868,914
Note payable
2,000,000
-
Notes payable to related parties
3,247,740
3,432,064
EUR-Bond
12,056,458
14,216,707
Total current liabilities
21,117,932
22,344,787
Non-current liabilities
CHF-Bond
5,566,811
5,689,364
Notes payable to related parties
16,947,284
11,125,741
Fair value of conversion feature
50,181
-
Pension liabilities
70,756
74,075
Total non-current liabilities
22,635,032
16,889,180
Total liabilities
43,752,964
39,233,967
Stockholders' equity (deficit)
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; 75,541,600 and
54,092,186 shares issued and outstanding
755,416
540,922
Additional paid-in capital
20,319,850
19,446,367
Accumulated other comprehensive gain/loss
178,997
(1,102,408)
Retained earnings prior to development stage
1,602
1,602
Deficit accumulated during the development stage
(29,534,132)
(28,786,537)
Treasury stock, 157,220 and 157,220 shares
(23,755)
(23,755)
Total stockholders' equity (deficit)
(8,302,022)
(9,923,809)
Total liabilities and stockholders' equity (deficit) $
35,450,942
29,310,158
The accompanying notes are an integral part of these consolidated financial statements.
4
SUNVESTA, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Three months ended Three months ended
Cumulative
March 31, 2013
March 31, 2012
Amounts*
(unaudited)
(unaudited & restated)
(unaudited)
Revenues
Revenues, net
$
-
-
-
Cost of revenues
-
-
-
Gross profit
-
-
-
Operating income / - expenses
General and administrative expenses
$
(1,304,957)
(971,627)
(22,514,214)
Sales and marketing
-
-
(480,872)
Impairment on property and equipment
-
-
(1,311,000)
Release of accrual for penalty to Mélia
Hotels & Resorts
1,000,000
-
1,000,000
Total operating income / - expenses
$
(304,957)
(971,627)
(23,306,086)
Loss from operations
$
(304,957)
(971,627)
(23,306,086)
Other income / - expenses
Loss on disposals of assets
$
-
-
(3,258)
Loss on sale of investments
-
-
(1,137,158)
Loss on extinguishment of debt
-
-
(1,806,758)
Interest income
174
3,060
168,141
Interest expense
(426,656)
(280,995)
(2,901,639)
Amortization of debt issuance costs
and commissions
(82,815)
712
(887,053)
Exchange differences
143,872
130,272
519,929
Change in fair value of conversion
feature
(50,181)
-
(50,181)
Other income / - expenses
(27,032)
14,053
10,067
Total other income / - expenses
$
(442,638)
(132,898)
(6,087,910)
Loss before income taxes
$
(747,595)
(1,104,525)
(29,393,996)
Income Taxes
-
-
(140,136)
Net loss
$
(747,595)
(1,104,525)
(29,534,132)
Comprehensive income / (loss)
Foreign currency translation
1,281,405
(802,775)
199,997
Comprehensive income / (loss)
$
533,810
(1,907,300)
(29,334,135)
Loss per common share
Basic and diluted
$
(0.01)
(0.02)
Weighted average common shares
Basic and diluted
71,251,720
54,092,186
* Cumulative amounts: January 1, 2005 (date of inception) to March 31, 2013
The accompanying notes are an integral part of these consolidated financial statements.
5
SUNVESTA, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
January 1, 2005 (Date of Inception) to March 31, 2013
Common
Additional Paid
Accumulated Other
Prior Earnings
Deficit Accumulated
Treasury Stock
Total
Stock
in Capital
Comprehensive
During Development
Stockholders
Income (Loss)
Stage
Equity (Deficit)
January 1, 2005
$
210,000 $
281,521 $
128 $
1,602 $
- $
-
$
493,251
Net loss
-
-
-
-
(807,118)
-
(807,118)
Translation adjustments
-
-
23,149
-
-
-
23,149
December 31, 2005
210,000
281,521
23,277
1,602
(807,118)
-
(290,718)
Net loss
-
-
-
-
(3,575,713)
-
(3,575,713)
Translation adjustments
-
-
(163,151)
-
-
-
(163,151)
December 31, 2006
210,000
281,521
(139,874)
1,602
(4,382,831)
-
(4,029,582)
Net loss
-
-
-
-
(2,912,578)
-
(2,912,578)
Translation adjustments
-
-
35,580
-
-
-
35,580
Acquisition of OpenLimit, Inc.
14,000
(63,080)
-
-
-
-
(49,080)
Issuance of stock for debt
64,312
10,742,025
-
-
-
-
10,806,337
December 31, 2007
288,312
10,960,466
(104,294)
1,602
(7,295,409)
-
3,850,677
Net loss
-
-
-
-
(1,188,377)
-
(1,188,377
Translation adjustments
-
-
(367,601)
-
-
-
(367,601)
Issuance of stock for compensation
417
61,852
-
-
-
-
62,269
Issuance of stock for debt
18,182
2,709,091
-
-
-
-
2,727,273
December 31, 2008
306,911
13,731,409
(471,895)
1,602
(8,483,786)
-
5,084,241
Net loss
-
-
-
-
(2,471,845)
-
(2,471,845)
Translation adjustments
-
-
401,460
-
-
-
401,460
Issuance of stock for compensation
600
44,400
-
-
-
-
45,000
Issuance of stock for cash
10,000
290,000
-
-
-
-
300,000
Issuance of stock for debt
77,259
3,785,668
-
-
-
-
3,862,927
Purchase of treasury stock
-
-
-
-
-
(12,200)
(12,200)
December 31, 2009
394,770
17,851,477
(70,435))
1,602
(10,955,631)
(12,200)
7,209,583
Net loss
-
-
-
-
(1,173,292)
-
(1,173,292)
Translation adjustments
-
-
10,983
-
-
-
10,983
Issuance of stock for debt
146,152
876,914
-
-
-
-
1,023,066
Purchase of treasury stock
-
-
-
-
-
(11,555)
(11,555)
December 31, 2010
540,922
18,728,391
(59,452)
1,602
(12,128,923)
(23,755)
7,058,785
Net loss
-
-
-
-
(10,382,930)
-
(10,382,930)
Translation adjustments
-
-
21,575
-
-
-
21,575
December 31, 2011
540,922
18,728,391
(37,877)
1,602
(22,511,853)
(23,755)
(3,302,570)
Net loss
-
-
-
-
(6,274,684)
-
(6,274,684)
Translation adjustments
-
-
(1,064,531)
-
-
-
(1,064,531)
Issuance of stock for debt
-
717,976
-
-
-
-
717,976
December 31, 2012
540,922
19,466,367
(1,102,408)
1,602
(28,786,537)
(23,755)
(9,923,809)
Net loss
-
-
-
-
(747,595)
-
(747,595)
Translation adjustments
-
-
1,281,405
-
-
1,281,405
Issuance of stock for compensation
35,000
335,000
-
-
-
-
370,000
Issuance of stock for debt
179,494
538,483
-
-
-
-
717,977
March 31, 2013
$
755,416 $
20,319,850 $
178,997 $
1,602 $
(29,534,132) $
(23,755)
$
(8,302,022)
The accompanying notes are an integral part of these consolidated financial statements.
6
SUNVESTA, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
January 1 to
January 1 to
Cumulative
31 March 2013
31 March 2012
Amounts*
Unaudited
Unaudited & restated
Unaudited
Cash flows from operating activities
Net loss
$
(747,595)
(1,104,525)
(29,534,132)
Adjustments to reconcile net loss to net cash
Depreciation and amortization
10,198
22,443
330,283
Other income / expenses
-
(60,700)
(60,700)
Release of accrual for penalty to Mélia Hotels & Resorts
(1,000,000)
-
311,000
Amortization of debt issuance cost and commissions
82,815
(712)
894,751
Stock compensation expense
370,000
-
1,195,245
Unrealized exchange differences
(143,872)
(130,272)
(519,929)
Loss on securities acquired as deposit on stock
-
-
1,008,324
Loss on disposal of assets
-
-
3,258
Loss on extinguishment of debt
-
-
1,806,758
Change in fair value of conversion feature
50,181
-
50,181
Increase in pension fund commitments
(3,318)
12,774
70,757
Increase / decrease in:
Other current assets
(16,639)
(14,126)
(66,516)
Accounts payable
811,469
39,106
2,174,388
Accrued expenses
(693,751)
64,462
3,437,893
Net cash used in operating activities
(1,280,513)
(1,171,550)
(18,898,440)
Cash flows from investing activities
Proceeds from securities available-for-sale
-
-
1,740,381
Short term investments
-
75,000
-
Other receivables from related parties
(290,970)
(673,293)
(2,463,304)
Purchase of property and equipment
(753,024)
(1,002,487)
(18,520,832)
Down payments for property and equipment
(2,250,040)
(1,300,082)
(12,320,183)
Restricted cash
(739,327)
-
(980,827)
Net cash used in investing activities
(4,033,361)
(2,900,862)
(32,544,765)
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
7,256,757
2,178,258
34,476,478
Repayment of notes payable related parties
-
-
(778,243)
Advances from third parties
-
-
700,000
Note payable
-
-
(714,819)
Proceeds from bond issuance, net of commissions
900,853
1,871,681
22,323,654
Repayments of bonds
(2,649,073)
-
(4,123,896)
Payment for debt issuance costs
(269,516)
(316,189)
(3,537,127)
Purchase of treasury stock
-
-
(23,755)
Net cash provided by financing activities
5,239,021
3,733,750
52,286,709
Effect of exchange rate changes
(6,677)
(17,775)
(665,069)
Net decrease in cash
(81,530)
(320,887)
178,435
Cash, beginning of period
260,520
505,500
555
Cash, end of period
$
178,990
184,613
178,990
Additional information
Interest paid
-
-
Income taxes paid
-
-
Conversion of note payable to Mr. Rigendinger to
stockholders' equity (non-cash)
717,977
-
Purchase of property and equipment through a note payable
(non-cash)
2,000,000
-
Reclassification of down payment for property and
equipment to property and equipment
10,200,000
-
Capitalized interest and debt issuance costs for construction
(non-cash)
368,000
314,000
* Cumulative amounts: January 1, 2005 (date of inception) to March 31, 2013
The accompanying notes are an integral part of these consolidated financial statements.
