Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - SUNVESTA, INC. | Financial_Report.xls |
| EX-31 - SUNVESTA CERTIFICATION - SUNVESTA, INC. | exhibit31.htm |
| EX-21 - SUNVESTA SUBSIDIARIES - SUNVESTA, INC. | exhibit21.htm |
| EX-32 - SUNVESTA CERTIFICATION - SUNVESTA, INC. | exhibit32.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014.
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)
Registrant’s telephone number, including area code: 011 41 43 388 40 60
Securities registered under Section 12(b) of the Act: none.
Securities registered under Section 12(g) of the Act: common stock (title of class), $0.01 par value.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No þ
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 þ No
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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. Smaller reporting company þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No þ
The aggregate market value of the registrant’s common stock, $0.01 par value (the only class of voting stock), held by non-affiliates
40,144,004 shares was approximately $5,620,161 based on the based on the average closing bid and ask prices ($0.14) for the
common stock on April 14, 2015.
At April 14, 2015, the number of shares outstanding of the registrant’s common stock, $0.01 par value (the only class of voting
stock), was 83,541,603.
1
TABLE OF CONTENTS
PART I
Business
3
Risk Factors
15
Unresolved Staff Comments
15
Properties
15
Legal Proceedings
15
Mine Safety Disclosures
15
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of
16
Equity Securities
Selected Financial Data
17
Management's Discussion and Analysis of Financial Condition and Results of Operations
17
Quantitative and Qualitative Disclosures about Market Risk
23
Financial Statements and Supplementary Data
23
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
24
Controls and Procedures
24
Other Information
26
PART III
Directors, Executive Officers, and Corporate Governance
27
Executive Compensation
31
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
35
Matters
Certain Relationships and Related Transactions, and Director Independence
36
Principal Accountant Fees and Services
38
PART IV
Exhibits, Financial Statement Schedules
39
40
2
PART I
ITEM 1.
As used herein the terms “Company,” “we,” “our,” and “us” refer to SunVesta, Inc., its predecessors,
and its subsidiaries, unless context indicates otherwise.
Corporate History
The Company was incorporated in the State of Florida on September 12, 1989. On August 24, 2007, the
Company acquired SunVesta Holding AG (hereinafter “SunVesta AG”) as a wholly-owned subsidiary.
SunVesta AG was incorporated in Switzerland on December 18, 2001, and is domiciled in the Canton of
Zurich, Switzerland. SunVesta AG operates through its wholly owned subsidiaries:
— SunVesta Projects & Management AG (Switzerland)
— SunVesta Costa Rica Limitada (Costa Rica)
— Rich Land Investments Limitada (Costa Rica)
— Altos del Risco SA (Costa Rica)
— Profunda Capital Partners LLC (USA)
The Company’s principal place of business is located at Seestrasse 97, Oberrieden, Switzerland CH-8942.
Our telephone number is + 41 43 388 40 60. Our registered agent is Hubco Registered Agents Services,
Inc., located at 155 Office Plaza Drive, first Floor, Tallahassee, Florida, 32301. Hubco’s telephone number
is (800) 443-8177.
SunVesta
Business Overview
We are in the process of developing high-end luxury hotels and resorts worldwide. Our initial focus is
concentrated on offering luxury hotel products located in attractive, top-class coastal vacation destinations
in countries such as Costa Rica that are fast emerging as popular tourist destinations. Each prospective
development takes into consideration country specific conditions and general considerations that include
the stability of local political conditions, geologically useful cultivability, and the types of destinations that
attract a five-star clientele. Once identified as eligible, prospective developments are 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 in two phases as Vista Mar (Family Concierge) and
Vista Bahia (Royal Service), on 20.5 hectares of prime land located in Guanacaste Province, Costa Rica,
will comprise the Paradisus Papagayo Bay Resort & Luxury Villas, a five star luxury hotel. The
determination to split the project into phases was taken in response to unanticipated delays associated with
earth movement, an unrelated environmental dispute with a neighbor at the Vista Bahia location and
availability of financing to complete the development. The Paradisus Papagayo Bay Resort & Luxury
Villas is scheduled to open in the first quarter of 2017, subject to the procurement of the requisite financing.
3
Specifications
Paradisus Papagayo Bay Resort & Luxury Villas’ initial specifications are to be as follows:
— eco-luxury all-inclusive resort
— 382-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
Vista Mar
Family Concierge
The Family Concierge will be a family orientated part of the Paradisus Papagayo Bay Resort & Luxury
Villas. The accommodations will be designed to satisfy the needs of the modern family.
The Family Concierge area will include:
— 166 Junior Suites Deluxe
(47* square meters)
— 34 Suites Deluxe
(87* square meters)
— 33 Suites Premium
(93* square meters)
— 6 Handicapped Junior Suites Deluxe
(47* square meters)
— 1 Bridal Suites
(93* square meters)
— 2 Deluxe Suites Presidential
(88* square meters)
— 1 Presidential Suite
(194* 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. Family Concierge guests will furthermore have access to restaurants, bars, and lounges.
The planned Onyx Night Club and the Gabi Club will be located near the beach.
Vista Bahia
Royal Service
Our Royal Service will include an extensive range of services such as a butler service, private pools for each
Garden Villa and/or a Jacuzzi in every suite.
The Royal Service area will include:
— 108 Junior Suites Grand Deluxe
(43-60* square meters)
— 2 Junior Suites Grand Deluxe for Handicapped Guests
(53* square meters)
— 6 Grand Master Suites
(87* square meters)
— 2 Deluxe Suites Presidential
(60 square meters)
— 1 Grand Presidential Suite (4 bedrooms)
(145* square meters)
— 20 one or two bedroom Garden Villas
(91–212* square meters)
— Room size does not include balconies and terraces.
* Room size does not include balconies and terraces.
4
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.
The Paradisus Papagayo Bay Resort & Luxury Villa’s will feature other highlights including:
— more than 65 private, swim up and resort pools including the world’s 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 lease them back to the
resort when not occupied by the owners.
Management
Overall project development is led by Josef Mettler, our Chief Executive Officer, Charles Fessel, Project
Director Paradisus Papagayo Bay Resort & Luxury Villas, Hans Rigendinger, Chairman of the Board and
Chief Operating Officer of SunVesta AG and Ernst Rosenberger, the Company’s Corporate Controller. The
lead architect is Ossenbach, Pendones & Bonilla, one of Costa Rica’s 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 led by Concreta Srl.
Resort management is to be provided by Melía Hotels International (“Melía”). “Paradisus” is Meliá’s five
star all-inclusive luxury hotel brand that is well recognized in the hospitality industry around the world.
Melía was founded in 1956 in Palma de Mallorca, Spain and is today one of the world’s largest resort hotel
chains, as well as Spain’s 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 Melía, Sol Melía, ME by Sol Melía,
Innside by Sol Melía, Tryp, Sol Melía, Sol Melía Vacation Club, and Paradisus brands. The Paradisus brand
represents all-inclusive luxury resorts with hotels in Mexico and the Dominican Republic.
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 Melía until
April 30, 2011. Our project is part of Meliá’s master expansion plan, which includes the opening of two
resorts in Playa del Carmen, Mexico. Melía aims to solidify Paradisus Resorts as a leader in the luxury
all-inclusive market segment.
An amendment to the Company’s management agreement with Meliá dated August 18, 2014, stipulates that
should the Papagayo Bay Resort & Luxury Villa’s not be completed by November 15, 2015, and should an
extension date not be agreed, subsequent to November 15, 2015, that Meliá will be entitled to receive a
daily amount of $2,000 as liquidated damages. Should the completion of the construction not occur by
February 15, 2016, 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.
5
Since the completion date for the Paradisus Papagayo Bay Resort & Luxury Villas development is now
anticipated for the first quarter of 2017, the Company is in discussions with Meliá regarding another
addendum that will allow an extension of the deadlines stipulated in Sixth Addendum. Should the Company
not be successful in obtaining an additional amendment to the agreement, the penalty due to Meliá would be
$5,000,000.
Additional Concession Properties
On April 20, 2012, the Company entered into an agreement with Meridian IBG (“Meridian”), as amended
on November 13, 2012 and replaced on May 7, 2013, to purchase two additional concession properties in
Polo Papagayo, Guanacaste comprised of approximately 230,000 square meters for $17,500,000.
The Company paid down-payments on the purchase of these properties of $2,369,816 as of December 31,
2014 and since then made another payment of $100,000 against the purchase price. The Company is in
discussions with Meridian regarding an extension of the agreement. Should the Company not be successful
in obtaining a time extension for the payment of the purchase price, it would have to write-off $300,000 of
that purchase price already paid.
Hotel and Entertainment Complex (Atlanta, Georgia, U.S.A)
On September 19, 2012, the Company entered into an agreement, as amended, with Fundus America
(Atlanta) Limited Partnership (“Fundus) to purchase a hotel and entertainment complex in Atlanta, Georgia
(United States of America). The entire purchase amount of $26 million for the assets had no firm financing
commitment. On March 28, 2014, the Company decided not to continue with the project due to the changes
in the conditions related to the acquisition and an inability to adjust a financing package to the new
conditions. As part of the termination and to avoid potential litigation, the Company agreed to pay the
counterparty EUR 100,000 (approximately $124,500) to settle any further obligation. On April 7, 2014, the
Company paid the EUR 100,000 settlement amount to Fundus which amount (approximately $124,500) has
been expensed and included in other operating expenses.
Finance
The anticipated completion of the Paradisus Papagayo Bay Resort & Luxury Villas in the first quarter of
2017 will require a net investment of approximately $183 million (excluding non-recuperated overhead
expenses), of which approximately $54 million has been expended as of December 31, 2014. We expect to
realize a minimum of $100 million in new funding over the next twelve months. New funding over the next
twelve months is expected to be raised from a construction loan, debt financing through bonds, shareholder
loans and, if necessary, the guaranty agreement in place as described herein.
Bonds
SunVesta AG, has four bond issues outstanding, denominated in either EUR (€) or Swiss Francs (CHF) and
has settled one bond issue.
EUR (€) Bonds
The Company initiated its first offering of unsecured EUR bonds on December 1, 2010, of up to
€25,000,000 in units of €1,000 that bore interest at 8.25% per annum payable each November 30 over a
three year term that expired on November 30, 2013. We realized $792,740 for the year ended December 31,
2013, for a cumulative total raise of $15,009,447 as of December 31, 2013, in connection with this offering.
6
The Company failed to repay $5,786,248 of the amount due on November 30, 2013, which amount was
repaid in full on April 7, 2014.
The Company initiated a second offering of unsecured EUR bonds on December 2, 2013, of up to
€15,000,000 in units of €10,000 that bear interest at 7.25% per annum payable each December 1 over a
three year term that expires on December 2, 2016. We realized $1,562,402 for the year ended December 31,
2014, and $6,603,097 in the year ended December 31, 2013, for a cumulative amount of $ 7,657,650 as of
the date of this report.
The Company initiated a parallel third offering of unsecured EUR bonds on December 2, 2013, of up to
€15,000,000 in units of €10,000 that bear interest at 7.25% per annum payable each December 2 over a
three year term that expires on December 2, 2016. We realized $1,960,226 for the year ended December 31,
2014 and $0 in the year ended December 31, 2013, for a cumulative amount of $1,761,258 as of the date of
this report.
Swiss Francs (CHF) Bonds
The Company initiated the first offering of CHF bonds on September 1, 2011, of up to CHF 15,000,000 in
units of CHF 50,000 that bear interest at 7.25% per annum payable each August 31 over a four year term
that expires on August 31, 2015. We realized $5,542,245 for the year ended December 31, 2014 and
$2,650,882 in the year ended December 31, 2013, for a cumulative amount of $10,999,192 as of the date of
this report.
The Company initiated a second offering of unsecured CHF bonds on September 1, 2013, of up to CHF
10,000,000 in units of CHF 10,000 that bear interest at 7.25% per annum payable each August 31, over a
two year term that expires on August 31, 2015. We realized $12,912,402 in the year ended December 31,
2014 and $0 in the year ended December 31, 2013, for a cumulative amount of $18,278,203 as of the date of
this report.
Aires International Investment, Inc.
On July 27, 2011, SunVesta AG entered into a line of credit agreement with Aires International Investments
Inc. (“Aires”), a company owned by Dr. Rössler (currently a board member of the Company). The loan
agreement was amended on May 11, 2012 and on June 21, 2012 and replaced by a new loan agreement on
October 31, 2013, that included the following conditions:
— All existing loan agreements or credit facilities, including amendments, between SunVesta AG
and Aires were cancelled and superseded by the new loan agreement.