7
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
1.
CORPORATE INFORMATION AND BASIS OF PREPARATION
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 holiday resorts and investments 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 (US $) 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 Companys Form 10-K, for the year ended December
31, 2012, 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, 2013.
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 Companys Form
10-K for the year ended December 31, 2012, filed with the Securities and Exchange
Commission.
8
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
2.
SIGNIFICANT ACCOUNTING POLICIES
New accounting standards adopted
In February 2013, the FASB released ASU 2013-02 Other comprehensive Income (Topic
220). The amendments in this Update supersede and replace the presentation requirements for
reclassifications out of accumulated other comprehensive income in AUSs 2011-05 (issued in
June 2011) and 2011-12 (issued in December 2011) for all public and private organizations. The
amendments would require an entity to provide additional information about reclassifications out
of accumulated other comprehensive income (loss). This Accounting Standard Update is the final
version of Proposed Accounting Standards Update 2012-240 Comprehensive Income (Topic
220) which has been deleted. The amendments do not change the current requirements for
reporting net income or other comprehensive income (loss) in financial statements. However, the
amendments require an entity to provide information about the amounts reclassified out of
accumulated other comprehensive income (loss) by component. In addition, an entity is required
to present, either on the face of the statement where net income (loss) is presented or in the notes,
significant amounts reclassified out of accumulated other comprehensive income (loss) by the
respective line items of net income but only if the amounts reclassified is required under U.S.
GAAP to be reclassified to net income in its entirety in the same reporting period. For other
amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income,
an entity is required to cross-reference to other disclosures required under U.S. GAAP that
provide additional detail about those amounts. For public entities, the amendments are effective
prospectively for reporting periods beginning after December 15, 2012. The Company adopted
this ASU as of January 1, 2013 and its adoption did not impact the Companys consolidated
financial statements.
9
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
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:
Expenditures
USD
a. Gross project cost
195,000,000
b. Less: Proceeds from sale of villas
(24,000,000)
c. Net project cost
171,000,000
d. Overhead expenses
21,000,000
e. Less: Recuperated in gross project cost
(12,000,000)
f
Total, excluding other potential projects
180,000,000
Sixty percent (60%) of the Net project cost is going to be financed by traditional mortgage
loans, for which negotiations have been initiated. The remaining forty percent (40% of the Net
project cost), as well as non-recuperated overhead expenses are going to be financed by the
main shareholders or lenders of the project, i.e. Zypam Ltd., shareholder, Mr. Hans Rigendinger,
shareholder and board member of SunVesta AG, Mr Max Rössler, majority shareholder of Aires
International Investment, Inc., Mr Josef Mettler, shareholder, director and chief executive officer.
On July 16, 2012, certain principal shareholders of the Company or principal lenders to the
project entered into a guaranty agreement in favor 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 projects 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.
Based on this guaranty agreement, management believes that available funds are sufficient to
finance cash flows for the twelve months subsequent to March 31, 2013 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
March 31, 2013
4.
RESTRICTED CASH
As per March 31, 2013 the company has the following restricted cash positions:
Restricted Cash
March 31, 2013
December 31, 2012
$
$
Credit Suisse in favor of
BVK Personalvorsorge des Kantons Zürich
133,574
-
HSBC in favor of
Costa Rican Tourism Board
243,000
241,500
Banco Nacional de Costa Rica in favor of
Costa Rican Environmental Agency SETENA
603,753
-
Gross
980,327
241,500
Restricted cash positions in favor of Costa Rican Tourism Board and Costa Rican Environmental
Agency SETANA are related to the hotel project in Costa Rica and therefore their release is not
expected before finalization of the corresponding project. Due to this fact these restricted cash
positions has been classified as long term.
The restricted cash position in favor of BVK Personalvorsorge des Kantons Zürich is a rental
deposit related to a long term lease contract for office space. Due to this fact this restricted cash
position is also classified as long term.
The balances as of December 31, 2012 were reclassified to conform to the current presentation.
11
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
5.
PROPERTY & EQUIPMENT
Property & equipment
March 31, 2013
December 31, 2012
$
$
Land
19,700,000
7,000,000
IT Equipment
185,846
185,846
Other equipment and furniture
284,901
284,901
Leasehold improvements
66,617
66,617
Construction in-process
10,712,982
9,591,958
Gross
31,203,346
17,129,322
Less accumulated depreciation
(339,980)
(329,782)
Net
30,610,366
16,799,540
Depreciation expenses for the period ended
March 31, 2013
10,198
22,443
Property & equipment is comprised primarily of land held in Costa Rica that is currently being
developed for hotels and capitalized project costs in connection with the Papagayo Gulf Tourism
project. The land amounts to $19.7 million whereas $7 million relates to the concession held by
Richland (~84,000 m2) and $12.7 million held by Altos del Risco (~120,000 m2). The latter was
acquired through the acquisition of the shares of Altos del Risco SA whose only asset is the
concession, which does not qualify as a business. Control over Altos del Risco SA was obtained
on March 8, 2013. The previous down payments were reclassified to property and equipment.
The Richland concession is a right to use the property for a specific period of time of 20 years,
which thereafter will be renewed at no further cost, if the landholder is up to date with its
obligations and if there is no significant change in government policies. The current concession
expires in June 2022.
The Altos del Risco concession is also a right to use the property for a specific period of time of
30 years, which thereafter will be renewed at no further cost, if the landholder is up to date with
its obligations and if there is no significant change in government policies. The current
concession, which was issued in 2006, expires in November 2036. For further information
regarding acquisition of this piece of land see note 13.
The construction in process amount that was spent up to March 31, 2013 is represented primarily
by architectural work related to the hotel and apartments but also to some construction work.
12
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
6.
PLEDGES
March 31, 2013
December 31, 2012
Pledge of shares of Rich Land Investments Ltda.
0%
10%
in favor of Zypam Ltd. for Zypam Ltd's liabilities
(0 shares)
(1 share)
Pledge of shares of Rich Land Investments Ltda.
in favor of Meliá Hotels International for bonds
0%
20%
of EUR 2 million
(0 shares)
(2 shares)
The Company pledged the above shares as part of the bond agreement with Meliá and
corresponding contracts in Zypam Ltd. During the period ended March 31, 2013 the share
pledges were released back to the Company due to the repayment of the bond due to Meliá and
the amendment of the corresponding contracts in Zypam Ltd.
13
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
7.
FAIR VALUE MEASUREMENT
The guidance on fair value measurements defines fair value as the exchange price that would be
received for an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market
participants. This guidance also specifies a fair value hierarchy based upon the observability of
inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained
from independent sources, while unobservable inputs (lowest level) reflect internally developed
market assumptions. In accordance with this guidance, fair value measurements are classified
under the following hierarchy:
Level 1 Quoted prices for identical instruments in active markets.
Level 2 Quoted prices for similar instruments in active markets, quoted prices for identical
or similar instruments in markets that are not active; and model-derived valuations
in which all significant inputs or significant value drivers are observable in active
markets.
Level 3 Model- deroved valuations in which one or more significant inputs or significant
value-drivers are unobservable.
When available, we use quoted market prices to determine fair value, and we classify such
measurements within Level 1. In some cases where market prices are not available, we make use
of observable market based inputs to calculate fair value, in which case the measurements are
classified within Level 2. If quoted or observable market prices are not available, fair value is
based upon internally developed models that use, where possible, current market-based
parameters such as interest rates, yield curves and currency rates. These measurements are
classified within Level 3.
Fair value measurements are classified according to the lowest level input or value-driver that is
significant to the valuation. A measurement may therefore be classified within Level 3 even
though there may be significant inputs that are readily observable.
Fair value measurement includes the consideration of nonperformance risk. Nonperformance risk
refers to the risk that an obligation (either by counterparty or us) will not be fulfilled. For
financial assets traded in an active market (Level 1), the nonperformance risk is included in the
market price. For certain other financial assets and liabilities (Level 2 and 3), our fair value
calculations have been adjusted accordingly.
As of March 31, 2013 and December 31, 2012, respectively, there are no financial assets or
liabilities measured on a recurring basis at fair value with the exception of fair value of
conversion option.
In addition to the methods and assumptions we use to record the fair value of financial
instruments as discussed above, we used the following methods and assumptions to estimate the
fair value of our financial instruments.
14
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
7.
FAIR VALUE MEASUREMENT - continued
Cash and cash equivalents carrying amount approximated fair value.
Restricted cash carrying amount approximated fair value.
Receivables from related parties (current) - carrying amount approximated fair value due to
the short term nature of the receivables.
Accounts Payable carrying amount approximated fair value.
Note payable - carrying amount approximated fair value due to the short nature of the note
payable.
EUR-Bond The fair values of the bonds payable are classified as level 3 fair values. 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, which represents the
current market rate based on the creditworthiness of the Company. Hence, the carrying
values approximate fair value.
CHF-Bond The fair values of the bonds payable are classified as level 3 fair values. The
fair values of the bonds have been determined by discounting cash flow projections
discounted at the respective interest rates of 7.25% for CHF bonds, which represents the
current market rate based on the creditworthiness of the Company. Hence, the carrying
values approximate fair value.
Notes payable to related parties (current) Rigendinger carrying amount approximated fair
value due to the short term nature of the note payable.
Notes payable to related parties (current) other carrying amount approximated fair value
due to the short term nature of the note payable.
Notes payable to related parties Dr. M. Roessler (current) - carrying amount approximated
fair value due to the short term nature of the notes payable and the fair value of the
underlying publicly trades shares
Notes payable to related parties Aires The fair values of the notes payable to Aires
International Investments Inc. is classified as level 3 fair values. The fair values of the notes
were determined by discounting cash flow projections discounted at the respective interest
rates of 7.25%, which represents the current market rate based on the creditworthiness of the
Company. Hence, the carrying value approximates fair value.
Fair value of conversion feature The fair value of the conversion option is classified as
level 3 fair value. The fair value of the option was determined by using Black-Scholes with
the following input data:
- Stock price $0.10
- Exercise price: $1.01
- Expected term in years: 2.5 years
- Volatility 80%
- Annual Rate of quarterly dividends: 0%
- Discount Rate: 0.305%
The fair value of our financial instruments is presented in the table hereinafter:
15
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
7.
FAIR VALUE MEASUREMENT continued
March 31, 2013
December 31, 2012
Fair
Carrying
Fair Value
Carrying
Fair Value
Value
Amount
Amount
Reference
$
$
$
$
Levels
Cash and cash
equivalents
178,990
178,990
260,520
260,520
1
None
Restricted cash
980,327
980,327
241,500
241,500
1
Note 4
Receivable from
related parties
290,971
290,971
-
-
1
Note 8
Accounts Payable
1,638,571
1,638,571
827,102
827,102
1
None
Notes payable
2,000,000
2,000,000
-
-
1
Note 13
Notes payable to
related parties
other (current)
35,706
35,706
149,328
149,328
3
Note 8
Notes payable to
related parties Dr.
M. Roessler
(current)
2,612,034
2,612,034
2,682,736
2,594,284
1
Note 8
Notes payable to
related parties
Rigendinger
(current)
600,000
600,000
600,000
600,000
3
Note 8
EUR-bond
12,056,458
12,056,458
14,216,707
14,216,707
3
Note 10
CHF-bond
5,566,811
5,566,811
5,689,364
5,689,364
3
Note 10
Notes payable to
related parties
Aires (non-current)
16,947,284
16,947,284
10,407,764
10,407,764
3
Note 8
Notes payable to
related parties
Rigendinger Aires
(non-current)
-
-
717,977
717,977
3
Note 9
Fair value of
conversion option
50,181
50,181
-
-
3
Note 8
8.
RECEIVABLES FROM AND PAYABLES TO RELATED PARTIES
16
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
Advances from (to) related parties are composed as follows:
Receivables
Payables
Receivables from and notes
March 31,
December 31,
March 31,
December 31,
to related parties
2013
2012
2013
2012
$
$
$
$
01
Hans Rigendinger
-
-
600,000
600,000
02
Josef Mettler
36,000
-
-
-
L03
Adrian Oehler
-
-
35,706
37,380
o04
Sportiva
46,976
-
-
31,948
a
n05
Aires International
-
16,974,284
10,407,764
06
Dr. Max Roessler
-
2,612,034
2,682,736
a07
Hans Rigendinger
-
-
-
717,977
g08
Akyinyi Interiors
-
-
-
80,000
r
e09
4f capital ag
207,995
e
Total excluding
m
interest
290,971
-
20,222,024
14,577,805
e
Accrued interest
-
-
768,245
566,093
n
Total
290,971
-
20,990,269
15,123,898
t
of which non-current
-
-
16,974,284
11,125,741
No
Related party
Capacity
Interest
Repayment
Rate
Terms
Security
01
Hans Rigendinger
Shareholder, director, chief operating
officer (COO)
0.00%
none
none
Shareholder, chairman of the board of
02
Josef Mettler
directors, chief executive officer
(CEO), chief financial officer (CFO)
3.00%
none
none
and principal accounting officer (PAO)
03
Adrian Oehler
Shareholder and SunVesta AG board
member
0.00%
none
none
04
Sportiva
Entity owned by the Companys
director, CEO, CFO and PAO
3.00%
none
none
05
Aires International
*** see hereinafter***
06
Dr. Max Roessler
Shareholder and director
*** see hereinafter ***
07
Hans Rigendinger
Shareholder, director and COO
*** see hereinafter ***
08
Akyinyi Interiors
Entity owned by a directors wife
0.00%
01/31/13
none
09
4f Capital Ag
Entity owned by the Companys
director, CEO, CFO and PAO
0.00%
none
none
8.
RECIEVABLES FROM AND PAYABLE TO RELATED PARTIES - Continued
17
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
Loan agreement Aires International Investment Inc.
On July 27, 2011, SunVesta signed a loan agreement with Aires International Investments Inc.
(Aires), a company owned by a board member of the Company, which has been amended and
superseded by an amendment on May 11, 2012 respectively June 21, 2012 and which includes the
following major conditions:
The lender grants the Company a terminable, interest bearing and non-secured loan in the
maximum amount of CHF 10,000,000.
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.
Once the entire amount of CHF 10,000,000 has been drawn down, Aires now has the right to
convert its entire loan of CHF 10,000,000 into 20% shares of SunVesta Inc. (instead of
Richland) whereas 20% shares reflect the number of shares at the time when the entire
amount of CHF 10,000,000 has been drawn down.
In principle, the loan will become due in September 30, 2015, being the latest date on which
Aires can exercise its conversion option
CHF 10,000,000 of this line of credit is subordinated in favour of other creditors.
The interest rate is 7.25% and interest is due on September 30 of each year.
The conditions of the above mentioned conversion option was met during 2012. The Company
has analyzed the accounting treatment of this financial instrument. Based on this analysis the
Company concluded that the conversion option needs to be bifurcated and is to be accounted for
as a derivative under ASC 815. Main factors for this accounting treatment are: the debt is
denominated in CHF while the shares are convertible into shares of the Company, whose
functional currency is USD and whose shares are traded in USD. Based on that, the Company
determined that the conversion feature is not indexed to the Companys shares and it should be
bifurcated and accounted for as a derivative. As of November 13, 2012 (the date when the loan
became convertible) and December 31, 2012 the fair value of the conversion feature was
immaterial. As of March 31, 2013 the fair value of the conversion feature was $50,181 which is
recorded in fair value of conversion option.
The fair value of the call option value has been calculated by using Black-Scholes with the
following assumptions:
- Stock price $0.10
- Exercise price $1.01
- Expected term in years 2.50
- Volatility of 80%
- Annual Rate of quarterly Dividends 0%
- Discount Rate 0.305%
Based on this calculation one call option has a fair value of $0.005 as per March 31, 2013.
Multiplied with number of option granted of 10,818,437 this result in fair value of the conversion
feature of $50,181.
18
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
8.
RECIEVABLES FROM AND PAYABLE TO RELATED PARTIES Continued
Loans Dr. Max Roessler
On June 7, 2012, Dr. Max Roessler (board member of SunVesta AG) gave a short term loan of
$1.81 million that is repayable on May 30, 2013, or on demand within five working days. On this
short term loan the Company is not required to pay any interest and can repay the loan either in
cash or with the delivery of 10,000 shares of Intershop Holding AG, a publically traded entity,
regardless of actual trading value on the date of delivery. The Company therefore might
recognize a gain if the loan is repaid in Intersthop Holding AG shares and the trading price of the
shares is less than the amount due. Based on the trading price for Intershop Holding AG shares on
March 31, 2013 the Company would not have recognized a gain. Therefore the fair value of the
loan approximates the carrying value of the loan.
On July 24, 2012, Dr. Max Roessler (board member of SunVesta AG) gave an additional short
term loan of $0.47 million that is repayable on May 30, 2013, or on demand within five working
days. On this short term loan the Company is not required to pay any interest and can repay the
loan either in cash or with the delivery of 10,000 shares of Schindler Holding AG, a publically
traded entity, regardless of actual trading value on the date of delivery. The Company therefore
might recognize a gain if the loan is repaid in Schindler Holding AG shares and the trading price
of the shares is less than the amount due. Based on the trading price for Schindler Holding AG
shares on March 31, 2013 the Company would not have recognized a gain. Therefore the fair
value of the loan approximates the carrying value of the loan.
On August 8, 2012, Dr. Max Roessler (board member of SunVesta AG) gave a further short term
loan of $0.4 million that is repayable also on May 30, 2013, or on demand within five working
days. On this short term loan the Company is not required to pay any interest and can repay the
loan either in cash or with the delivery of 700 shares of Zug Estates Holding AG, a publically
traded entity, regardless of actual trading value on the date of delivery. The Company therefore
might recognize a gain if the loan is repaid in Zug Estates Holding AG shares and the trading
price of the shares is less than the amount due. Based on the trading price for Zug Estates AG
shares on March 31, 2013, the Company would have recognized a gain, which gain is immaterial.
The Company has not recorded such gain and the fair value of the loan approximates the carrying
value of the loan.
On March 1, 2013, Dr. Max Roessler (board member of SunVesta AG) gave a further short term
loan of $0.05 million that is repayable on July 31, 2013, or on demand within five working days.
On this short term loan the Company is not required to pay any interest and can repay the loan
either in cash or with the delivery of 52,500 shares of Daetwyler Holding AG, a publically traded
entity, regardless of actual trading value on the date of delivery. The Company therefore might
recognize a gain if the loan is repaid in Datewyler Holding AG shares and the trading price of the
shares is less than the amount due. Based on the trading price for Daetwyler Holding AG shares
on March 31, 2013, the Company would not have recognized a gain. Therefore the fair value of
the loan approximates the carrying value of the loan.
19
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
9.
RELATED PARTY TRANSACTIONS
Debt Settlement Agreements
On December 31, 2012 the Company concluded a debt settlement agreement with Hans
Rigendinger. This debt settlement agreement, settled the outstanding balance of $717,977 as of
December 31, 2012 as described hereinafter:
The Company issued 17,949,417 shares of its common stock ($0.01 par value) at a
conversion price of $0.04 to Hans Rigendinger for the purposes of this debt settlement.
The difference between the carrying value of this debt and the fair value of the common
stock issued amounted to $717,976. The difference has been recorded as stock compensation
expense in general and administrative expenses in the year ended December 31, 2012.
To determine the fair value of the common stock issued the quoted market price as of
December 31, 2012 was used.
The shares were not formally issued as of December 31, 2012, and therefore, the note
payable was not eliminated as of December 31, 2012. The satisfaction of the note payable
was recorded on the issuance of the shares as of January 8, 2013.
Comissions paid to related parties
During Quarter ended March 31, 2013 and March 31, 2012 the Company paid commissions to
4f Capital AG in the amount of approximately $108,000 and $0, respectively related to financing
of the Company.
20
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
10.
BONDS
SunVesta Holding AG has a bond outstanding with the following major conditions.
Description
EUR () bond
CHF bond
Issuer:
SunVesta Holding AG
SunVesta Holding AG
Type of securities:
Bond in accordance with
Bond in accordance with
Swiss law
Swiss law
Approval by SunVesta
May 12, 2010
June 3, 2011
Holding AG Board of Directors
Volume:
Up to 25,000,000
Up to CHF 15,000,000
Units:
1,000
CHF 50,000
Offering period:
11/10/2010 04/30/2011
09/01/2011 02/28/2012
Due date:
November 30, 2013
August 31, 2015
Issuance price:
100 %
100%
Issuance day:
December 1, 2010
September 1, 2011
Interest rate:
8.25% p.a.