— The loans are due after December 31, 2017 and before December 31, 2020.
— Despite the scheduled repayment dates, each party has the option to cancel the loan agreement
with a prior notice period of 90 days, requiring repayment of the loans in full.
— Loan amounts outstanding including any additional amounts and additions are subordinated.
— Interest on the loan amounts is 7.25% per annum, which charge is accrued to the loan account.
The Company has borrowed on a consolidated basis approximately $30,300,000 from Aires as of
December 31, 2014, and $33,410,000 from Aires as of December 31, 2013.
7
Dr. Max Rössler
Over the course of 2012 and 2013, the Company entered into a series of interest free loans with Dr. Max
Rössler, a director of the Company and a principal of Aires. The loans were originally due either on
predetermined dates or on demand, repayable in cash or in a fixed number of shares of certain publically
traded entities. On April 19, 2013, the Company and Dr. Rössler concluded on an act of transfer under
which the loans from June 7, 2012 and March 1, 2013 were transferred to Aires International and the
balances of $1,810,000 and $50,000 added to the existing loan agreement with Aires. On June 4, 2014, the
due dates of the remaining loans were extended to May 30, 2015, as follows:
Date of Agreement
Amount
Shares
Public Entity
July 24, 2012
$470,000
10,000
Schindler Holding AG
August 8, 2012
$400,000
700
Zug Estates Holding AG
Receivable from and loans to Josef Mettler
During the period ended December 31, 2013, the Company borrowed $1,065,963 (CHF 1,054,770) at 3%
interest from Josef Mettler.
In 2014, the amount borrowed by the Company became a loan receivable to the Company of $1,455,214
(CHF 1,439,935) from Mr. Mettler.
On August 15, 2014, and November 17, 2014, Aires International Investments Inc. absorbed the
Company’s receivables from Mr. Mettler in the amount of $851,564 (CHF 842,623) and $603,650 (CHF
597,312) respectively by crediting the amount due to the Company against the amount due from the
Company to Aires. There are no outstanding receivables from Mr. Mettler as of December 31, 2014.
For the year ended December 31, 2014 and December 31, 2013, the Company expensed no interest on the
payable but earned interest in 2013 on the receivable.
Receivables 4f capital ag
For the year ended December 31, 2013, the Company owed $27,590 (CHF 27,300) for commissions to 4f
capital ag.
During the period ended December 31, 2014, the amount owed by the Company became a receivable to the
Company of $1,142,681 (CHF 1,113,683) from 4f capital ag.
On August 15, 2014, and November 17, 2014, Aires International Investments Inc. absorbed the
Company’s receivables from 4f capital ag in the amount of $114,891 (CHF 113,685) and $1,027,790 (CHF
1,016,998) respectively by crediting the amount due to the Company against the amount due from the
Company to Aires.
For the year ended December 31, 2014 and December 31, 2013, the Company expensed no interest but
earned interest in 2013.
For the year ended December 31, 2014 and December 31, 2013, the Company incurred no interest expense
and earned no interest income for these amounts.
8
Commissions paid or payable to related parties
During the periods ended December 31, 2014, and December 31, 2013, the Company paid commissions to
4f capital ag in the amount of $123,000 and $291,740, respectively, related to financing of the Company. 4f
capital ag is a company owned and directed by Mr. Mettler (Board Member and CEO of the Company) that
receives a commission of 1.5% for new funds that the Company receives based on consulting services
rendered by 4f capital ag. These costs have been capitalized to debt issuance costs.
Hans Rigendinger
In 2013, the Company borrowed $600,000 at 3% interest from Hans Rigendinger. The amount due to Mr.
Rigendinger for this loan at December 31, 2014 was $1,914.
Mr. Rigendinger also held bonds denominated in Euros and Swiss Francs valued at approximately
$4,316,000 as of December 31, 2014 and December 31, 2013.
DIA S.A.
On March 8, 2013, the Company entered into an interest free loan agreement with DIA S.A. in the
amount of $2,000,000 payable on March 8, 2014 in connection with the purchase of land adjacent to the
Paradisus Papagayo Bay Resort & Luxury Villas from Altos held in the name of Altos del Risco S.A. The
terms of the loan agreement were amended on March 16, 2015 to extend the due date for said payable until
March of 2016.
Specogna Holding AG
On September 16, 2014, the Company entered into a short term loan agreement for approximately $736,000
with Specogna Holding AG (“Specogna”) repayable on October 31, 2014, with a fixed interest payment of
approximately $32,000. The loan was secured personally and jointly by Dr. Max Rössler, Mr. Josef Mettler
and Mr. Hans Rigendinger. The amounts due to Specogna were repaid on March 24, 2015 by Aires on
behalf of the Company, with no penalties incurred.
Roland Weimar
On May 23, 2014, the Company entered into a short term loan agreement for approximately $376,800 with
Roland Weimar (“Weimar”). The loan is repayable in five instalments, (four payments of $84,700, one
payment of $38,000), with the initial payment being due on June 2, 2014 and the latest one being due on
June 1, 2015. The interest rate is 2 % per annum. The Company had repaid $159,017 as of the filing date of
this report of the $205,000 that should have been repaid. The agreement does not stipulate any penalties for
late payment.
Bruno Wernli
On September 16, 2014, the Company entered into a short term loan agreement for approximately $568,000
with Bruno Wernli (“Wernli”), repayable on October 31, 2014, with a fixed interest payment of
approximately $53,000 (CHF 50,000). The loan was secured personally and jointly by Dr. Max Rössler,
Mr. Josef Mettler and Mr. Hans Rigendinger. The amounts due to Bruno Wernli were repaid on December
19, 2014, by Aires on behalf of the Company.
9
Global Care AG
On September 23, 2014, the Company entered into a short term loan agreement of approximately $194,435
(CHF 185,000) with Global Care AG (“Global Care”), repayable on October 31, 2014, with a fixed interest
payment of $21,020 (CHF 20,000). The amounts due to Global Care had not been paid as of the filing date
of this report. According to the agreement, there are no penalties for late payments.
Guaranty Agreement
During the year ended December 31, 2013, the Company borrowed $1,065,693 at 3% interest from Josef
Mettler pursuant to the terms and conditions of the guaranty agreement dated July 16, 2012, which amount
was repaid during the year ended December 31, 2014.
Timeline
Our expected timeline for developing the Paradisus Papagayo Bay Resort & Luxury Villas is as follows:
— commence onsite vertical construction in the second quarter of 2015
— complete construction in the fourth quarter of 2016
— handover to Melía in the first quarter of 2017
Competition
Three key factors have been taken into consideration when defining our hotel competitors in relation to the
Paradisus Papagayo Bay Resort & Luxury Villas:
— the proximity of competitors to our location in Guanacaste Province, Costa Rica
— the consumption habits of prospective clientele
— the ability to compete based on product similarity in relation to service standards, facilities,
the availability of equipment and the number or variety of services offered.
Based on our criteria we have determined that our prospective competitors are those characterized as 5 star
holiday resorts in geographic proximity to our planned location.
Luxury Hotel Resorts
We distinguish between primary and secondary competitors.
Primary competition in Guanacaste Province is comprised of the following properties:
— Four Seasons Peninsula Papagayo
— JW Marriot Guanacaste
— Hilton Papagayo Costa Rica
— Westin Golf Resort & Spa Playa Conchal
— Andaz Peninsula Papagayo Resort
— Dreams Las Mareas Costa Rica
The closest direct and most prominent competition for our Guanacaste property will be the Four Seasons
Hotel.
10
All of our primary competitive establishments have common characteristics with a standard vacation resort
format with much more equipment and many more facilities to offer than hotels based in a city such as:
— several modules/ lodging buildings around central services
— ample water areas with outdoor swimming pools, areas for hammocks and sun bathing
— children and entertainment activity areas
— restaurant pool areas with bars and service throughout the day
— large lounges for breakfast, lunch and dinner services
— alternative gastronomic or theme restaurants
— sports areas (basketball court, tennis courts, golf course, soccer field)
— Fitness Center, Wellness Center and Spa Areas
Our competitors are managed by leading international chains or experienced domestic companies.
Despite what might be construed as obvious obstacles to entry, including robust competition within the
hospitality industry in Guanacaste Province, we believe that our development of the Paradisus Papagayo
Bay Resort & Luxury Villas will be successful based principally on the following factors:
— the beach front location of the development
— environmental integrity in project development and operation
— the reputation of the Paradisus brand in the region and internationally
Further, we believe that we have certain distinctive competitive advantages over all or many of our
competitors including:
— location in one of the most appealing areas worldwide
— outstanding product with unique features
— superior project development and management agreements that maximize resources and
broaden market penetration
We believe that all of the factors detailed above, in combination with the dedication of our personnel and
partners, will enable us to be competitive in developing the Paradisus Papagayo Bay Resort & Luxury
Villas.
Marketability
Costa Rican Tourism
Costa Rica has a long track record of political stability along with a well-established outward-looking
growth model. The government has adopted a proactive policy of fostering higher-end beach resort tourism,
mainly through fiscal incentives for investors. As such, Costa Rica is benefiting from a burgeoning hotel
development pipeline emerging as a regional hotel investment hot-spot, boasting a burgeoning upscale and
luxury hotel development pipeline which still provides much fertile ground for real estate investors and
developers to expand their search for profitable growth. Foreign tourism investment is projected to continue
this upward trend over the next several years as demand outpaces the existing lodging and tourism services
supply.
11
Costa Rica stands as the most visited nation in the Central American region. The Costa Rican Tourism
Institute (“TI”) is responsible for collecting information on the number and economic impact of tourists that
visit Costa Rica. TI also collects information related to hotel rooms and the country of origin for tourists
arriving in Costa Rica. Records produced by TI detail that the number of tourists visiting Costa Rica
surpassed 2 million in 2008, and that tourist-related income reached US$2.1 billion that year. Due to the
global economic crisis, TI recorded that international arrivals began to fall beginning in August 2008, as the
number of U.S. citizens visiting the country shrank, which market segment represented 54% of all foreign
tourists visiting Costa Rica. The combined effect of the economic crisis and the 2009 flu pandemic resulted
in reduction of tourist arrivals in 2009 to 1.9 million visitors, an 8 percent reduction as compared to 2008.
However, in 2013 TI determined that the number of visitors rose to a historical record of 2.34 million,
which number represented a 6.9% increase over 2012. The continuing increase in visitors to Costa Rica
over the period indicates a mature demand market attractor with very positive worldwide destination
positioning.
The 2013 Travel and Tourism Competitiveness Index (“TTCI”), indicates that Costa Rica reached the 47th
place in the world ranking, classified as the second most competitive among Latin American countries after
Mexico, and ranking sixth in the Americas. Focusing solely on the sub index measuring human, cultural,
and natural resources, Costa Rica ranks 38th worldwide, and 7th when considering just the natural
resources criteria. The TTCI report also notes Costa Rica's main weaknesses, limited number of cultural
sites (109th), time required to start a business (130th), poor condition of ground transport infrastructure
(100th), and poor quality of port infrastructure (136th).
TI has determined that the most relevant origin markets in terms of demand are the United States, Canada
and Mexico which generated approximately 48% of all tourists followed by Central American countries
including Guatemala, El Salvador, Panama and Nicaragua, which generated approximately 31% of the
tourists arriving in Costa Rica in 2011. According to official data, the United States remains the largest
source of tourists to Costa Rica with a total of 929,402 in 2013, representing 40% of all visits. Tourists from
European countries represented approximately 14% all tourists in 2011 led by Spain, Germany, France,
Holland and the United Kingdom.
TI and the Directorate General of Immigration (“DGME”) reported that in the first two months of 2014
there were 545,117 tourists through all ports, an increase of 36,110 from January and February of 2013. Air
arrivals were the most increased with 351,777 arrivals in the first two months of 2014 compared to the same
period in 2013, an increase of 9%, representing the greatest increase over the last four years. The increase
in airport arrivals is directly related to the government’s policy to attract new airlines, including Spirit
Airlines, Frontier Airlines, JetBlue, Interjet, Aeromexico, United Airlines and Delta Airlines. Most visitors
to Costa Rica arrive through the airport in San Jose, Costa Rica, during three peak seasons from December
to January, March to April and June through August. Recently however, there has been an increase in the
number of visitors received through the country’s second airport in Liberia, Guanacaste. Entering the
country through Liberia airport enables weary travelers to be on the Guanacaste beaches within an hour of
arrival.