7.25% p.a.
Interest due dates:
November 30 of each year,
August 31 of each year,
the first time November 30, 2011
the first time August 31, 2012
Applicable law:
Swiss
Swiss
The nominal amounts have changed as follows:
EUR-Bond
CHF Bond
EUR-Bond
CHF Bond
2013
2013
2012
2012
USD
USD
USD
USD
Balances January 1
14,216,707
5,689,364
9,598,537
3,818,898
Cash inflows
792,740
108,113
4,015,549
3,191,888
Cash outflows
(2,649,073)
-
-
1,474,823
Foreign currency adjustments
(239,193)
59,736
692,295
463,849
Sub-total (Fair value)
12,121,181
5,857,113
14,306,380
5,999,813
Commissions paid to bondholders
(248,195)
(417,709)
(248,195)
(417,709)
Amortization of such commissions
183,472
127,307
158,522
107,260
Balance March 31, 2013
December 31, 2012 (Carrying value)
12,056,458
5,566,811
14,216,707
5,689,364
Should the refinancing of the EUR bonds not be completed by November 30, 2013, certain
principal shareholders of the Company or principal lenders to the project would provide bridge
financing according to the guaranty agreement (see Note 3).
21
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
11.
PENSION PLAN
The Company maintains a pension plan covering all employees in Switzerland; it is considered a
defined benefit plan and accounted for 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 th is 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 the 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
Net periodic pension cost has been included in the Companys results as follows:
Three months ended
Three months ended
Pension expense
March 31, 2013
March 31, 2012
$
$
Current service cost
13,632
25,383
Past service cost
-
-
Net actuarial (gain) loss recognized
(268)
-
Interest cost
1,181
772
Expected return on assets
(1,208)
(692)
Employee contributions
(5,448)
(10,164)
Net periodic pension cost
7,890
15,299
During the three months periods ended March 31, 2013 and March 31, 2012 the Company made
cash contributions of $5,500 and $10,000, respectively, to its defined benefit pension plan.
All of the assets are held under the collective contract by the plans re-insurer Company and are
invested in a mix of Swiss and international bond and equity securities within the limits
prescribed by the Swiss Pension Law.
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, 2013 are $16,500.
22
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
12.
STOCK COMPENSATION
The Company has included share based remuneration based on SunVesta Inc. Stock Option Plan
2013 as part of the total remuneration in some new employment contracts. Based on this stock
option plan the Company has the possibility since January 1, 2013 to issue up to 50,000,000
common stock shares under the plan.
The purpose of these share based remuneration is to advance the interests of the Company by
encouraging its employees to remain associated with the Company and assist the Company in
building value. Such share based remuneration includes either shares or options to acquire shares
of the Companys common stock.
The Company grants equity awards to its employees and directors. Certain employee and director
awards vest over stated vesting periods and others also require achievement of specific
performance. The grant-date fair value of awards to employees and directors will be expensed
over their respective vesting periods. To the extent that employee and director awards vest only
upon the achievement of a specific performance condition, expense is recognized over the period
from the date management determines that the performance condition is probable of achievement
through the date they are expected to be met. The fair value of stock options is estimated using
the Black-Scholes option-pricing model. Option pricing methods require the input of highly
subjective assumptions, including the expected stock price volatility.
Share Grants
On January 1, 2013 the Company issued 3,500,000 common shares, valued at $0.08 which has
been the share price and therefore the fair value on grant date, to Hans Riegendinger in
connection with his employment agreement of even date as so-called signing bonus.
Additionally the Company granted 2,500,000 common shares as so-called retention award for
each completed year of employment (e.g. first time as per January 1, 2014). The employment
contract has been concluded for three years with an additional bilateral option for another two
years. Therefore in total the Company could be requested to issue maximal 12,500,000 common
shares up to January 1, 2018 to Hans Rigendinger related to this retention bonus.
23
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
12.
STOCK COMPENSATION - Continued
Based on this contract the Company has included the following stock-based compensation in the
Companys results:
Three months
Three months
Stock-based compensation (shares)
ended March 31,
ended March 31,
2013
2012
Shares granted
16,000,000 shares
---
Fair Value respectively market price on grant date
$ 0.08
---
Total maximal expenses (2013-2017)
$ 1,280,000
---
Shares vested (signing bonus)
3,500,000 shares
---
Unvested shares (retention award)
12,500,000 shares
---
Expenses recorded under general & administrative
---
expenses
$ 330,000
Unrecorded costs related to unvested share grants
---
(retention bonus)
$ 950,000
Tax benefit associated with compensation expense
$ 0
---
As of March 31, 2013 the Company expects to record compensation expense in the future as
follows:
Through
Year ending December 31,
Stock-based
December 31,
compensation (shares)
2013
2014
2015
2016
2017
$
$
$
$
$
Unrecognized
compensation expense
150,000
200,000
200,000
200,000
200,000
Stock options
The Company granted to Hans Rigendinger in connection with his employment contract
10,000,000 options on January 1, 2013. Each option entitles to buy one Companys share at a
strike price of $0.05. These options will vest in two identical installments (installment A and B)
of 5,000,000 options.
For installment A it is required that the Company complete a financing arrangement with a
specific counterparty. As of grant date the fair value was $300,000. As of March 31, 2013, the
Company assessed that this financing arrangement will not be completed. Therefore, the
Company assessed the probability of completion to be zero and therefore no expense has been
recognized for the stock options associated with installment A as per March 31, 2013.
For installment B it is required that the Company completes the Paradisius Papagayo Bay Resort
& Luxury Villas (see Note 16) by the thereinafter mentioned date of November 1, 2014. The
grant date fair value was $300,000. As of March 31, 2013 the Company assessed that the
probability that this performance condition will be met at 100%.
24
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
12.
STOCK COMPENSATION - Continued
A summary of stock options outstanding as per March 31, 2013, is as follows (during three-
month period ended March 31, 2012, no options were granted):
Options outstanding
Number of Options
Weighted average
Weighted average
exercise price
remaining
contractual life
Outstanding January 1, 2013
None
None
Granted
10,000,000
$ 0.05
9.75 years
Exercised
0
0
Forfeited or expired
0
0
Outstanding March 31, 2013
10,000,000
$ 0.05
9.75 years
Exercisable March 31, 2013
0
The following table depicts the Companys non-vested options as of March 31, 2013 and changes
during the period:
Non-vested options
Shares under Options
Weighted average grant
date fair value
Non-vested at December 31, 2012
0
$ 0.00
Non-vested-granted
10,000,000
$ 0.06
Vested
0
$ 0.00
Non-vested, forfeited or canceled
0
$ 0.00
Non-vested at March 31, 2013
10,000,000
$ 0.06
Under the provisions of FASB ASC Topic 718, the Company is required to measure and
recognize compensation expense related to any outstanding and unvested stock options
previously granted, and thereafter recognize, in its consolidated financial statements,
compensation expense related to any new stock options granted after implementation using a
calculated fair value based option-pricing model. The Company uses the Black-Scholes option-
pricing model to calculate the fair value of all of its stock options and its assumption are based on
historical and or if available market information. The following assumptions were used to
calculate the compensation expense and the calculated fair value of stock options granted:
Assumption
March 31, 2013
March 31, 2012
Dividend yield
None
---
Risk-free interest rate
1.00%
---
Expected market price volatility
80.00%
---
Average expected life of stock options
6.0 years
---
The computation of the expected volatility assumption used in the Black-Scholes calculation for
new grants is based on historical volatilities of a peer group of similar companies in the same
industry. The expected life assumptions are based on underlying contracts.
25
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
12.
STOCK COMPENSATION - Continued
The Company recorded the following amounts related to the expense of the fair values of options
during the quarter ended March 31, 2013:
Stock based compensation (options)
March 31, 2013
March 31, 2013
$
$
Expenses recorded under general &
40,000
---
administrative expenses
Benefit for income taxes
0
---
Effect on net loss
40,000
---
As of March 31, 2013 the Company had unrecognized compensation expenses related to stock
options currently outstanding, to be recognized in future quarters respectively years as follows:
Through December 31,
Year ending December 31,
Stock-based compensation (options)
2013
2014
$
$
Unrecognized compensation expense
120,000
140,000
26
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
13.
AGREEMENT TO PURCHASE NEIGHBORING PIECE OF LAND
In 2010 SunVesta AG entered into a sale and purchase agreement with a company called DIA
S.A. (DIA), domiciled in San José, Costa Rica to acquire a piece of land, neighboring the
Paradisus Papagayo Bay Resort & Luxury Villas development, of approximately 120,000 m2
having direct beach access by purchasing 100% of the shares of Altos del Risco S.A. from DIA.
The total purchase consideration was $12.7 million. On March 9, 2013 the Company concluded
the purchase of this piece of land and ownership has been officially transferred. Up to March 9,
2013 the Company paid $10.7 million in cash.
As part of the completion of the purchase, the parties agreed that a remaining part of the purchase
price of $2,000,000 has been converted into a non interest bearing and uncollateralized loan
payable which is due for payment on March 8, 2014.
14.
MANGEMENT AGREEMENT WITH MELIA HOTELS & RESORTS
In March 2011 the Company concluded a management agreement for the management of the
planned resort in Guanacaste, Costa Rica. This agreement includes a clause saying that if
SunVesta AG were not able to conclude the purchase of the property described in Note 12 by
November 30, 2011, then a penalty of $1 million would become due to Sol Meliá, S.A. Therefore
the Company recorded a liability in accrued expenses in the full amount as of December 31, 2011
with the corresponding expense recorded in general and administrative expense in the year ended
December 31, 2011.
On March 3, 2012, the deadline to pay the penalty of $1 million was extended by Sol Meliá, S.A.
to June 30, 2012. On June 30, 2012 neither the whole penalty nor a part of the penalty has been
paid. Therefore the deadline to pay the penalty of $1 million was extended on June 30, 2012 up to
August 31, 2012.