12
TI has also reported that medical tourism in 2011 generated $388 million from some 48,000 foreigners, of
which 82% came from the United States, 11% from Canada, 3% from Central America and the Caribbean
and 1% from Europe and Asia. Proximity to North America is particularly attractive to tourists arriving
from the United States who seek out quality in medical services and lower costs. Costa Rica estimates that
medical tourism offers from 30% to 50% in savings as compared to US costs for quality dental and cosmetic
surgery services, and on average, up to 70% in lower costs for nonsurgical procedures and tests.
When it comes to facilitating hospitality in Costa Rica, TI expects that 1,309 new rooms would be added to
existing inventory by November 2014 to service the need and forecasts strong growth in the hotel sector
over the next two years. IT also notes that seven major hotel projects are currently under way in Costa Rica
and that positive signs of growth in the vacation rentals sector in Guanacaste province. However, hotel
records in Guanacaste, as detailed by TI statistics, evidence that the number of hotels in the 4 to 5 star
category has not increased since 2008 while the number of 4 or 5 star category rooms increased from 2,728
rooms in 2008 to 3,415 rooms in 2011. The fact that the number of rooms on Guanacaste has increased even
though the number of hotels in our category has remained the same over the past three years indicates a
building demand for new facilities that fall within the 4 to 5 star category and the attendant additional rooms
that new resort construction will bring to the area.
The Travel and Tourism Competitiveness Report 2013 ranked Costa Rica 6th in the region and 47th overall
in competitiveness. The country gets excellent marks for its natural resources (ranked 7th), with several
World Heritage sites, a high percentage of nationally protected areas, and very diverse fauna. Given the
importance of the natural environment for the county’s tourism industry, it is notable that it ranks a high
26th overall for environmental sustainability, an area where it has continued to improve slightly over the
past few years. However, health and hygiene remains a concern (78th). Further, although its tourism
infrastructure is relatively well developed (33rd), with a strong presence of major car rental companies and
abundant hotel rooms, ground transport infrastructure requires significant upgrading (100th), particularly
roads and ports, making travel in the country somewhat difficult.
We believe that our Paradisus Papagayo Bay Resort & Luxury Villas development project is marketable.
Geography
Costa Rica’s Guanacaste Province is bound in the east by a group of vegetated volcanoes and the west by
beaches on the Pacific Ocean. The province contains heavily forested areas and seven national parks, and
includes the Area de Conservación Guanacaste World Heritage Site. Guanacaste is the northern-most
province of Costa Rica, with the Papagayo Bay a 40-minute flight from San Jose and a half hour car transfer
to the beach. Tourism has emerged as the most lucrative revenue source in the province. Tourists to the
Guanacaste Province of Costa Rica are most often motivated by a desire for favorable weather and beach
conditions. Active tourism – those activities including canopying, trekking, visiting volcanoes and flora or
fauna watching – are secondary considerations.
We believe that the Paradisus Papagayo Bay Resort & Luxury Villas will be well located as a hospitality
property.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements and Labor Contracts
The Company currently operates under and holds no patents, trademarks, licenses, franchises, or
concessions other than having registered its “SunVesta” trademark in various countries.
The Company is not subject to any labor contracts.
13
Governmental and Environmental Regulation
Our operations are subject to a variety of national, federal, provincial and local laws, rules and regulations
relating to, among other things, worker safety and the use, storage, discharge and disposal of
environmentally sensitive materials. We believe that we are in compliance in all material respects with all
laws, rules, regulations and requirements that affect our business. Further, we believe that compliance with
such laws, rules, regulations and requirements do not impose a material impediment on our ability to
conduct business.
Costa Rican National Environmental Office
The Costa Rican National Environmental Office (“SETENA”) created by the Organic Environmental Law
is tasked with administering the process of reviewing and evaluating environmental impact considerations.
Local municipal governments often require a ruling from SETENA before issuing building permits. Any
larger project in Costa Rica must apply for an Environmental Impact Statement from SETENA before
development is permitted. Delays associated with this process would have a negative impact on the
Company’s project in Guanacaste Province.
The Company is not aware of any existing environmental impact issues that could have a material effect on
the development of the Paradisus Papagayo Bay Resort & Luxury Villas.
Costa Rican Sustainable Development
Costa Rica is considered as being in the forefront of implementing environmental policies. The country’s
national strategies for sustainable development are a broad matrix of policies requiring eco-friendly
practices, such as Agenda 21. The Agenda 21 process as developed by the 1992 and 2002 Earth Summits is
defined as a participative planning tool in which sectors in the government and civil society concertedly
determine the course to be taken by their communities, regions, or countries in pursuit of sustainable
development. This process and other Costa Rican sustainable development policies could delay or increase
the cost of the development of the property.
The Company is not aware of any existing environmental impact issues that could have a material effect on
the development of the Paradisus Papagayo Bay Resort & Luxury Villas.
Climate Change Legislation and Greenhouse Gas Regulation
Many studies over the past couple decades have indicated that emissions of certain gases contribute to
warming of the Earth’s atmosphere. In response to these studies, many nations agreed to limit emissions of
“greenhouse gases” or “GHGs” pursuant to the United Nations Framework Convention on Climate Change,
and the “Kyoto Protocol” to which Costa Rica is a signatory. Greenhouse gas legislation in Costa Rica
could have a material adverse effect on our business, financial condition, and results of operations.
The Company is not aware of any existing environmental impact issues that could have a material effect on
the development of the Paradisus Papagayo Bay Resort & Luxury Villas.
Employees
The Company is a development stage company and currently has four employees. Our management uses
consultants, attorneys, and accountants to assist in the conduct of our business.
14
ITEM 1A.
RISK FACTORS
Not required of smaller reporting companies.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.
Costa Rican Properties
The Company owns approximately 20 hectares of undeveloped prime land in Guanacaste Province,
Costa Rica. The purchase of the original concession of approximately 8 hectares was completed for a
consideration of $7,000,000. The purchase of the additional 12 hectares was based on an agreement dated
March 22, 2010, with DIA of San Jose, Costa Rica. The total purchase price for the concessions was
$12,700,000 of which $10,700,000 had been paid as of December 31, 2014, with the remainder of
$2,000,000 converted into an interest free loan due by March of 2016.
On April 20, 2012, the Company entered into an agreement with Meridian IBG (“Meridian”), as amended
on November 13, 2012 and replaced on May 7, 2013, to purchase two additional concession properties in
Polo Papagayo, Guanacaste comprised of approximately 230,000 square meters, for $17,500,000. The
Company paid down-payments on the purchase of these properties of $2,369,816 as of December 31, 2014
and since then has made another payment of $100,000 against the purchase price. In an e-mail dated March
25, 2015 Meridian confirmed “that we remain in good order and agreement for completing this purchase
and sale”.
Executive Offices
We maintain our offices at Seestrasse 97, Oberrieden Switzerland CH-8942 on a leasehold basis with an
annual rental expense of $130,000 per annum through December 31, 2017.
The Company recognized lease expenses of $130,000 and $125,000 for the years ended December 31, 2014
and 2013, respectively, for the use of these executive offices. We believe that we have sufficient office
space for the foreseeable future in order to pursue the completion of the project described herein.
ITEM 3.
LEGAL PROCEEDINGS
None.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
15
PART II
ITEM 5.
MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS,
AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s common stock is quoted on the OTCQB, a service maintained by OTC Link under the
symbol “SVSA.” Trading in the common stock over-the-counter market has been limited and sporadic and
the quotations set forth below are not necessarily indicative of actual market conditions. These prices reflect
inter-dealer prices without retail mark-up, mark-down, or commission, and may not necessarily reflect
actual transactions. The high and low bid prices for the common stock for each quarter of the years ended
December 31, 2014 and 2013 are as follows:
Year
Quarter Ended
High
Low
2014
December 31
$0.07
$0.05
September 30
$0.06
$0.06
June 30
$0.05
$0.10
March 31
$0.10
$0.07
2013
December 31
$0.12
$0.10
September 30
$0.30
$0.05
June 30
$0.10
$0.05
March 31
$0.10
$0.05
Capital Stock
The following is a summary of the material terms of the Company’s capital stock. This summary is subject
to and qualified by our articles of incorporation and bylaws.
Common Stock
As of December 31, 2014, there were 84 shareholders of record holding a total of 83,541,603 shares of fully
paid and non-assessable common stock of the 200,000,000 shares of common stock, par value $0.01,
authorized. The Board of Directors believes that the number of beneficial owners is greater than the number
of record holders because a portion of our outstanding common stock is held in broker “street names” for
the benefit of individual investors. The holders of the common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders. Holders of the common stock have no
preemptive rights and no right to convert their common stock into any other securities. There are no
redemption or sinking fund provisions applicable to the common stock.
Preferred Stock
As of December 31, 2014, there were no shares issued and outstanding of the 50,000,000 shares of
preferred stock authorized. The par value of the preferred stock is $0.01 per share. Our preferred stock may
have such rights, preferences and designations and may be issued in such series as determined by the Board
of Directors.
Stock Options
As of December 31, 2014, we have granted 32,000,000 outstanding stock options, pursuant to the 2013
SunVesta Stock Option Plan, to purchase shares of our common stock at an exercise price of $0.05 that vest
according to the realization of specific milestones, none of which have vested as of year-end.
16
Warrants
As of December 31, 2014, we have no outstanding warrants to purchase shares of our common stock.
Dividends
We have not declared any cash dividends since inception and do not anticipate paying any dividends in the
near future. The payment of dividends on our common stock is within the discretion of the Board of
Directors subject to earnings, capital requirements, financial condition, and other relevant factors including
those contractual restrictions related to certain debt obligations and those limitations generally imposed by
applicable state law.
Transfer Agent and Registrar
Our transfer agent and registrar is Standard Register & Company, Inc., located at 12528 South 1840 East,
Draper, Utah 84020 and their phone number is (801) 571-8844.
Purchases of Equity Securities made by the Issuer and Affiliated Purchasers
None.
Recent Sales of Unregistered Securities
None.
ITEM 6.
SELECTED FINANCIAL DATA
Not required.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other
parts of this current report contain forward-looking statements that involve risks and uncertainties.
Forward-looking statements can also 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 thereto included in this current report. Our fiscal year end is December 31.
Discussion and Analysis
Our plan of operation through December of 2016 is to complete the Paradisus Papagayo Bay Resort &
Luxury Villas project that will require a total net investment of approximately $183 million (excluding
non-recuperated overhead expenses and the anticipated $25 million in net proceeds for the sale of private
villas). We expect to realize a minimum of $100 million in new funding over the next twelve months and an
additional $30 million in funding by the time the development is completed, though our actual financing
requirements may be adjusted to suit that amount realized. New funding over the next twelve months is
expected to be raised from debt financing through bonds, shareholder loans and the guaranty agreement.
17
Results of Operations
During the year ended December 31, 2014, 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. Figueres and Mr. Glicken to the Board of Directors; (iii) obtaining building permits for the
development of the Paradisus Papagayo Bay Resort & Luxury Villas property; (iv) continuing earth work
excavations on the Paradisus Papagayo Bay Resort & Luxury Villas property; (v) discussions with
prospective project development partners; and (vi) pursuing additional debt and equity financing and
procuring loans from related parties.
The Company has been funded since inception from debt or equity placements and by shareholders or
partners in the form of loans. 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
Comprehensive losses for the year ended December 31, 2014 were $4,482,482 as compared to $12,039,166
for the year ended December 31, 2013. The decrease in comprehensive losses over the comparative twelve
month period periods can primarily be attributed to the strengthening of the US dollar and certain other
changes as reconciled below:
Comprehensive loss 2013
12,039,166
Variances 2014
Lower general and administrative expenses
(1,589,012) 2013 included a write-off of $1.6 million on
the Atlanta project, otherwise expenses were
fairly consistent.
No release of accrual for penalty
1,000,000 2013, included an accrual for a potential
penalty that was released in 2014
Lower interest income
8,377 Lower deposits
Higher interest expense
1,556,766 Financing of the project and overhead
expenses resulted in higher interest expense
Higher amortization of debt issuance costs
795,109 As a result of raising additional finance, the
related expenses (commission) increased,
which resulted in higher amortization.
Higher exchange gains
(4,682,297) As the US Dollar strengthened against, the
Euro and Swiss Franc, significant unrealized
exchange gains were incurred.
Lower other expenses
(76,617) Miscellaneous
Higher foreign currency translation gain
(4,569,010) As the US Dollar strengthened against, the
Euro and Swiss Franc, significant unrealized
exchange gains were incurred.