Neither on August 31, 2012, nor on December 31, 2012, was the whole penalty or a part of the
penalty paid although the deadline of August 31, 2012 to pay the penalty of $1 million has
expired. Hence, the penalty of $1 million remained in accrued expenses as of December 31, 2012.
On February 5, 2013, the Company extended the deadline to complete the purchase of the
property pursuant to the terms of the management agreement with Sol Meliá, S.A., to March 15,
2013 and agreed that the penalty of $1 million would be waived if the purchase was completed by
March 15, 2013. The purchase of the property was concluded on March 9, 2013.
Since the Company concluded the purchase of the property described within the extension period
the penalty otherwise payable to Sol Meliá, S.A. and the corresponding allowance has been
eliminated as of March 9, 2013. Therefore, the Company has released the accrual of $1 million
related to this transaction in the period ended March 31, 2013.
27
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
15.
INTENTION TO PURCHASE TWO ADDITIONAL CONCESSION PROPERTIES AT
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 Papagayo Bay Resort & Luxury Villas (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 to decrease the total purchase price to
$17.2 million with no equity payment. The terms and conditions of the cash payment were still 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 up to March 31, 2013, which is included in down
payment for property and equipment.
Subsequent to the balance sheet date March 31, 2013 the Company entered into a new, revised
agreement regarding the purchase of the two additional concession properties (refer to Note 20).
16.
OPENING DATE Paradisius Papagayo Bay Resort & Luxury Villas
During the 3rd Quarter of 2012, the Company postponed the opening date for Papagayo Gulf
Tourism Project of Costa Rica, which is now scheduled for the winter of 2014. Due to the
postponement an addendum to the original management agreement with Sol Meliá, S.A. was
agreed as follows:
The construction of the Paradisius will be completed by November 1, 2014
Should the Paradisius not be completed by November 1, 2014, (subject to force majeure)
and should an extension date not be agreed, subsequent to November 1, 2014, the Company
will be obligated to pay Sol Meliá, S.A. a daily amount of $2,000 as liquidated damages
Should the Company be unable to complete the construction of the Paradisius by February
28, 2015, Sol Meliá, S.A. can terminate the management agreement obligating the Company to
compensate Sol Meliá, S.A. in the amount of $5,000,000 unless the respective parties agree to
extend such date.
Regarding current situation, subsequent to March 31, 2013, refer to Note 20.
28
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
17.
HOTEL PROJECT ATLANTA
On September 19, 2012, the Company entered into a purchase agreement for 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, an
additional amount of approximately $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. Should the Company conclude the transaction on or before
July 10, 2013, those amounts paid on deposit extension will be credited to the purchase price.
Otherwise, the Company will lose non-refundable deposits of $750,000 of which $500,000 was
paid up to March 31, 2013 and $250,000 subsequent to March 31, 2013.
Regarding current situation, subsequent to March 31, 2013, refer to Note 20.
18.
EARNINGS PER SHARE
Basic earnings per share are the result of dividing the Companys net income (or net loss) by the
weighted average number of shares outstanding for the contemplated period. Diluted earnings per
share are calculated applying the treasury stock method. When there is a net income dilutive
effect all stock-based compensation awards or participating financial instruments are considered.
When the Company posts a loss, basis loss per share equals diluted loss per share. The following
table depicts how the denominator for the calculation of basic and diluted earnings per share was
determined under the treasury stock method.
Earnings per share
Three-month period ended
March 31, 2013
March 31, 2012
Company posted
Net loss
Net loss
Basic weighted average shares outstanding
71,251,720
54,092,186
Dilutive effect of common stock equivalents
none
none
Dilutive weighted average shares outstanding
71,251,720
54,092,186
The following table shows the number of stock equivalents that were excluded from the
computation of diluted earnings per share for the respective period because the effect would have
been anti-dilutive.
Three-month period
Three-month period
Earnings per share
ended
ended
March 31, 2013
March 31, 2012
Conversion feature loan to Aires International
10,818,437
---
Investment Inc.
Shares to Hans Rigendinger (retention bonus)
12,500,000
---
Options
10,000,000
---
Total
33,318,437
---
29
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
19.
RESTATEMENT
During the year ended December 31, 2012 the Company determined that the interest capitalized
was understated in the quarter ended March 31, 2012. The Company capitalized interest costs on
the carrying value of the construction in progress during the contraction period based on the
contractual rate. However, interest cost as defined in ASC 835-20 includes stated interest,
imputed interest (ASC 835-30), and interest related to a capital lease in accordance with ASC
840-30, as well as amortization of discount, premium and issue costs on debt.
Management has concluded that the impact of the error is not material to the previously filed
quarterly report for the quarter ended March 31, 2012 and therefore has not filed any amendments
to this quarter. The table below summarizes the impact of the restatement, which has been
reflected in the quarterly report for the period ended March 31, 2013:
Quarter to date
Period ended March 31
2012
2012
as reported
as restated
Property and equipment, net
$12,370,324
$12,600,324
Shareholders' equity (deficit)
$(5,439,870)
$(5,209,870)
Total assets
$20,145,618
$20,375,618
Amortization of debt issuance
$(229,288)
$712
costs and commissions
Net loss
$(1,334,525)
$(1,104,525)
Basic and diluted loss per share
$(0.02)
$(0.02)
30
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
20.
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:
Hotel Project Atlanta
The Company has not been able to complete a financing package for this project up to July 10,
2013 and has concluded on July 30, 2013 a new agreement. The Company is requested to pay
another deposit of $250,000 up to August 16, 2013. Therefore, the Company was able to extend
the deadline to finalize a financing package up to September 30, 2013. Additionally the Company
bears taxes of the counterparty for the tax year 2013 of approximately $573,932. Therefore the
Company is requested to pay directly to the counterparty on or before August 30, 2013 $579,932.
The Company has neither remitted the additional deposit of $250,000 nor paid the counterparty
the taxes on the property for the tax year 2013.
Since the Company has not been able to conclude a financing package as of date of this report the
Company is in default and will lose all deposits (including taxes paid for the counterparty) of
$1,329,932 of which $500,000 was paid up to March 31, 2013 and another $250,000 on June 10,
2013, if the Company is not able to extend the deadline.
EUR Bond Offering
The Company initiated a EUR bond offering on December 1, 2010 of up to EUR 25,000,000 in
units of EUR 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 EUR 9.45 million ($12.1 million) 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 5.60 million ($5.85 million) has been realized by the Company
from the initial date up to the date of this filing.
31
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
20.
SUBSEQUENT EVENTS Continued
Intention to purchase two additional concession properties at Polo Papagayo, Guanacaste
During the 2nd Quarter of 2013 the Company entered into a new, revised agreement regarding the
purchase of two additional concession properties at Polo Papagayo, Guanacaste. The original
contract (refer to Note 15) has been cancelled and replaced by a new contract which includes the
following clauses:
The Company has paid approximately $1,669,000 as of the date of this report which is
refundable.
The total purchase price is $17,500,000 and the remaining balance as of the date of this report is
$15,830,299.
Since the original seller of these two additional concession properties at Polo Papagayo,
Guanacaste owes a third party $8,000,000 the Company will pay $7,700,000 ($ 300,000 already
paid) of the purchase price directly to this third party instead of the original seller. The remaining
$8,130,000 will be paid directly to the original seller of the concession properties.
The payment schedule for these two additional concession properties at Polo Papagayo
Guanacaste is as hereinafter:
Third Party
$300,000 on May 4, 2013 which was paid on May 3, 2013 and is non-refundable
$1,000,000 on June 30, 2013, which is refundable and has not been paid as of the date of this
report
$1,000,000 on July 31, 2013, which is refundable and has not been paid as of the date of this
report
$1,000,000 on August 31, 2013 which is refundable and has not been paid as of the date of this
report
$1,500,000 on September 30, 2013, which is refundable and has not been paid as the date of this report
$1,500,000 on October 31, 2013, which is refundable
$1,700,000 on November 30, 2013, which is refundable
$8,000,000 in total to Third Party
Original Seller
$1,000,000 on January 31, 2014 and is non-refundable
$1,000,000 on February 28, 2014 and is non-refundable
$1,000,000 on March 31, 2014 and is non-refundable
$1,000,000 on April 30, 2014 and is non-refundable
$1,000,000 on May 31, 2014 and is non-refundable
$1,000,000 on June 30, 2014 and is non-refundable
$1,000,000 on July 31, 2014 and is non-refundable
$1,130,000 on August 31, 2014 and is non-refundable
$8, 130,000 in total to Original Seller
Should the Company be able to pay the third party and the original seller all amounts - as above
mentioned - earlier than scheduled, the original seller will give a discount on his remaining
portion of the purchase price as following:
Should the Company complete the remaining balance due to the third party on or before August
31, 2013, the discount will be $3,250,000
Should the Company complete the remaining balance due to the third party on or before
September 30, 2013, the discount will be $2,750,000
Should the Company complete the remaining balance due to the third party on or before October
31, 2013, the discount will be $2,250,000
Should the Company complete the remaining balance due to the third party on or before
November 30, 2013, the discount will be $1,750,000
32
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
20.
SUBSEQUENT EVENTS Continued
Loan Aires International Investment Inc.
As described in Note 8, the Company is still negotiating with Aires International Investment Inc.
a revised conversion option for their loan. Despite of this fact Aires International Investment Inc.
has paid additional amounts to the Company since March 31, 2013.
As of the date of this report the Company has borrowed CHF 23.82 million (approximately
$23.56 million) from Aires.
New Entity
The Company founded on June 26, 2013 a wholly owned new subsidiary in the United States.
Name:
Profunda Capital Partners LLC
Incorporated:
State of Nevada, United States
Manager:
Josef Mettler / Hans Rigendinger
Issuances of securities
On July 4, 2013, the Company authorized the issuance of 5,000,000 shares of restricted common
shares to Josef Mettler valued at Fair Value at the corresponding date. Additionally the Company
granted 12,000,000 options of common stock of the Company as of July 4, 2013 to Josef
Mettler. These Options shall be exercisable in three portions at an exercise price of $0.05 as
following:
3,000,000 options
On the date that the Company or one of its subsidiaries
completes a bridge financing prior to completion of the
main financing anticipated for the development of the
Paradsius Papagayo Bay.