Total variances
(7,556,684)
Comprehensive loss 2014
4,482,482
We did not generate revenue during this period and we expect to continue to incur losses through the year
ended December 31, 2015.
18
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 inception to
December 31, 2014, 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 December 31, 2014 and 2013 the following were the working capital items:
December 31, December 31,
2014
2013
Current assets
Cash and cash equivalents
14,347
629,673
Receivable from related parties
27,163
0
Other assets
289,156
21,255
Total current assets
330,666
650,928
Current liabilities
Bank liabilities
153,375
0
Accounts payable
6,181,057
7,063.070
Accrued expenses
5,444,514
3,276,506
Notes payable
3,023,759
2,000,000
Notes payable to related parties
1,162,100
2,721,445
CHF-Bond
25,511,898
0
EUR-Bond
0
5,786,248
Total current liability
41,476,703
20,847,269
Net working capital
(41,146,037)
(20,196,341)
19
As of December 31, 2014 and 2013 the following were the items making up the total stockholders’ deficit:
December 31, December 31,
2014
2013
Assets
Current assets
330,666
650,928
Non-current assets
58,083,516
49,779,712
Total assets
58,414,182
50,430,640
Liabilities
Current liabilities
41,476,703
20,847,269
Non-current liabilities
39,568,568
48,845,553
Total liabilities
81,045,271
69,692,822
Total stockholders’ deficit
(22,631,089)
(19,262,182)
The Company’s negative net working capital of approximately $41,000,000 is of immediate concern and
will require significant action to meet anticipated cash needs, including the upcoming maturity of
CHF-bonds in the aggregate amount of approximately $25,000,000. Management is considering the
replacement of these bonds with a new bond issue in at least the same amount.
We expect negative net cash in operating activities to continue 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 in 2017.
Net cash used in investing activities for the twelve months ended December 31, 2014, was $7,784,605 as
compared to $19,203,791 for the twelve months ended December 31, 2013. Net cash used in investing
activities in the current twelve month period is comprised of other receivables from related parties, the
purchase of property and equipment, interest paid and capitalized on property and equipment, deposits
related to construction, and restricted cash. Net cash used in investing activities in the prior twelve month
period is comprised of other receivables from related parties, the purchase of property and equipment,
deposits related to construction, down payments for property and equipment and restricted cash.
We expect negative net cash flow in investing activities to continue while in the process of developing the
Paradisus Papagayo Bay Resort & Luxury Villas.
Net cash provided by financing activities for the twelve months ended December 31, 2014, was
$14,618,170 as compared to $20,859,541 for the year ended December 31, 2013. Net cash provided by
financing activities in the current twelve month period is comprised of an increase in cash liabilities,
proceeds from notes payable related parties, a note payable and other long term debts, proceeds from bond
issuances net of commissions and the sale of treasury stock, offset by the repayment of notes payable to
related parties, the repayment of bonds and the payment of debt issuance costs. Net cash provided by
financing activities in the prior twelve month period ended December 31, 2013, was comprised of proceeds
from notes payable related parties, and proceeds from bond issuances, offset by the repayment of bonds,
and debt issuance costs.
We expect net cash flow provided by financing activities to continue as the result of debt and equity
infusions required to complete the development of the Paradisus Papagayo Bay Resort & Luxury Villas.
20
Management believes that our cash on hand, related party loans and the assurance of the guaranty
agreement as described in the going concern paragraph below are sufficient for us to conduct operations
over the next twelve months.
We had no lines of credit or other bank financing arrangements as of December 31, 2014, except for a
temporary secured overdraft facility.
We have commitments for executed purchase orders and agreements in the amount of $57 million as of
December 31, 2014, in connection with the development of the Paradisus Papagayo Bay Resort & Luxury
Villas, which commitments are included in the required estimated financing of $185 million to complete the
project. Most material commitments were not contractually agreed as of the end of the period.
The Sixth addendum (dated August 18, 2014) to the management agreement with Melía stipulates that
should the completion of the construction not occur by November 15, 2015, and should an extension date
not be agreed, subsequent to November 15, 2015, Melía will be entitled to receive a daily amount of $2,000
as liquidated damages. Should the completion of the construction not occur by February 15, 2016, Melía
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.
Since the completion date for the Paradisus Papagayo Bay Resort & Luxury Villas development is now
anticipated for the first quarter of 2017, the Company is in discussions with Meliá regarding another
addendum that will allow an extension of the deadlines stipulated in Sixth Addendum. Should the Company
not be successful, the penalty would be $5,000,000.
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 $15,000,000 as of December 31,
2014, to Meridian for the purchase of two additional concession properties in Polo Papagayo, Guanacaste,
Costa Rica.
We maintain a defined benefit plan that covers all of our Swiss employees and have employment
agreements with our Chief Executive Officer and Chief Operating Officer as of December 31, 2014.
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 December 31, 2014.
Future Financings
The Company received conditional approval for a credit facility of $50,000,000 from Banco Nacional, San
José, Costa Rica in 2013, subject to the fulfillment of certain legal and financial conditions. On evaluating
the requirements of the credit facility approval, the Company determined not to proceed with the
transaction and is considering alternative means of financing.
A letter of engagement was executed with ISM Capital LLP, a London based investment firm, on March 10,
2015, for the purpose of conducting a $100 million asset backed bond issuance. Despite the firm’s
commitment to identify investors, the success of this proposed bond issuance for the amount contemplated
or any lesser amount, does not guarantee that all or part of the amount offered will be subscribed.
21
The Company is in negotiations to secure a $40 million credit facility from certain general contractors that
would be involved in the construction of the Paradisus Papagayo Bay Resort & Luxury Villas. The terms of
this credit facility are being evaluated and would complement amounts realized through ISM.
We are also in process of determining the means by which the Company can retire the current CHF-bond
that matures on August 31, 2015, which may include additional debt or equity financings.
The Company will further continue to rely on the terms of the Guaranty Agreement to meet shortfalls in
development financing.
Off-Balance Sheet Arrangements
As of December 31, 2014, 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 $183 million.
The project is expected to open in the first quarter of 2017. Until the completion of the project, the
following expenditures are estimated to be incurred:
a. Gross project cost
$
208,000,000
b. Less: Proceeds from sale of villas
(25,000,000)
c. Net project cost
183,000,000
d. Overhead expenses
24,000,000
e. Less: Recuperated in gross project cost
(12,000,000)
f Total, excluding other potential projects
$
205,000,000
Sixty percent (60% ) of the “Net project cost” is intended to be financed through the issuance of secured
bonds, for which negotiations have been initiated. The remaining forty percent (40% of the “Net project
cost”, as well as “non-recuperated overhead expenses” and the cost of potential “other projects” are
intended to be financed by the main shareholders or lenders of the project, i.e. Zypam Ltd., shareholder and
related entity to Mr. Josef Mettler, Mr. Hans Rigendinger, shareholder, Chief Operating Officer and
Company Board Member, Dr. Max Rössler, Company Board Member and controlling shareholder of Aires,
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 favour of SunVesta AG. The purpose of the guarantee is to ensure that until
such time as financing is secured for the entire project that they will act as a guarantor to creditors to the
extent of the project’s ongoing capital requirements. The guaranty agreement requires that within 30 days
of receiving a demand notice, the guarantors are required to pay to SunVesta AG that amount required for
ongoing capital requirements, until such time as financing of the project is secured. The guaranty may not
be terminated until such time as SunVesta AG has secured financing for the completion of the project.
Based on this guaranty agreement, management believes that available funds are sufficient to finance cash
flows for the twelve months subsequent to December 31, 2014, 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.
22
Forward-Looking Statements and Factors That May Affect Future Results and Financial Condition
The statements contained in the section titled Management’s Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in this current report, with the exception of historical
facts, are forward-looking statements. We are ineligible to rely on the safe-harbor provision of the Private
Litigation Reform Act of 1995 for forward looking statements made in this current report. Forward-looking
statements reflect our current expectations and beliefs regarding our future results of operations,
performance, and achievements. These statements are subject to risks and uncertainties and are based upon
assumptions and beliefs that may or may not materialize. These statements include, but are not limited to,
statements concerning:
— 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 elsewhere in this report. We
also wish to advise readers not to place any undue reliance on the forward-looking statements contained in
this report, which reflect our beliefs and expectations only as of the date of this report. We assume no
obligation to update or revise these forward-looking statements to reflect new events or circumstances or
any changes in our beliefs or expectations, other than as required by law.
Recent Accounting Pronouncements
Please see Note 2 to the accompanying consolidated financial statements for recent accounting
pronouncements.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our audited financial statements for the years ended December 31, 2014 and 2013 are attached hereto as
F-1 through F-47.
23
SUNVESTA, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
Page
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Balance Sheets
F-3
Consolidated Statements of Comprehensive Loss
F-4
Consolidated Statements of Stockholders’ Deficit
F-5
Consolidated Statements of Cash Flows
F-6
Notes to Consolidated Financial Statements
F-8
F-1
Tel. +41 44 444 35 55
BDO Visura International AG
Fax +41 44 444 37 66
Fabrikstrasse 50
8031 Zürich
Switzerland
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
SunVesta, Inc., Oberrieden, Switzerland
We have audited the accompanying consolidated balance sheets of SunVesta, Inc. as of December 31, 2014 and
2013 and the related consolidated statements of comprehensive loss, stockholders’ deficit, and cash flows for the
years ended December 31, 2014 and 2013. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company is not required to have, nor were
we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of SunVesta, Inc. at December 31, 2014 and 2013, and the results of its
operations and its cash flows for the years ended December 31, 2014 and 2013, in conformity with accounting
principles generally accepted in the United States of America.
Zürich, April 15, 2015
BDO Visura International AG
// Christoph Tschumi
// Julian Snow
Christoph Tschumi
ppa. Julian Snow
F-2
SUNVESTA, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2014
December 31, 2013
Assets
Current assets
Cash and cash equivalents
$
14,347
629,673
Receivable from related parties
27,163
-
Other assets
289,156
21,255
Total current assets
330,666
650,928
Non-current assets
Property and equipment - net
51,201,352
43,372,214
Deposits related to construction work
820,565
650,685
Debt issuance costs - net
2,006,849
1,689,023
Down payment for property and equipment
2,369,816
2,369,816
Restricted cash
1,684,934
1,697,974
Total non-current assets
58,083,516
49,779,712
Total assets
$
58,414,182
50,430,640
Liabilities and stockholders' deficit
Current liabilities
Bank liabilities
153,375
-
Accounts payable
6,181,057
7,063,070
Accrued expenses
5,444,514
3,276,506
Note payable
3,023,759
2,000,000
Notes payable to related parties
1,162,100
2,721,445
CHF-Bond
25,511,898
-
EUR-Bond
-
5,786,248
Total current liabilities
41,476,703
20,847,269
Non-current liabilities
EUR-Bond
9,057,986
6,757,065
CHF-Bond
-
8,558,443
Notes payable to related parties
30,299,312
33,409,095
Other long term debts
74,837
30,426
Pension liabilities
136,433
90,524
Total non-current liabilities
39,568,568
48,845,553
Total liabilities
$
81,045,271
69,692,822
Stockholders' deficit
Preferred stock, $0.01 par value; 50,000,000 shares
authorized, no shares issued and outstanding
-
-
Common stock, $0.01 par value; 200,000,000 shares
authorized; 83,541,603 shares issued and outstanding
835,416
835,416
Additional paid-in capital
22,942,486
21,852,666
Accumulated other comprehensive income / (loss)
1,265,590
(2,202,914)
Accumulated deficit
(47,674,581)
(39,723,595)
Treasury stock, 0 and 157,220 shares
-
(23,755)
Total stockholders' deficit
(22,631,089)
(19,262,182)
Total liabilities and stockholders' deficit
$
58,414,182
50,430,640
The accompanying notes are an integral part of these consolidated financial statements.