4,000,000 options
On the date that the Company or one of its subsidiaries
completes a financing for the development of the
Paradsius Papagayo Bay.
5,000,000 options
On the date that Paradisus (Sol Meliá S.A.) assumes
management responsibilities for the Paradisus Papagayo
Bay.
These issuances of securities are in relation with a new employment contract concluded between
Josef Mettler and the Company on July 4, 2013. This employment contract includes a retention
award of 3,000,000 restricted common shares of the Company as of each annual anniversary of
the employment contract, as well as an annual base salary of $144,000.
On July 3, 2013, the Company authorized the issuance of 3,000,000 shares of restricted common
shares to Dr. Roessler, valued at Fair Value at the corresponding date, in relation with his election
as board member of the Company.
33
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
20.
SUBSEQUENT EVENTS Continued
OPENING DATE Paradisius Papagayo Bay Resort & Luxury Villas
The official opening of the Paradisius Papagayo Bay Resort & Luxury Villas will be delayed
by a few months due to geological difficulties during earthwork operations in August and
September 2013. Due to these geological difficulties some rock demolition became necessary. On
September 6, 2013 the Company has achieved an agreement in good understanding with Sol
Meliá, S.A. (5th addendum to the management agreement of March 8, 2011) to postpone the
opening date as follows:
The construction of the Paradisius will be completed by July 1, 2015
Should the Paradisius not be completed by July 1, 2015, (subject to force majeure)
and should an extension date not be agreed, subsequent to July 1, 2015, the Company
will be obligated to pay Sol Meliá, S.A. a daily amount of $2,000 as liquidated
damages
Should the Company be unable to complete the construction of the Paradisius by
October 1, 2015, Sol Meliá, S.A. can terminate the management agreement obligating
the Company to compensate Sol Meliá, S.A. in the amount of $5,000,000 unless the
respective parties agree to extend such date.
34
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Managements 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 month periods ended March 31, 2013 and March 31, 2012. Our fiscal year end is December 31.
Discussion and Analysis
Business Overview
We are 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. Country specific conditions are taken into account when properties are
considered for development. General considerations as to where to develop properties include the stability
of local political conditions, geologically useful cultivability, and the types of destinations that attract a
five-star clientele. Each potential investment is first compared against a validation checklist and then, if
warranted, subjected to a substantial due diligence process. Since location is the key to the success of any
tourist based luxury real estate project, each development will be carefully considered during the
eligibility process.
Initial Development
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 Resort & Luxury Villas, a five star
luxury hotel scheduled to open in July 2015 subject to requisite financing.
Specifications
Paradisus Papagayo Bay Resort & Luxury Villas 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
19,000 square feet of meeting facilities with the business traveler in mind
35
Royal Service
Our Royal Service will include an extensive range of services such as butler service, private pools for
each Garden Villa and/or a Jacuzzi in every suite.
The Royal Service area will include:
112 Junior Suites Grand Deluxe
(53-60* square meters)
3 Junior Suites Grand Deluxe for Handicapped Guests
(53* square meters)
6 Grand Master Suites
(82* square meters)
1 Grand Presidential Suite (4 bedrooms)
(145* square meters)
20 one or two bedroom Garden Villas
(91 117* square meters)
* Room size does not include balconies and terraces.
All ground floor suites will have direct access to swim-up pools. Each of the suites and villas will have a
full view of the sea. Royal Service guests will furthermore have access to restaurants, bars, lounges,
fitness equipment, spas and outside massage areas.
Family Concierge
The Family Concierge will be the family orientated part of the Paradisus Papagayo Bay Resort & Luxury
Villas. The accommodations will be designed to satisfy the needs of the modern family.
166 Junior Suites Deluxe
(47* square meters)
34 Suites Deluxe
(87* square meters)
34 Suites Premium
(93* square meters)
6 Handicapped Junior Suites Deluxe
(47* square meters)
1 Presidential Suite
(189* square meters)
* Room size does not include balconies and terraces.
All ground floor suites will have direct access to swim-up pools. Each of the suites will have a full view
of the sea. Family Concierge guests will furthermore have access to restaurants, bars, and lounges. The
intended Onyx Night Club and the Gabi Club will be located near the beach.
The Paradisus Papagayo Bay Resort & Luxury Villas will feature other highlights including:
over 65 private, swim up and resort pools including the worlds second largest Infinity Pool all
within idyllic landscaped grounds
a wedding chapel with a stunning ocean view
rain forest walkways that permit guests to experience the flora and fauna of the rain forest
a multipurpose convention hall with over 2,000 square meters of space that can be utilized as a
whole or divided to create smaller meeting rooms
a full service spa committed to providing for the wellbeing of our guests. The spa will be located
with a 180 degree sea view within approximately 1,000 square meters that will include 12 large
treatment rooms, a hairdresser, relaxation areas, pools, saunas and steam rooms
the 20 private villas will be located within the Royal Service area of the resort. The present
intention being that these villas will be sold to individuals who will then let them back to the
36
resort when not occupied by the owners.
Management
Overall project development is lead by Josef Mettler, our chief executive officer, Charles Fessel, project
director Paradisus Papagayo Bay Resort & Luxury Villas, Hans Rigendinger, our chief operating officer
and Ernst Rosenberger, the Companys corporate controller. The lead architect is Ossenbach, Pendones &
Bonilla, one of Costa Ricas largest architectural offices with over 45 architects and designers. Civil
engineering services are provided by DEHC Engineers and structural engineering services by IEAC.
Landscape architects are TPA and interior designers are lead by Concreta Srl.
Resort management is to be provided by Meliá Hotel International, S.A. (Sol Meliá). Paradisus is
Meliás five star all-inclusive luxury hotel brand that is well recognized in the hospitality industry around
the world. Sol Meliá was founded in 1956 in Palma de Mallorca, Spain and is today one of the worlds
largest resort hotel chains, as well as Spains leading hotel chain for business or leisure. The company
currently offers more than 300 hotels in 26 countries over four continents under its Gran Sol Meliá, Sol
Meliá, ME by Sol Meliá, Innside by Sol Meliá, Tryp, Sol Meliá, Sol Meliá Vacation Club, and Paradisus
brands. The Paradisus brand represents all-inclusive luxury resorts with hotels in Mexico and the
Dominican Republic, including:
Paradisus Palma Real (Dominican Republic):
496 oversized suites
numerous pools and whirlpools, five tennis courts, casino, beach, golf, meeting space, five
restaurants, two buffets, nine bars, etc.
The Reserve at Palma Real (Dominican Republic):
184 rooms Residential Concierge Suites
private beach, swimming pools, 7800 sq ft Kids Zone, 24,000 sq. ft. Yhi Spa, three
restaurants, two buffets, two bars, etc.
Paradisus Punta Cana (Dominican Republic):
884 oversized suites (500 - 1000+ sq ft)
seven pools, four tennis courts, casino, beach, Kids Zone, Yhi Spa and fitness, meeting
rooms, 12 restaurants, eight bars, etc.
The Reserve at Punta Cana (Dominican Republic):
132 residential suites
pools (with partially underwater pool beds, water features, etc), private beach, spa, cabanas,
etc.
La Esmeralda at Playa del Carmen
512 suites including 56 swim-up suites
spas, meeting spaces, 11 restaurants, 10 bars, etc. (partially shared with La Perla at Playa
del Carmen).
37
La Perla at Playa del Carmen
394 suites including 60 swim-up suites
Paradisus adults-only Royal Service level of accommodations
spas, meeting spaces, 11 restaurants, 10 bars, etc. (partially shared with La Esmeralda at
Playa del Carmen)
Our Paradisus Papagayo Bay Resort & Luxury Villas 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 Meliás 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 Resort & Luxury Villas project.
Additional Concession Properties
On April 20, 2012, SunVesta AG entered into an agreement with Meridian IBG (Meridian) to purchase
two additional concession properties in Polo Papagayo, Gunacaste with a total surface of approximately
230,000 square meters, on terms, for a total of $22,895,806. The agreement with Meridian was amended
on November 13, 2012 to do away with the agreed equity payment, decrease the total purchase price to
$17.2 million and to provide that all payments for the purchase of the property were refundable in the
event SunVesta AG determines not to complete the purchase. SunVesta AG had paid down-payments of
approximately $1,400,000 as of March 31, 2013.
Subsequent to period end, on May 7, 2013, SunVesta AG entered into a new agreement with Meridian
that replaced the original contract, with a new total purchase price of $17,500,000 and a remaining
amount due of $15,830,299. The new agreement includes a payment plan for the remainder due divided
amongst Meridian and a third party as follows:
Third Party
$300,000 on May 4, 2013 which was paid on May 7, 2013 and is non-refundable
$1,000,000 on June 30, 2013, which is refundable and has not been paid as of the date of
this report
$1,000,000 on July 31, 2013, which is refundable and has not been paid as of the date of
this report
$1,000,000 on August 31, 2013, which is refundable and has not been paid as of the date of
this report
$1,500,000 on September 30, 2013, which is refundable
$1,500,000 on October 31, 2013, which is refundable
$1,700,000 on November 30, 2013, which is refundable
$8,000,000 in total to Third Party
Original Seller
$1,000,000 on January 31, 2014
$1,000,000 on February 28, 2014
$1,000,000 on March 31, 2014
$1,000,000 on April 30, 2014
38
$1,000,000 on May 31, 2014
$1,000,000 on June 30, 2014
$1,000,000 on July 31, 2014
$1,130,000 on August 31, 2014
$8,130,000 in total to Original Seller
Should SunVesta AG be able to meet the payments due to the third party in advance of the required
payment dates, the new agreement provides for certain discounts against the amount to be paid to
Meridian based on a sliding scale determined as of the full satisfaction date. SunVesta AG has not made
the required June and July payments to the third party as of the filing date of this report.
Hotel and Entertainment Complex (Atlanta, Georgia, U.S.A)
On September 19, 2012, SunVesta AG entered into an agreement with Fundus America (Atlanta) Limited
Partnership (Fundus) to purchase a hotel and entertainment complex in Atlanta, Georgia, U.S.A. for
$26 million. An additional $18 million for renovations would be required to remediate the hotel and
entertainment complex. The Company entered into a series of negotiations with various parties to finalize
a financing package for this project but was unable to procure such financing. On February 6, 2013
SunVesta paid $250,000 to Fundus. A second amendment and reinstatement agreement was entered into
on March 12, 2013, pursuant to which SunVesta AG remitted an additional non-refundable closing
extension fee in the amount of $250,000 to extend the closing date for the transaction to April 1, 2013.
Subsequent to period end, on May 17, 2013, SunVesta AG entered into a third amendment and
reinstatement agreement pursuant to which it remitted an additional non-refundable closing extension fee
in the amount of $250,000 in order to extend the closing date for the transaction to July 10, 2013. A
fourth amendment and reinstatement agreement was entered into on July 30, 2013, pursuant to which
SunVesta was required to remit another deposit of $250,000 on or before August 16, 2013 and to pay the
taxes on the property in the amount of $573,932 by August 30, 2013 in order to extend the closing date to
September 30, 2013. SunVesta AG did not remit the additional deposit of $250,000 nor did SunVesta pay
the taxes due on the property as required by the fourth amendment. Should SunVesta either determine not
to close the purchase or not be able to finance the transaction, said amounts remitted are to be considered
earned by Fundus and definitely non-refundable to SunVesta AG. Should SunVesta be able to finance all
above mentioned amounts, with exception of the taxes, would be offset against the total purchase price of
$26 million.
Finance
The anticipated completion of the Paradisus Papagayo Bay Resort & Luxury Villas in November of 2014
will require a total investment of approximately $180 million of which approximately $28 million has
been expended as of March 31, 2013. We expect to realize a minimum of $80 million in new funding
over the next twelve months, though our actual financing requirements may be adjusted to suit that
amount realized, and an additional $72 million 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,
construction financing, or shareholder loans, equity placements and, if deemed necessary, the guaranty
agreement as described herein.
SunVesta AG, our wholly owned subsidiary recently completed the offering of fixed-income Euro
denominated bonds and continues to offer fixed income CHF denominated bonds up to an aggregate
amount of CHF 15,000,000 to fund the initial development of the Paradisus Papagayo Bay Resort &
Luxury Villas project.
39
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 has raised $14,834,783 in connection
with the Euro bond offering of which $2,649,073 had been repaid as of March 31, 2013.
The CHF bonds 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 has raised $ 7,488,871 of which $ 1,474,823
have been repaid as of March 31, 2013, in connection with the CHF bond offering.
On July 27, 2011, SunVesta AG entered into a line of credit agreement with Aires International
Investment, Inc. (Aires), a company owned by a board member of SunVesta AG, which was
subsequently amended on May 11, 2012 and June 21, 2012 to include the following provisions:
the lender grants the Company a terminable, interest bearing and non-secured loan in the
maximum amount of CHF 10,000,000.
the conversion right granted in the original contract to convert the balance of the line of
credit into 10% ownership interest in Rich Land was cancelled.
Once the entire amount of CHF 10,000,000 has been drawn down, Aires now has the right to
convert its entire loan of CHF 10,000,000 into 20% shares of SunVesta Inc. (instead of
Richland) whereas 20% shares reflect the number of shares at the time when the entire
amount of CHF 10,000,000 has been drawn down.
the repayment of the line of credit is due on September 30, 2015, until such time Aires can
exercise its conversion option.
CHF 10,000,000 of this line of credit is subordinated in favour of other creditors.
the interest rate is 7.25% and interest is due on September 30 of each year.
SunVesta AG loaned approximately $6,567,000 against the line of credit for the three month period ended
March 31, 2013, and approximately $10,407,000 as of December 31, 2012, for a total of approximately
$16,974,000 as of March 31, 2013. SunVesta AG had loaned approximately $23,560,000 against the
Aires line of credit as of the filing date of this report.
Since surpassing the maximum amount permitted under the line of credit, SunVesta AG and Aires have
been in discussions in connection with a revised conversion option for that amount due. A conversion
option to replace the one vested according to prior agreement contemplates the conversion of that amount
due to Aires into preferred Company shares with a fixed interest payment with the option to convert into
common Company shares at a discount to market within a limited time frame. No agreement has yet been
reached.
During the second half of 2012 up to the current three month period, SunVesta AG entered into a series of
interest free loans with Dr. Max Roessler, a director of the Company and a principal of Aires. The loans
were originally due either on predetermined dates or on demand, in cash or in a fixed number of shares of
certain publically traded entities. Since the predetermined due dates have now passed the loans have been
extended by verbal agreement on undetermined terms, as follows:
Loan Date
Amount
Shares
Public Entity
June 7, 2012
$
1,733,000
10,000 Intershop Holding AG
July 24, 2012
$
446,000
10,000 Schindler Holding AG
August 8, 2012
$
383,000
700 Zug Estates Holding AG
March 1, 2013
$
50,000
52,500 Datewyler Holding AG
40
On March 8, 2013, SunVesta AG entered into an interest free loan agreement with DIA S.A. in the
amount of $2,000,000 payable on March 8, 2014. The loan was made payable in connection with the
closing of SunVesta AGs purchase of land adjacent to the Paradisus Papagayo Bay Resort & Luxury
Villas from Altos held in the name of Altos del Risco S.A.
Timeline
Our expected timeline for developing the Paradisus Papagayo Bay Resort & Luxury Villas is as follows:
complete architectural plans in the 3th quarter of 2013
commence onsite (Altos del Risco property) earthwork in the 2nd quarter of 2013
obtain final building permits in the 3rd quarter of 2013
secure construction loan in the 4th quarter of 2013
commence onsite vertical construction in the 4th quarter of 2013
complete construction in the 1st quarter of 2015
Handover to Sol Meliá on July 1st of 2015
Results of Operations
During the three month period ended March 31, 2013, our operations were focused on (i) completing the
purchase of an additional 12 hectares contiguous with our existing property in Guanacaste Province,
Costa Rica in connection with the development of the Paradisus Papagayo Bay Resort & Luxury Villas;
(ii) appointing Mr. Rigendinger to the board of directors and engaging him as chief operating officer; (iii)
obtaining building permits for the development of the Paradisus Papagayo Bay Resort & Luxury Villas
property; (iv) commencing earth work excavations on the Paradisus Papagayo Bay Resort & Luxury
Villas property; (v) discussions with prospective project development partners; (vi) pursuing additional
debt and equity financing arrangements including a bond offering through SunVesta AG in Europe and
loans from related parties; and (vii) repaying a portion of the Euro bonds outstanding.
The Company has been funded since inception from debt or equity placements and by shareholders or
partners in the form of loans. All of the capital raised to date has been allocated to the development of the
Costa Rican property 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 March 31, 2013,
the Company had incurred comprehensive losses of $29,334,135. Comprehensive income for the three
months ended March 31, 2013 were $533,810 as compared to a comprehensive loss of $1,907,300 for the
three months ended March 31, 2012. The decrease in comprehensive losses - which resulted in a
comprehensive income - over the comparative three month periods can be attributed to a gain of
$1,000,000 relating to a release of a prior period accrual to satisfy what was to be a penalty payable to Sol
Meliá, S.A. based on the delayed purchase of the Paradisus Papagayo Bay Resort & Luxury Villas
property, and the gain on foreign currency translation of $1,281,405 from a loss of $802,775, which is
due to volatility between Swiss Francs and US Dollars, and the related foreign currency translation
difference on intercompany loans which is classified as a permanent investment and the translation of the
balance sheet and results of operations of our foreign subsidiaries. These positive factors regarding
comprehensive income have been offset partially due to an increase in general and administrative
expenses to $1,304,957 from $971,627, of which a significant component was the additional payroll cost
as a result of hiring new personnel and stock based compensation as a result of granting options and
41
shares to our Chief Operating Officer and board member. Other contributing factors which partially offset
the comprehensive income over the comparative three month periods ended March 31, 2013 and March
31, 2012, respectively, were an increase in interest expense to $426,656 from $280,995 due to maturing
bond and credit line debt obligations, the amortization of debt issuance costs and commissions of $82,815
from a gain of $712, other losses of $27,032 from other gain of $14,053, the loss of $50,181 from zero,
due to an increase in the fair value of the conversion option associated with the Aires credit line and the
decrease in interest income to $174 from $3,060 due to declining cash balances,
We did not generate revenue during this period and we expect to continue to incur losses through the year
ended December 31, 2013.
Income Tax Expense (Benefit)
The Company has a prospective income tax benefit resulting from a net operating loss carry-forward and
startup costs that will offset future operating profits.
Capital Expenditures
The Company expended a significant amount on capital expenditures for the period from January 1, 2005
to March 31, 2013, 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
The Company has been in the development stage since inception and has experienced significant changes
in liquidity, capital resources, and stockholders equity.
As of March 31, 2013, we had a working capital deficit of $20,592,095. We had current assets of
$525,837 and total assets of $35,450,942. Our current assets consisted of $178,990 in cash, $55,876 in
other assets and $290,971 in receivables from related parties. Our total assets consisted of property and
equipment of $30,610,366 (mainly land and capitalized project costs for Paradisus Papagayo Bay Resort
& Luxury Villas, net debt issuance costs of $1,464,576, down payments for property and equipment of
$1,869,836 and restricted cash of $980,327. We had current liabilities of $21,117,932 and total liabilities
of $43,752,964. Our current liabilities consisted of $1,638,571 in accounts payable, $2,175,163 in accrued
expenses, $2,000,000 in a note payable, $3,247,740 in notes payable to related parties and $12,056,458 in
Euro bond debt. Our total non-current liabilities consisted of CHF bond debt of $5,566,811, notes payable
to related parties of $16,947,284, fair value conversion feature of $50,181 and pension liabilities of
$70,756. Total stockholders deficit in the Company was $8,302,022 at March 31, 2013.
For the period from January 1, 2005 to March 31, 2013, net cash used in operating activities was
$18,898,440.
Net cash used in operating activities for the three months ended March 31, 2013, was $1,280,513 as
compared to $1,171,550 for the three months ended March 31, 2012, which differences reflect the
increase in general and administrative expenses and changes in working capital. Net cash used in
operating activities in the current three month period is comprised of general and administrative expenses
that include but are not limited to, personnel costs, accounting fees, consulting expenses, finders fees and
professional fees, such as for auditing purposes and legal consultation, changes in other assets, accounts
payable and accrued expenses. Net cash used in operating activities in the prior three month period can
42
also be primarily attributed to general and administrative expenses and changes in other assets, accounts
payable and accrued expenses.