F-3
SUNVESTA, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Years Ended December 31, 2014 and 2013
2014
2013
Revenues
Revenues, net
$
-
-
Cost of revenues
-
-
Gross profit
-
-
Operating expenses
General and administrative expenses
(6,734,491)
(8,323,503)
Release of accrual for penalty to Meliá Hotel & Resorts
-
1,000,000
Total operating expenses
(6,734,491)
(7,323,503)
Loss from operations
$
(6,734,491)
(7,323,503)
Other income / (expenses)
Interest income
36,006
44,383
Interest expense
(4,146,322)
(2,589,556)
Amortization of debt issuance costs and commissions
(928,914)
(133,806)
Exchange differences
3,837,903
(844,394)
Other income / (expenses)
(15,168)
(91,784)
Total other income / (expenses)
(1,216,495)
(3,615,157)
Loss before income taxes
(7,950,986)
(10,938,660)
Income Taxes
-
-
Net loss
(7,950,986)
(10,938,660)
Comprehensive loss:
Foreign currency translation
3,468,504
(1,100,506)
Comprehensive loss
$
(4,482,482)
(12,039,166)
Loss per common share
Basic and diluted
$
(0.09)
(0.14)
Weighted average common shares
Basic
88,325,165
76,171,495
Diluted
88,325,165
76,171,495
The accompanying notes are an integral part of these consolidated financial statements.
F-4
SUNVESTA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
Years Ended December 31, 2014 and 2013
Common
Additional
Accumulated
Accumulated
Treasury
Total
Stock
Paid in
Other
deficit
Stock
Stockholders’
Capital
Comprehensive
Deficit
Income (Loss)
December 31, 2012
540,922
$
19,446,367 $
(1,102,408)
(28,784,935) $
(23,755) $
(9,923,809)
Net loss
-
-
-
(10,938,660)
-
(10,938,660)
Translation
-
-
(1,100,506)
-
-
(1,100,506)
adjustments
Stock based
115,000
1,867,816
-
-
-
1,982,816
compensation
expense
Issuance of stock for
179,494
538,483
-
-
-
717,977
debt
December 31, 2013
835,416 $
21,852,666 $
(2,202,914)
(39,723,595) $
(23,755) $
(19,262,182)
Net loss
-
-
-
(7,950,986)
-
(7,950,986)
Translation
-
-
3,468,504
-
-
3,468,504
adjustments
Stock based
-
1,103,275
-
-
-
1,103,275
compensation
expense
Sale of treasury stock
-
(13,455)
-
-
23,755
10,300
December 31, 2014
$
835,416 $
22,942,486 $
1,265,590
(47,674,581) $
- $
(22,631,089)
The accompanying notes are an integral part of these consolidated financial statements.
F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2014 and 2013 2014 2013 Cash flows from operating activities Net loss $ (7,950,986) (10,938,660) Adjustments to reconcile net loss to net cash - Depreciation and amortization 62,478 50,967 Write-off down payment on property - 1,573,957 Release of accrual for penalty to Melía Hotels & Resorts - (1,000,000) Amortization of debt issuance cost and commissions 928,914 133,806 Unrealized exchange differences (1,301,145) 844,395 Stock compensation expense 1,103,275 1,982,816 Increase in pension fund commitments 50,604 16,449 - Increase / decrease in: Other current assets (270,465) 17,983 Accounts payable (544,694) 5,662,036 Accrued expenses 429,009 307,591 Net cash used in operating activities (7,493,010) (1,348,660) Cash flows from investing activities Proceeds from securities available-for-sale - - Short term investments - - Receivables from related parties (2,625,058) (856,522) Purchase of property and equipment (5,005,536) (12,524,712) Interest paid and capitalized in property and equipment Deposits related to construction (151,477) (650,685) Down payments for property and equipment - (3,750,045) Restricted cash (2,534) (1,421,827) Net cash used in investing activities (7,784,605) (19,203,791) Cash flows from financing activities Increase in bank liabilities 153,375 - Proceeds from notes payable related parties 2,114,876 22,769,759 Repayment of notes payable related parties (1,733,837) - Proceeds from notes payable 2,690,800 - Repayment of notes payable (1,076,495) - Proceeds from bond issuance, net of commissions 20,664,185 9,663,234 Repayment of bonds (5,729,712) (9,779,614) Payment for debt issuance costs (2,519,733) (1,793,838) Changes in other long term debt 44,411 - Purchase/Sale of treasury stock 10,300 - Net cash provided by financing activities 14,618,170 20,859,541 Effect of exchange rate changes 44,119 62,063 Net increase / - decrease in cash (615,326) 369,153 Cash and cash equivalents, beginning of period 629,673 260,520 Cash and cash equivalents, end of period $ 14,347 629,673
The accompanying notes are an integral part of these consolidated financial statements
F-6
| SUNVESTA, INC. | ||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
| Years Ended December 31, 2014 and 2013 | ||||||
| Continued | ||||||
|
| ||||||
|
|
| 2014 |
| 2013 |
|
|
| Additional information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest paid |
| 1,509,889 |
| 717,472 |
|
|
| 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) |
| 2,883,999 |
| 2,039,000 |
|
|
| Reclassification of loan from Dr. M. Rössler to AIRES loan |
| - |
| 1,740,000 |
|
|
| Assumption of receivables from Josef Mettler and 4f capital by AIRES |
| (2,597,895) |
| - |
|
|
| Payment of Wernli loan by AIRES |
| (568,000) |
| - |
|
|
| Transfer of loan Dr. Max Rössler to AIRES loan |
| - |
| 1,810,000 |
|
|
| Assumption of receivables in settlement of related payable (non-cash) |
| - |
| 856,522 |
|
|
| Bond issuance with offset against related party payable (non-cash) |
| - |
| 324,828 |
|
|
The accompanying notes are an integral part of these consolidated financial statements
F-7
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
1.
CORPORATE INFORMATION
On August 27, 2007, SunVesta Inc. (“SunVesta”) acquired SunVesta Holding AG (“SunVesta
AG”) (collectively “the Company”). SunVesta AG holds five wholly-owned subsidiaries:
SunVesta Projects and Management AG, a Swiss company; Rich Land Investments Limitada, a
Costa Rican company (“Rich Land”); SunVesta Costa Rica Limitada, a Costa Rican company
(“SVCR”), Altos del Risco SA, a Costa Rican company (“AdR”) and Profunda Capital Partners
LLC (“Profunda”), a US company.
In January 2005, the Company changed its business focus to the development of holiday resorts and
investments in the hospitality and related industry. The Company has one major project in Costa
Rica. Planning for this project has been fully completed, all consents have been granted, and
excavation work began in March 2013. The Company is still in process of completing the financing
of the project and has not realized revenue to date. Since the financing of the project is not
complete, the Company’s activities are subject to significant risks and uncertainties.
These consolidated financial statements are prepared in US Dollars on the basis of generally
accepted accounting principles in the United States of America (“US GAAP”).
2.
SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include those of the Company and its subsidiaries. One
hundred percent of assets and liabilities as well as revenues and expenses of all consolidated
companies are included. Receivables, payables, as well as revenues and expenses between
consolidated companies are eliminated. Unrealized intercompany profits, which may be included
in assets as of the end of the respective periods are also eliminated. Certain previously reported
amounts have been reclassified to conform to the current presentation.
Fiscal year
The fiscal year of the Company and all its subsidiaries correspond with the calendar year.
Use of estimates
These consolidated financial statements are prepared in conformity with accounting principles
generally accepted in the United States of America (“US GAAP”) and require management to
make assumptions and estimates, which have an impact on the reported assets and liabilities as well
as on the disclosure of contingent assets and liabilities at the balance sheet dates. These
considerations also impact reported income statement items. While the effective amounts may vary
from the estimates, management is convinced that all relevant information having an impact on the
estimates have been taken into consideration and are appropriately disclosed. Management
believes that the valuation of property and equipment includes substantial estimates.
F-8
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
2.
SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Cash and cash equivalents
Cash and cash equivalents include petty cash, post and bank accounts as well as time deposits with
maturities of less than three months.
Other assets
Other assets include items, such as value added tax, withholding tax or similar credits with
maturities less than one year.
Property and equipment
Property and equipment are valued at cost less accumulated depreciation. Repair and maintenance
expenses are charged to the income statement when incurred. The cost of fixed assets, including
leasehold improvements are capitalized and depreciated over the following useful lives:
— Land (concession)
not depreciated
— IT equipment
3 years
— Other equipment and furniture
5 years
— Leasehold improvements
5 years
— Vehicles
5 years
— Project in process
not depreciated until project finished
The cost and the related accumulated depreciation are removed from the balance sheet at the time
of disposal.
Project in process relates to costs incurred directly related to the planning and construction of the
hotel in the Papagayo Gulf Tourism Project of Costa Rica and are reasonably recoverable from
future hotel and rental operations or the sale of certain apartments. Once the project in process is
finished the Company will reclassify the capitalized costs to corresponding categories and
determine the depreciation method and depreciation period.
Interest capitalization
Interest expense is capitalized on the carrying value of the construction in progress during the
construction period, in accordance with ASC 835-20, Capitalization of Interest. With respect to the
construction in progress, the Company capitalized $6,030,000 and $3,254,000 of interest expense
and debt issuance costs as of December 31, 2014 and December 31, 2013, respectively to property
and equipment.
Deposits related to construction work
The Company prepays deposits for construction work, which costs are capitalized initially and will
be amortized once construction has begun.
F-9
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
2.
SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Debt issuance costs
Debt issuance costs arise as a result of issuing debt, i.e. the EUR bonds, CHF bonds and the loan
with Aires International Investments Inc., and are amortized over the life of the debt using the
effective interest method. The costs comprise of finder's fees of generally between three and 12
percent of the amount issued and costs incurred in connection with issuing the bonds, such as legal
and accounting fees, and stamp duty taxes. The accumulated amortization of debt issuance costs
was $4,345,089 and $2,399,005 as of December 31, 2014 and December 31, 2013, respectively.
Down payment for property and equipment
Down payments for property and equipment are recorded at cost. Once the corresponding property
and equipment item has been completely purchased, it will be reclassified to a corresponding
subcategory within property and equipment and amortized. The Company assesses regularly if the
down payments are recoverable in accordance with ASC 360 Property, Plant, and Equipment.
Should any down payments due to specific circumstances not be assessed as recoverable, they will
be impaired.
Restricted Cash
Restricted cash includes cash that is not disposable for the Company without third party permission
such as rental deposits or deposits related to the project in process. Based on the nature of the
Company’s underlying business it will be determined whether a deposit is recorded as a current or
non-current asset.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable. The carrying value of a
long-lived asset or asset group is considered to be impaired when the undiscounted expected cash
flows from the asset or asset group are less than its carrying amount. An impairment loss is
recognized to the extent that the carrying value of the asset exceeds its fair value. Fair value is
determined based on quoted market prices, where available, or is estimated as the present value of
the expected future cash flows from the asset or asset group discounted at a rate commensurate with
the risk involved.
F-10
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
2.
SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Income taxes
The Company has not incurred material current taxes on income as it has not generated taxable
income in any of the jurisdictions in which it operates.
Deferred taxes are calculated on the temporary differences that arise between the tax base of an
asset or liability and its carrying value on the balance sheet of the Company prepared for
consolidation purposes, with the exception of temporary differences arising on investments in
foreign subsidiaries where the Company has plans to permanently reinvest profits into the foreign
subsidiaries.
Deferred tax assets on tax loss carry-forwards are only recognized to the extent that it is more likely
than not, that future profits will be available and the tax loss carry-forward can be utilized.
Changes to tax laws or tax rates enacted at the balance sheet date are taken into account in the
determination of the applicable tax rate provided that they are likely to be applicable in the period
when the deferred tax assets or tax liabilities are realized.
The Company is subject to income taxes in the United States of America, Switzerland and Costa
Rica. Significant judgment is required in determining income tax provisions and in evaluating tax
positions.
The Company recognizes the benefit of uncertain tax positions in the financial statements when it is
more likely than not that the position will be sustained on examination by the tax authorities. The
benefit recognized is the largest amount of tax benefit that is greater than 50 percent likely of being
realized on settlement with the tax authority, assuming full knowledge of the position and all
relevant facts. The Company adjusts its recognition of these uncertain tax benefits in the period in
which new information is available impacting either the recognition or measurement of its
uncertain tax position. Interest and penalties related to uncertain tax positions are recognized as
income tax expense.
Concentration of risks
Financial instruments that potentially subject the Company to concentrations of credit risk are
primarily cash and cash equivalents. Cash and cash equivalents are maintained with several
financial institutions. Deposits held with banks may exceed the amount of insurance provided on
such deposits. Generally, these deposits may be redeemed upon demand. Cash and cash equivalents
are subject to currency exchange rate fluctuations.
F-11
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
2.
SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Foreign Currency Translation and Transactions
The consolidated financial statements of the Company are presented in US Dollars (“$”) which is
also the functional currency of the parent company. The financial position and results of operations
of our foreign subsidiaries are determined using the currency of the environment in which an entity
primarily generates and expends cash as the functional currency. Assets and liabilities of these
subsidiaries are translated at the exchange rate in effect at each year-end. Statement of
comprehensive loss accounts are translated at the average rate of exchange prevailing during the
year. Translation adjustments arising from the use of differing exchange rates from period to period
are included in accumulated other comprehensive income (loss) in stockholders’ deficit. Gains and
losses resulting from foreign currency transactions are included in other income and expenses
(exchange differences), except intercompany foreign currency transactions that are of a
long-term-investment nature which are included in accumulated other comprehensive income in
stockholders’ equity.
Bonds
Bonds comprise of bonds payable in Euros (“EUR”) and Swiss Francs (“CHF”), which bear fixed
interest rates. Bonds are carried at notional value. If a bond becomes repayable within the next 12
months from the balance sheet date on, such bond or the corresponding portion of this bond will be
categorized as current. Commissions paid to bondholders themselves are reflected as debt
discounts and amortized over the term of the bond, based on the “effective interest method”. The
amortization expense is reflected in amortization of debt issuance cost.
Pension Plan
The Company maintains a pension plan covering all employees in Switzerland; it is considered a
defined benefit plan and accounted 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 ratably over this period, and therefore, the
statement of comprehensive loss 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, by recording a corresponding
expense in the net loss. If the projected benefit obligation exceeds the fair value of plan assets, then
that difference or unfunded status represents the pension liability.
The Company records a net periodic pension cost in the statement of comprehensive loss. 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.
F-12
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
2.
SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Related parties
Parties are considered to be related if one party directly or indirectly controls, is controlled by, or is
under common control with the other party, if it has an interest in the other party that gives
significant influence over the party, if it has joint control over the party, or if it is an associate or a
joint venture. Senior management of the Company or close family members is also deemed to be
related parties.
Earnings per Share
Basic earnings per share are calculated using the Company’s weighted-average outstanding
common shares. When the effects are not anti-dilutive, diluted earnings per share is calculated
using the weighted-average outstanding common shares and the dilutive effect of warrants and
stock options, if any, as determined under the treasury stock method.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, restricted cash,
receivables from related parties, bank liabilities, accounts payable to third or related parties, note
payables to third or related parties and bonds. The fair value of these financial instruments
approximate their carrying value due to the short maturities of these instruments, unless otherwise
explicitly noted.
ASC 820 Fair Value Measurements establishes a three-tier fair value hierarchy, which prioritizes
the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs
such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active
markets that are either directly or indirectly observable; and Level 3, defined as unobservable
inputs in which little or no market data exists, therefore requiring an entity to develop its own
assumptions.
Stock-based compensation
Stock-based compensation costs are recognized in earnings using the fair value based method for
all awards granted. Compensation costs for unvested stock options and awards are recognized in
earnings over the requisite service period based on the fair value of those options and awards. For
employees, fair value is estimated at the grant date and for non-employees fair value is re-measured
at each reporting date as required by ASC 718 Compensation-Stock Compensation, and ASC
505-50 Equity-Based Payments to Non-Employees. Fair values of awards granted under the share
option plans are estimated using a Black-Scholes option pricing model. The model’s input
assumptions are determined based on available internal and external data sources. The risk-free rate
used in the model is based on the US treasury rate for the expected contractual term. Expected
volatility is based on historical volatilities of a peer group of similar companies in the same
industry.
F-13
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
2.
SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
New accounting standards – adopted
In June 2014, the FASB Accounting Standards Update 2014-10, Income Taxes Topic 915:
Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable
Interest Entities Guidance in Topic 810, Consolidation. The amendments in this update eliminated
the concept of a development stage entity (“DSE”) from US GAAP. This change rescinds financial
reporting requirements that have historically applied to DSEs such as labeling financial statements
as those of a DSE, providing inception-to-date information in the statements of income, cash-flows
and shareholder equity and certain specific disclosures. This ASU has been early adopted by the
Company as of April 1, 2014 and therefore for the year ended December 31, 2014. Early adoption
is permitted for all financial statements that have not been issued or made available for issuance.
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 first quarter of 2017. Until the
completion of the project, the following expenditures are estimated to be incurred:
a. Gross project cost
$
208,000,000
b. Less: Proceeds from sale of villas
(25,000,000)
c. Net project cost
183,000,000
d. Overhead expenses
34,000,000
e. Less: Recuperated in gross project cost
(12,000,000)
f
Total, excluding other potential projects
$
205,000,000
Sixty percent (60%) of the Net project cost is intended to be financed through the issuance of
secured bonds, for which negotiations have been initiated. The remaining forty percent (40%) of
the Net project cost, as well as non-recuperated overhead expenses are intended to be financed by
the main shareholders or lenders of the project, i.e. Zypam Ltd., shareholder and related entity to
Mr. Josef Mettler, Mr. Hans Rigendinger, shareholder, Company Director and Chief Operating
Officer, Dr. Max Rössler, controlling shareholder of Aires International Investment, Inc. and
Company Director, Mr. Josef Mettler, shareholder, Company Director, Chief Executive Officer
and Chief Financial 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 project’s ongoing capital requirements. The guaranty
agreement requires that within 30 days of receiving a demand notice, the requested funds are made
available by the guarantors to the Company. 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 December 31, 2014 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.
F-14
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
4.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are available to the Company without any restriction or limitation on
withdrawal and/or use of these funds. The Company’s cash equivalents are placed with financial
institutions that maintain high credit ratings. The carrying amounts of these assets approximate
their fair value.
Cash & cash
USD ($)
EURO
CHF
CRC
Total
Total
equivalents
December 31, 2014 December 31, 2013
original currency
8,618
1,442
3,018 494,038
in $
8,618
1,753
3,050
926
14,347
629,673
USD ($) =
US Dollar
EURO =
Euro
CHF
=
Swiss Francs
CRC
=
Costa Rican Colón
5.
RESTRICTED CASH
As of December 31, 2014, the Company has the following restricted cash positions:
Restricted Cash
December 31, 2014
December 31, 2013
$
$
Credit Suisse in favor of
BVK Personalvorsorge des Cantons Zurich
129,272
142,657
HSBC in favor of
Costa Rican Tourism Board
370,000
372,205
Banco Nacional de Costa Rica in favor of the
Costa Rican Environmental Agency – SETENA
622,312
619,762
Banco National de Costa Rica in favor of the Costa Rican
Tourism Board
563,350
563,350
Gross
1,684,934
1,697,974
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 Cantons Zurich 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.
F-15
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
6.
PROPERTY & EQUIPMENT
December 31, 2014
December 31, 2013
Land
$
19,700,000
19,700,000
IT Equipment
185,846
185,846
Other equipment and furniture
277,557
321,901
Leasehold improvements
66,617
66,617
Vehicles
139,000
74,000
Construction in-process
31,275,559
23,404,599
Gross
51,644,579
43,752,963
Less accumulated depreciation
(443,227)
(380,749)
Net
$
51,201,352
43,372,214
Depreciation expenses for the year
62,478
50,967
Property and 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 comprised of $7 million related to the concession held
by Rich Land (~84,000 m2) and $12.7 million held by AdR (~120,000 m2). The latter was acquired
through the acquisition of the shares of AdR whose only asset is the concession. Control over AdR
was obtained on March 8, 2013. The previous down payments were reclassified to property and
equipment. The Rich Land 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 AdR 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 expires in November 2036. For both properties concession extension requests for 30
years (Rich Land) and 15.5 years (AdR) were filed during third quarter 2013. These extension
requests have not been answered as of date of this report.
The construction in process through December 31, 2014 and December 31, 2013, is represented
primarily by architectural work related to the hotel and apartments as well as construction work.
Deposit related to construction work
For the year ended December 31, 2014, the Company made deposits with several contractors to
initiate earth moving groundwork. These deposits will be offset against invoices for such
groundwork as completed. As of December 31, 2014 and 2013, the Company has deposits of
$820,565 and $650,685 respectively remaining.
Guaranty Retention
During the year ended December 31, 2014, main earthmoving groundwork has moved forward.
Due to this, the Company received several invoices from contractors. The Company retained some
amounts related to construction work. As soon as the Company officially accepts the corresponding
work retention the retention will be paid. As of December 31, 2014 and December 31, 2013, the
Company had guaranty retention in the amount of $0 and $179,719, which is stated in accrued
expenses.
F-16
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
7.
DOWN PAYMENTS FOR PROPERTY & EQUIPMENT
December 31, 2014
December 31, 2013
La Punta (neighboring piece of land)
$
2,369,816
2,369,816
Hotel Project Atlanta
$
-
1,573,957
Altos del Risco
$
-
-
Gross
$
2,369,816
3,943,773
Write off Hotel Project Atlanta
$
-
(1,573,957)
Total (net)
$
2,369,816
2,369,816
Agreement to purchase neighboring pieces of land
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 $22,895,806, whereof fifty percent was to be paid in cash and the other fifty
percent through a combination of a 10 percent equity share in La Punta (the concession properties
in Polo Papagayo) and five percent in equity of Paradisus Papagayo Bay Resort & Luxury Villas
(currently under construction). Both of these are located in Costa Rica. The payment schedule was
as follows:
-
$0.5 million is required as a cash payment by May 16, 2012
-
$5.0 million is required as a cash payment by August 31, 2012
-
$5.698 million is required as a cash payment by January 31, 2013
-
Equity is required to be transferred upon final payment
On November 13, 2012, the above agreement was amended to decrease the total purchase price to
$17.2 million with no equity payments. The terms and conditions of the cash payment were to be
defined. Furthermore, all payments by the Company to date and in the future became refundable.
During the second quarter of 2013, the Company entered into a new, revised agreement for the
purchase of two additional concession properties at Polo Papagayo, Guanacaste. The original
contract as described above was cancelled and replaced by a new contract, which included the
following clauses:
-
The total purchase price is $17,500,000 of which $1,369,816 has been paid as of date of the new revised
agreement and therefore $16,130,184 is outstanding as per date of the new, revised agreement.
-
Since the original seller of these two additional concession properties at Polo Papagayo, Guanacaste owes a
third party $8,000,000 the Company has to pay $8,000,000 of the purchase price directly to this third party
instead of the original seller. The remaining $8,130,184 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 $700,000 of this $1,000,000 was paid on October 29,
2013. The remaining $300,000 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 of the date of this report.
-
$1,500,000 on October 31, 2013, which is refundable and has not been paid as of the date of this report.
-
$1,700,000 on November 30, 2013, which is refundable and has not been paid as of the date of this report.
$8,000,000 in total to Third Party
F-17
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
7.
DOWN PAYMENT FOR PROPERTY & EQUIPMENT - CONTINUED
Original Seller
-
$1,000,000 on January 31, 2014 which has not been paid as of the date of this report and is non-refundable.
-
$1,000,000 on February 28, 2014 which has not been paid as of the date of this report and is non-refundable.
-
$1,000,000 on March 31, 2014 which has not been paid as of the date of this report and is non-refundable.
-
$1,000,000 on April 30, 2014 which has not been paid as of the date of this report and is non-refundable.
-
$1,000,000 on May 31, 2014 which has not been paid as of the date of this report and is non-refundable.
-
$1,000,000 on June 30, 2014 which has not been paid as of the date of this report and is non-refundable.
-
$1,000,000 on July 31, 2014 which has not been paid as of the date of this report and is non-refundable.
$1,130,184 on August 31, 2014 which has not been paid as of the date of this report and is non-refundable.
$8,130,184 in total to Original Seller
The Company had paid down-payments on the purchase of these properties of $2,369,816 as of
December 31, 2014 and has made a payment of $100,000 against the purchase price. The Company
is in discussions with Meridian regarding an extension of the agreement. Should the Company not
be successful in obtaining a time extension for the payment of the purchase price, it would have to
write-off $300,000 of that purchase price already paid.
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 has been in negotiations with various parties to finalize a
financing package for this project but has not been able to conclude the transaction by October 15,
2013. On that date, the fifth-amendment expired, causing the Company to fall into default.
Therefore those amounts paid as non-refundable deposits and taxes related to the property of total
$1,573,957 were expensed on October 16, 2013. The deposits and taxes paid were included in the
line item “Down payments for property and equipment” in the Company’s Consolidated Balance
Sheet and were expensed to general and administrative expenses in the Consolidated Statements of
Comprehensive Loss.
On October 28, 2013 the Company concluded the Sixth Amendment with the counterparty to
potentially further the purchase.