We expect to use net cash in operating activities until such time as net losses transition to net income
which transition is not anticipated until we complete the Paradisus Papagayo Bay Resort & Luxury Villas
project.
For the period from January 1, 2005 to March 31, 2013, net cash used in investing activities was
$32,544,765.
Net cash used in investing activities for the three months ended March 31, 2013, was $4,033,361 as
compared to $2,900,862 for the three months ended March 31, 2012. Net cash used in investing activities
in the current three month period can be attributed to receivables from related parties, the purchase of
property and equipment, down payments for property or equipment and restricted cash. Net cash used in
investing activities in the prior three month period ended March 31, 2012 can be attributed to receivables
from related parties, the purchase of property or equipment, down payments for property, offset by net
cash provided by investing activities that can be attributed to short term investments.
We expect negative net cash in investing activities while in the process of developing the Paradisus
Papagayo Bay Resort & Luxury Villas and looking to additional projects.
For the period January 1, 2005 to March 31, 2013, net cash provided by financing activities was
$52,286,709.
Net cash provided by financing activities for the three months ended March 31, 2013, was $5,239,021 as
compared to $3,733,750 for the three months ended March 31, 2012. Net cash provided by financing
activities in the current three month period can be attributed to proceeds from notes payable to related
parties and proceeds from SunVesta AGs bond issuance, offset by the repayment of bonds and the
payment of debt issuance costs. Net cash provided by financing activities in the prior three month period
can be attributed to proceeds from notes payable to related parties, proceeds from SunVesta AGs bond
issuance and notes payable to related parties, offset by the payment of debt issuance costs.
We expect net cash flow provided by financing activities in future periods from those debt and equity
infusions necessary to complete the development of the Paradisus Papagayo Bay Resort & Luxury Villas.
Management believes that our cash on hand in addition to short term related party loans and the guaranty
agreement in place as described in the going concern paragraph below are sufficient for us to conduct
operations over the next twelve months. Current debt financing efforts consist of a CHF bond offering in
progress, and short term related party loans that have permitted us to draw capital as necessary to meet
ongoing operational requirements. The Company has, as of the date of this filing, realized on a net basis
approximately $18,200,000 through its Euro and CHF bond offerings, drawn down approximately
$23,560,448 against the line of credit with Aires, a related party and borrowed on a short term basis
approximately $2,611,034 from Dr. Roessler, a related party.
We had no lines of credit or other bank financing arrangements as of March 31, 2013 other than that in
place with Aires. Since SunVesta AG has borrowed approximately $13 million in excess of that
anticipated by the line of credit agreement, the Company expects that this debt facility is exhausted.
We have commitments for executed purchase orders and agreements in the amount of $30 million as of
March 31, 2013, in connection with the development of the Paradisus Papagayo Bay Resort & Luxury
43
Villas, which commitments are included in the required financing of $180 million to complete the project.
Most material commitments were not contractually agreed as of the end of the period.
The firth addendum (dated September 6, 2013) to the management agreement with Sol Meliá stipulates
that should the completion of the construction not occur by July 1, 2015, and should an extension date not
be agreed, subsequent to July 1, 2015, Sol Meliá will be entitled to receive a daily amount of $2,000 as
liquidated damages. Should the completion of the construction not occur by October 1, 2015 Sol Meliá
will be entitled to terminate the management agreement and to receive a termination amount of $5 million
unless the parties agree in writing to extend such date.
We have cancellable commitments that are not included in the required financing for the development of
the Paradisus Papagayo Bay Resort & Luxury Villas of approximately $41.6 million including
approximately $15.8 million to third parties for the purchase of two additional concession properties in
Polo Papagayo, Guanacaste, Costa Rica and approximately $25.8 million to Fundus for the purchase of a
hotel and entertainment complex in Atlanta, Georgia, U.S.A and the payment of property taxes.
We maintain a defined benefit plan that covers all of our Swiss employees and have an employment
agreement with our chief executive officer and chief financial officer as of March 31, 2013.
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 Resort & Luxury Villas and discussed
above.
We have no current plans to make any changes in the number of our employees as of March 31, 2013.
Future Financings
We will continue to rely on debt or equity sales of our shares of common stock to fund our business
operations and may rely on a guaranty agreement to bridge traditional financing for the Paradisus
Papagayo Bay Resort & Luxury Villas.
Off-Balance Sheet Arrangements
As of March 31, 2013, 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.
Going Concern
The Company 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:
a. Gross project cost
$
195,000,000
b. Less: Proceeds from sale of villas
(24,000,000)
c. Net project cost
171,000,000
44
d. Overhead expenses
21,000,000
e. Less: Recuperated in gross project cost
(12,000,000)
f Total, excluding other potential projects
$
180,000,000
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 the Net Project Cost, as
well as non-recuperated overhead expenses are expected to be financed by the main shareholders of the
project, i.e. Zypam Ltd., shareholder, Mr. Hans Rigendinger, shareholder, director and officer, Mr. Max
Roessler, shareholder, director and majority shareholder of Aires, Mr. Josef Mettler, shareholder, director
and officer.
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 projects 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 Holding AG has secured financing for
the completion of the project.
Based on this guaranty agreement, management therefore believes that available funds are sufficient to
finance cash flows for the twelve months subsequent to March 31, 2013 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.
Forward-Looking Statements and Factors That May Affect Future Results and Financial Condition
The statements contained in the section titled Managements 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:
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
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. 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.
45
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.
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 the
Companys management, with the participation of the chief executive officer and chief financial officer,
of the effectiveness of the Companys 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
Commissions 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, the Companys management concluded that due to a lack of independent
oversight, failure to segregate duties, insufficient accounting resources and lack of US GAAP knowledge,
as of the end of the period covered by this report, that the Companys disclosure controls and procedures
were ineffective in recording, processing, summarizing, and reporting information required to be
disclosed, within the time periods specified in the Commissions 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 March 31, 2013, 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.
46
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
On July 3, 2013, the Company authorized the issuance of 3,000,000 shares of restricted common shares,
valued at $0.05 a share to Max Roessler in connection his appointment to the board of directors on even
date in reliance upon the exemptions from registration provided by Section 4(2) and Regulation S of the
Securities Act of 1933, as amended (Securities Act).
The Company complied with the exemption requirements of Section 4(2) of the Securities Act based on
the following factors: (1) the issuance was an isolated private transaction by the Company which did not
involve a public offering; (2) the offeree had access to the kind of information which registration would
disclose; and (3) the offeree was financially sophisticated.
The Company complied with the exemption requirements of Regulation S by having directed no offering
efforts in the United States, by offering common shares only to an offeree who was outside the United
States at the time of the offering, and ensuring that the offeree to whom the securities were offered and
authorized was a non-U.S. offeree with an address in a foreign country.
On July 4, 2013, the Company authorized the issuance of 5,000,000 shares of restricted common shares,
valued at $0.07 a share, and granted 12,000,000 stock options from the SunVesta, Inc. 2013 Stock Option
Plan, that vest in three parts on the satisfaction of certain criteria tied to the development of the Paradisus
Papagayo Bay Resort & Luxury Villas, to Josef Mettler in connection his employment agreement of even
date in reliance upon the exemptions from registration provided by Section 4(2) and Regulation S of the
Securities Act.
The Company complied with the exemption requirements of Section 4(2) of the Securities Act based on
the following factors: (1) the issuance was an isolated private transaction by the Company which did not
47
involve a public offering; (2) the offeree had access to the kind of information which registration would
disclose; and (3) the offeree was financially sophisticated.
The Company complied with the exemption requirements of Regulation S by having directed no offering
efforts in the United States, by offering common shares only to an offeree who was outside the United
States at the time of the offering, and ensuring that the offeree to whom the securities were offered and
authorized was a non-U.S. offeree with an address in a foreign country.
On January 1, 2013, the Company authorized the issuance of 3,500,000 shares of restricted common
shares, valued at $0.08 a share, and granted 10,000,000 stock options from the SunVesta, Inc. 2013 Stock
Option Plan, that vest in two parts on the satisfaction of certain criteria tied to the development of the
Paradisus Papagayo Bay Resort & Luxury Villas, to Hans Rigendinger in connection his employment
agreement of even date in reliance upon the exemptions from registration provided by Section 4(2) and
Regulation S of the Securities Act.
The Company complied with the exemption requirements of Section 4(2) of the Securities Act based on
the following factors: (1) the issuance was an isolated private transaction by the Company which did not
involve a public offering; (2) the offeree had access to the kind of information which registration would
disclose; and (3) the offeree was financially sophisticated.
The Company complied with the exemption requirements of Regulation S by having directed no offering
efforts in the United States, by offering common shares only to an offeree who was outside the United
States at the time of the offering, and ensuring that the offeree to whom the securities were offered and
authorized was a non-U.S. offeree with an address in a foreign country.
ITEM 3.
DEFAULTS ON SENIOR SECURITIES
None.
ITEM 4.
MINE SAFETY DISCLOSURE
Not applicable.
ITEM 5.
OTHER INFORMATION
None.
ITEM 6.
Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits on page
50 of this Form 10-Q, and are incorporated herein by this reference.
48
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
October 10, 2013
Josef Mettler
Chief Executive Officer, Chief Financial Officer,
Principal Accounting Officer and Director
/s/ Hans Rigendinger
October 10, 2013
Hans Rigendinger
Chief Operating Officer and Director
49
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 the Company
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 the Company 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 the Company 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 the Company and Hans Rigendinger
(incorporated by reference from the Form 8-K filed with the Commission on March 10, 2010).
10.7*
Guaranty Agreement dated July 16, 2012 between SunVesta AG, Josef Mettler, Hans Rigendinger
and Max Rössler.
10.8*
Employment Agreement dated January 1, 2013 between the Company and Hans Rigendinger
(incorporated by reference to the Form 8-K filed with the Commission on February 4, 2013.
Employment Agreement dated July 4, 2013 between the Company and Josef Mettler.
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 the Company (incorporated by reference from the Form 10-K filed with the
Commission on June 20, 2013).
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.
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.
SunVesta, Inc. 2013 Stock Option Plan
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 the Company.
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.
50