On March 28, 2014, the Company decided not to continue with the project due to the changes in the
conditions related to the acquisition and an inability to adjust a financing package to the new
conditions. As part of the termination and to avoid potential litigation, the Company agreed to pay
the counterparty approximately $121,500 (EUR 100,000) to settle any further obligation. The
amount of approximately $121,500 (EUR 100,000) has been expensed during 2014 and is included
in general and administrative. On April 7, 2014 the amount was paid to the counterparty.
F-18
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
8.
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 process 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 significant inputs or
significant value drivers are observable in active markets.
Level 3
Model derived valuations in which one or more significant inputs or significant value-drivers are
unobservable.
When available, the Company uses quoted market prices to determine fair value, and classifies
such measurements within Level 1. In some cases where market prices are not available, the
Company makes 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 the Company) 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), the Company’s fair
value calculations have been adjusted accordingly.
As of December 31, 2014 and December 31, 2013, respectively, there are no financial assets or
liabilities measured on a recurring basis at fair value.
F-19
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
8.
FAIR VALUE MEASUREMENT - CONTINUED
In addition to the methods and assumptions to record the fair value of financial instruments as
discussed above, the Company used the following methods and assumptions to estimate the fair
value of our financial instruments:
—
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 term nature of the note payable.
—
Bank liabilities - carrying amount approximated fair value due to the short term nature of bank liabilities.
—
Notes payable to related parties - Dr. M. Rössler (current) –The fair value was calculated based on the underlying
publically traded shares. However, the Company records the loan at nominal value. The Company does not have
sufficient cash to repurchase the shares as of balance sheet date and hence repay the loans in shares.
—
Notes payable to related parties – (current) – carrying amount approximated fair value due to the short term nature of
the notes payable.
—
EUR– bond (old) – carrying amount approximated fair value due to its short term nature
—
EUR- bonds – 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
EUR bonds, which represents the current market rate based on the creditworthiness of the Company. Hence, the
carrying values approximate fair value.
—
CHF-bonds – 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 – Aires (non-current) – The fair values of the notes payable to Aires International
Investments Inc. are classified as level 3. 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.
F-20
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
8.
FAIR VALUE MEASUREMENT - CONTINUED
The fair value of our financial instruments is presented in the table below:
December 31, 2014
December 31, 2013
Carrying
Fair Value Carrying
Fair Value
Fair Value Reference
Amount
Amount
Levels
$
$
$
$
Cash and cash equivalents
14,347
14,347
629,673
629,673
1
Note 4
Restricted cash
1,684,934
1,684,934 1,697,974
1,697,974
1
Note 5
Receivables from related
parties – other (current)
27,163
27,163
0
0
3
Note 9
Accounts Payable
6,181,057
6,181,057 7,063,070
7,063,070
1
-
Bank liabilities
153,375
153,375
0
0
1
Note10
Note payable
3,023,759
3,023,759 2,000,000
2,000,000
1
Note 17
Notes payable to related
parties – Dr. M. Rössler
803,223
765,890
938,890
833,715
1
Note 9
(current)
Notes payable to related
parties – Rigendinger (current)
1,914
1,914
600,000
600,000
3
Note 9
Notes payable to related
parties – other (current)
356,963
356,963
116,592
116,592
3
Note 9
Notes payable to related
parties – Mettler (current)
0
0 1,065,963
1,065,963
3
Note 9
EUR-bond (old)
0
0 5,786,248
5,786,248
3
Note 11
EUR-bonds
9,057,986
9,057,986 6,757,065
6,757,065
3
Note 11
CHF-bonds
25,511,898
25,511,898 8,558,443
8,558,443
3
Note 11
Notes payable to related
parties – Aires (non-current)
30,299,312
30,299,312 33,409,095
33,409,095
3
Note 9
F-21
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
9.
RELATED PARTY TRANSACTIONS
The advances from (to) related parties are composed as follows:
Receivables
Payables
December 31,
December 31,
December 31,
December 31,
2014
2013
2014
2013
1
Hans Rigendinger
-
-
1,914
600,000
2
Josef Mettler
-
-
-
1,065,963
3
Adrian Oehler
-
-
-
39,002
4
Aires International
-
-
30,299,312
33,409,095
5
Dr. Max Rössler
-
-
803,223
938,890
6
4f capital ag
-
-
-
27,590
7
Akyinyi Interior and
Exterior Decoration
-
-
170,000
50,000
8
Global Care AG
-
-
186,963
-
9
Geoffrey Long
27,163
-
-
-
Total excluding
interest
27,163
-
31,461,412
36,130,540
Accrued interest
-
-
3,818,494
1,693,166
Total
27,163
-
35,279,906
37,823,707
of which non-current
-
-
30,299,312
33,409,095
Related party
Capacity
Interest Repayment
Rate
Terms
Security
1 Hans Rigendinger Shareholder, COO and Company board member
3%
none
none
2 Josef Mettler
Shareholder, CEO, CFO and Company board member
3%
none
none
3 Adrian Oehler
Shareholder and chairman of the board SunVesta AG
3%
none
none
(up to first quarter 2014)
4 Aires International
*** see hereinafter ***
5 Dr. Max Rössler
*** see hereinafter ***
6 4f capital ag
Company owned by Josef Mettler (see No. 2)
none
none
none
Akyinyi Interior
7 and Exterior
Company owned by the wife of a Company board
Decoration
member
none
none
none
8 Global Care AG
Company owned by Dr. Max Rössler
none
none
none
9 Geoffrey Long
Head of Accounting “The Americas”
none
none
none
F-22
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
9.
RELATED PARTY TRANSACTIONS - CONTINUED
Loan agreement Aires International Investment Inc.
On July 27, 2011, SunVesta AG signed a loan agreement with Aires International Investments Inc.
(“Aires”), a company owned by Dr. Rössler (a board member of the Company). The loan
agreement was amended on May 11, 2012, on June 21, 2012 and on October 31, 2013.
— All previous existing loan agreements including amendments between SunVesta Holding AG and Aires
International Investment, Inc. will be cancelled and superseded by the new agreement, signed on October 31, 2013.
— The loan shall not be due for repayment before December 31, 2017 but at the latest on December 31, 2020.
— Both parties have the possibility, despite of the scheduled repayment dates, to resign the loan agreement with a
notice period of 90 days subject to the subordination noted in the following.
— The complete loan amount including further additions is subordinated.
— Yearly interest on the loan is 7.25% and will be credited to the loan account on a quarterly basis, i.e. on March 31,
June 30, September 30 and December 31.
In addition, a fraction of the loan amounting to CHF 10,044,370 was transferred from SunVesta
Holding AG to SunVesta, Inc. as of December 31, 2012, as evidenced in a promissory note in
October 2013 with key terms outlined as follows:
— The effective date is December 31, 2012. However, since the promissory note was only signed in October 2013 this
is the relevant date for accounting purposes.
— The principal amount together with any interest will be payable on December 31, 2015 (the maturity date)
— The interest rate is 7.25%.
— Any amount of principal or interest which is not paid when due shall bear interest at the rate of 10% per year from
the due date until it is paid.
— The following covenants have been agreed:
(A) So long as the Company shall have any obligation under this Note, the Company shall not without Aires’
written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash,
property or other securities) on shares of capital stock or (b) directly or indirectly or through any subsidiary make
any other payment or distribution in respect of its capital stock.
(B) So long as the Company shall have any obligation under this Note, the Company shall not, without Aires’
written consent, redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other
securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the
Company or any warrants, rights or options to purchase or acquire any such shares.
F-23
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
9.
RELATED PARTY TRANSACTIONS - CONTINUED
Additionally, another fraction of the loan amounting to CHF 10,000,000 was transferred from
SunVesta Holding AG to SunVesta, Inc. as of December 31, 2013, as evidenced in a promissory
note in March 2014, with the key terms outlined as follows:
The effective date is December 31, 2013. However, since the promissory note was only signed in March 2014 this is
the relevant date for accounting purposes.
— The principal amount together with any interest will be payable on December 31, 2015 (the maturity date)
— The interest rate is 7.25%.
— Any amount of principal or interest which is not paid when due shall bear interest at the rate of 10% per year from
the due date until it is paid.
— The following covenants have been agreed:
(A) So long as the Company shall have any obligation under this Note, the Company shall not without Aires’
written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash,
property or other securities) on shares of capital stock or (b) directly or indirectly or through any subsidiary make
any other payment or distribution in respect of its capital stock.
(B) So long as the Company shall have any obligation under this Note, the Company shall not without Aires’
written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other
securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the
Company or any warrants, rights or options to purchase or acquire any such shares.
Due to the transfer of fractions of the loan from SunVesta Holding AG to SunVesta, Inc., foreign
exchange gains or losses are reflected in the income statement rather than in the comprehensive
income (cumulative translation adjustment).
As of December 31, 2014 and December 31, 2013, the Company borrowed CHF 29.98 million
(approximately $30.30 million) and CHF 31.12 million (approximately $31.45 million),
respectively from Aires with corresponding accrued interest of CHF 3.78 million (approximately
$3.82 million) and CHF 1.59 million (approximately $1.61 million), respectively.
F-24
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
9.
RELATED PARTY TRANSACTIONS - CONTINUED
Loans Dr. Max Rössler
On June 7, 2012, Dr. Rössler (Board member of the Company) provided a short term financing of
$1.81 million that would have been repayable on May 30, 2013, or on demand within five working
days. 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 concluded on April 19, 2013, with Dr.
Rössler and Aires, an act of transfer. Based on this act of transfer, the loan was transferred to Aires
and the balance added to the existing loan agreement with Aires.
On July 24, 2012, Dr. Rössler gave a short term loan of $0.43 million that is repayable on May 30,
2014, or on demand within five working days. 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 may 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. On June 4, 2014, Dr. Rössler agreed to extend the
due date to May 30, 2015. Based on the trading price for Schindler Holding AG shares on
December 31, 2014, the Company would not have recognized a gain. Therefore the fair value of the
loan is the carrying value of the loan.
On August 8, 2012, Dr. Rössler provided additional short term financing of $0.38 million that was
due May 30, 2014, or on demand within five working days. 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 may 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. On June 4, 2014, Dr. Rössler
agreed to extend the due date to May 30, 2015. Based on the trading price for Zug Estates Holding
AG shares on December 31, 2014, the Company would have recognized a gain, which has not been
recognized by the Company.
On March 1, 2013, Dr. Rössler extended another short term loan for $0.05 million that was
repayable on May 30, 2014, or on demand within five working days. 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. On October 19, 2014, the equivalent to the Daetwyler Holding AG shares have been
repaid to Dr Rössler.
Loan Global Care AG
During 2014, Global Care AG loaned the Company $186,963 (CHF 185,000), which amount was
repayable on October 31, 2014. The loan includes a fixed interest payment of $20,212 (CHF
20,000). As of the date of this report, both amounts are overdue. According to the agreement, there
are no penalties for late payments.
F-25
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
9.
RELATED PARTY TRANSACTIONS - CONTINUED
Receivable from and loans to Josef Mettler
During the period ended December 31, 2013, the Company borrowed $1,065,963 (CHF 1,054,770)
at 3% interest from Josef Mettler.
In 2014, the amount borrowed by the Company became a loan receivable to the Company of
$1,455,214 (CHF 1,439,935) from Mr. Mettler.
On August 15, 2014, and November 17, 2014, Aires International Investments Inc. absorbed the
Company’s receivables from Mr. Mettler in the amount of $851,564 (CHF 842,623) and $603,650
(CHF 597,312) respectively by crediting the amount due to the Company against the amount due
from the Company to Aires. There are no outstanding receivables from Mr. Mettler as of December
31, 2014.
For the year ended December 31, 2014 and December 31, 2013, the Company expensed no interest
but earned interest in 2013.
Receivables 4f capital ag
For the year ended December 31, 2013, the Company owed $27,590 (CHF 27,300) for
commissions to 4f capital ag.
During the period ended December 31, 2014, the amount owed by the Company became a
receivable to the Company of $1,142,681 (CHF 1,130,683) from 4f capital ag.
On August 15, 2014, and November 17, 2014, Aires International Investments Inc. absorbed the
Company’s receivables from 4f capital ag in the amount of $114,891 (CHF 113,685) and
$1,027,790 (CHF 1,016,998) respectively by crediting the amount due to the Company against the
amount due from the Company to Aires.
For the year ended December 31, 2014 and December 31, 2013, the Company expensed no interest
but earned interest in 2013.
For the year ended December 31, 2014 and December 31, 2013, the Company incurred no interest
expense and earned no interest income for these amounts.
Commissions paid or payable to related parties
During the periods ended December 31, 2014, and December 31, 2013, the Company paid
commissions to 4f capital ag in the amount of $123,000 and $291,740, respectively, related to
financing of the Company. 4f capital ag is a company owned and directed by Mr. Mettler (Board
Member and CEO of the Company) that receives a commission of 1.5% for new funds that the
Company receives based on consulting services rendered by 4f capital ag. These costs have been
capitalized to debt issuance costs.
F-26
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
9.
RELATED PARTY TRANSACTIONS - CONTINUED
Hans Rigendinger
In 2013, the Company borrowed $600,000 at 3% interest from Hans Rigendinger. The amount due
to Mr. Rigendinger for this loan at December 31, 2014 was $1,914.
Mr. Rigendinger also held bonds denominated in Euros and Swiss Francs valued at approximately
$4,316,000 as of December 31, 2014 and December 31, 2013.
Service fees paid or payable to Akyinyi Interior and Exterior Decoration
During the periods ended December 31, 2014, and December 31, 2013, the Company paid fees to
Akyinyi Interior and Exterior Decoration, which is a company owned by the wife of a member of
the Board of Directors, related to interior design of the Papagayo Gulf Tourism project in the
amount of approximately $120,000 for both years. These costs have been capitalized to property
and equipment. Through January 2015, the Company is committed to paying $10,000 monthly
based on the contract with Akyinyi Interior and Exterior Decoration.
Consulting Fees paid or payable to Cambridge Limited Corp.
During the periods ended December 31, 2014, and December 31, 2013, the Company paid fees to
Cambridge Limited Corporation, which is a company owned by the father-in-law of a member of
the Board of Directors. These fees related to accounting and consulting services rendered in Costa
Rica for the Company in the amount of approximately $166,851 and $0, respectively.
10.
BANK LIABLITIES
The bank liability at December 31, 2014, represents a temporary, secured overdraft facility, bearing
an interest rate of 8.9%.
F-27
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
11.
BONDS
Description
EUR (€) bond old (repaid)
CHF bond I
Issuer:
SunVesta Holding AG
SunVesta Holding AG
Type of securities:
Bond in accordance with Swiss law
Bond in accordance with Swiss law
Approval by SunVesta AG BOD:
May 12, 2010
June 3, 2011
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
Description
EUR (€) bond new I
CHF bond II (parallel)
Issuer:
SunVesta Holding AG
SunVesta Holding AG
Type of securities:
Bond in accordance with Swiss law
Bond in accordance with Swiss law
Approval by SunVesta AG BOD:
October 31, 2013
May 19, 2014
Volume:
Up to €15,000,000
CHF 15,000,000
Units:
€10,000
CHF 10,000
Offering period:
11/07/2013 – 03/31/2014
05/01/2014 – 06/30/2014
Due date:
December 2, 2016
August 31, 2015
Issuance price:
100%
100 %
Issuance day::
December 2, 2013
September 01, 2013 (retroactive)
Interest rate:
7.25% p.a.
7.25 % p.a.
Interest due dates:
December 2, 2013
August 31
Applicable law:
Swiss
Swiss
F-28
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
11.
BONDS - CONTINUED
Description
EUR (€) bond new II (parallel)
Issuer:
SunVesta Holding AG
Type of securities:
Bond in accordance with Swiss law
Approval by SunVesta AG BOD:
May 19, 2014
Volume:
Up to EUR 15,000,000
Units:
EUR 10,000
Offering period:
05/01/14 – 06/30/14
Due date:
December 02, 2016
Issuance price:
100 %
Issuance day::
December 02, 2013 (retroactive)
Interest rate:
7.25 % p.a.
Interest due dates:
December 02
Applicable law:
Swiss
The nominal amounts have changed as follows:
CHF Bond
CHF Bond
CHF BOND I
2014
2013
$
$
Balances January 1
8,558,443
5,689,364
Cash inflows
5,542,245
2,650,882
Cash outflows
-
(52,424)
Foreign currency adjustments
(953,513)
528,145
Reclassifications to CHF Bond II
(2,147,983)
Sub-total
10,999,192
8,815,967
Discounts (commissions paid to bondholders)
(670,764)
(476,636)
Accumulated amortization of discounts
474,294
219,112
Unamortized discounts
(196,470)
(257,524)
Balances December 31 (Carrying value)
10,802,722
8,558,443
F-29
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
11.
BONDS - CONTINUED
The reclassification was made from CHF bond I to CHF bond II. As CHF bond II has identical
terms as CHF bond I, this reclassification is neither an extinguishment nor a modification.
As per date of this report the Company has realized a cumulative amount of CHF 10,850,000
million ($10,999,192 million) related to CHF Bond I.
EUR-Bond
EUR-Bond
(new)
(new)
2014
2013
USD
USD
Balances December 2
6,757,065
0
Cash inflows
1,562,402
6,603,097
Cash outflows
-
-
Foreign currency adjustments
(963,896)
153,968
Sub-total
7,355,572
6,757,065
Discounts (commissions paid to bondholders)
(17,305)
-
Amortization of discounts
4,729
-
Unamortized discounts
(12,576)
-
Balance December 31 (Carrying value)
7,342,995
6,757,065
As per date of this report the Company has realized a cumulative amount of EUR 6,300,000 million
($7,657,650 million) related to the EURO Bond I.
EUR-Bond
EUR-Bond
old
old
EURO BOND I
2014
2013
$
$
Balances January 1
5,786,248
14,216,707
Cash inflows
-
792,740
Cash outflows
(5,729,712)
(9,727,189)
Foreign currency adjustments
(56,536)
503,991
Sub-total
-
5,786,249
Discounts (commissions paid to bondholders)
(248,195)
(248,195)
Amortization of discounts
248,195
248,195
Unamortized discounts
-
-
Balance December 31 (Carrying value)
-
5,786,248
F-30
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
11.
BONDS - CONTINUED
|
| CHF Bond II |
| CHF Bond II | |
|
| 2014 |
| 2013 | |
|
| $ |
| $ | |
|
|
|
|
|
|
| Balances January 1 |
| - |
| - |
| Cash inflows |
| 12,912,402 |
| - |
| Cash outflows |
| - |
| - |
| Foreign currency adjustments |
| 243,843 |
| - |
| Reclassifications from CHF Bond I |
| 2,147,983 |
| - |
| Sub-total |
| 15,304,228 |
| - |
| Discounts (commissions paid to bondholders) |
| (1,041,917) |
| - |
| Accumulated amortization of discounts |
| 446,864 |
| - |
| Unamortized discounts |
| (595,052) |
| - |
| Balances December 31 (Carrying value) |
| 14,709,176 |
| - |
As per date of this report the Company has realized a cumulative amount of
CHF 18,278,203 million ($18,472,160 million) related to CHF Bond II.
| EURO BOND NEW II |
| EUR-Bond new II |
| EUR-Bond new II |
|
| 2014 |
| 2013 | |
|
| $ |
| $ | |
|
|
|
|
|
|
| Balances January 1 |
| - |
| - |
| Cash inflows |
| 1,960,226 |
| - |
| Cash outflows |
| - |
| - |
| Foreign currency adjustments |
| (198,968) |
| - |
| Sub-total |
| 1,761,258 |
| - |
| Discounts (commissions paid to bondholders) |
| (59,740) |
| - |
| Amortization of discounts |
| 13,473 |
| - |
| Unamortized discounts |
| (46,266) |
| - |
| Balances December 31 (Carrying value) |
| 1,714,991 |
| - |
As per date of this report the Company has realized a cumulative amount of EUR 1,444,849 million ($1,761,258 million) related to the EURO Bond new II.
F-31
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
12.
INCOME TAXES
The components of loss before income taxes are as follows:
|
| December 31, 2014 |
| December 31, 2013 |
|
|
|
|
|
| Domestic | (1,571,359) |
| (2,729,564) |
| Foreign | (6,379,627) |
| (8,209,096) |
| Loss before income tax | (7,950,986) |
| (10,938,660) |
Income taxes relating to the Company’s operations are as follows:
|
| December 31, 2014 |
| December 31, 2013 |
|
|
|
|
|
| Current income taxes |
|
|
|
| US Federal, state and local | - |
| - |
| Foreign | - |
| - |
| Deferred income taxes | - |
| - |
| US Federal, state and local | - |
| - |
| Foreign | - |
| - |
| Income tax expense/recovery | - |
| - |
Income taxes at the United States federal statutory rate compared to the Company’s income tax expenses as reported are as follows:
|
| December 31, 2014 |
| December 31, 2013 |
|
|
|
|
|
| Net loss before income tax | (7,950,986) |
| (10,938,660) |
| Statutory rate | 35% |
| 35% |
| Expected income tax recovery | (2,782,845) |
| (3,828,531) |
| Impact on income tax expense/recovery from |
|
|
|
| Change in valuation allowance | 1,284,444 |
| 2,257,544 |
| Different tax rates in foreign jurisdictions | 140,441 |
| 949,069 |
| Expiration of unused tax loss carry forwards | 268,151 |
| 966,671 |
| Permanent differences | - |
| (291,868) |
| Tax penalty US Federal, state and local | - |
| - |
| Difference due to tax review / previous year adjustments | 1,263,087 |
| - |
| Others | (173,278) |
| (52,885) |
| Income tax expense | - |
| - |
F-32
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
12.
INCOME TAXES - CONTINUED
The Company’s deferred tax assets and liabilities consist of the following:
December 31, 2014
December 31, 2013
Deferred tax assets
Tax loss carry forward
12,342,291
11,057,847
Valuation allowance
(12,342,291)
(11,057,847)
Deferred tax assets/liabilities
-
-
As of April 2, 2012 the Company was advised by the Internal Revenue Service (IRS) of aggregate
penalties amounting to $140,000. This penalty concerns failures to file certain tax returns for the
years ended 2008, 2009 and 2010. Despite an ongoing appeal process, the Company changed its
assessment during the year ended December 31, 2012 and determined that it is “more likely than
not” that it will have to pay the penalty. Therefore the Company recorded $140,000 in income tax
expense.
As of December 31, 2014 and 2013, there were no known uncertain tax positions. We have not
identified any tax positions for which it is reasonably possible that a significant change will occur
during the next 12 months.
Pursuant to ASC 740-10-25-3 Income Taxes, an income tax provision has not been made for U.S.
or additional foreign taxes since all subsidiaries of the Company are not generating income nor are
expected to in the foreseeable future. The company expects that future earnings will be reinvested,
but could become subject to additional tax if they were remitted as dividends or were loaned to the
Company, or if the Company should sell or dispose of its stock in the foreign subsidiaries. It is not
practical to determine the deferred tax liability, if any, that might be payable on foreign earnings
because if the Company were to repatriate these earnings, the Company believes there would be
various methods available to it, each with different U.S. tax consequences.
The Company’s operating loss carry forward of all jurisdictions expire according to the following
schedule:
Domestic
Foreign
2015
-
-
2016
-
1,030,195
2017
-
5,576,793
2018
-
9,355,677
2019
-
6,401,213
2020
-
2,688,226
2021
-
1,257,818
Beyond 2021
16,365,208
-
Total operating loss carry forwards
$
16,365,208
26,309,922
F-33
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
12.
INCOME TAXES - CONTINUED
The following tax years remain subject to examination:
United States of America
Switzerland
Costa Rica*
2008
YES
NO
N/A
2009
YES
NO
N/A
2010
YES
NO
N/A
2011
YES
NO
N/A
2012
YES
YES
N/A
2013
YES
YES
YES
2014
YES
YES
YES
* The Costa Rican companies are taxable since 2013.
F-34
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
13.
PENSION PLAN
The Company maintains a pension plan covering all employees in Switzerland. The plan 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 ratably over this period, and
therefore, the income statement effects of pensions should follow a similar pattern. ASC 715
requires recognition of the funded status, or difference between the fair value of plan assets and the
projected benefit obligations of the pension plan on the balance sheet, with a corresponding
adjustment recorded in the net loss. If the projected benefit obligation exceeds the fair value of plan
assets, then that difference or unfunded status represents the pension liability.
The Company records a net periodic pension cost in the statement of comprehensive loss. 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.
Net periodic pension cost has been included in the Company’s results as follows:
|
|
| 2014 |
| 2013 |
|
|
|
|
|
|
| Projected Benefit Obligations beginning of year | $ | 293,423 |
| 239,046 |
| Service cost - current |
| 50,733 |
| 56,633 |
| Interest expense |
| 5,356 |
| 4,905 |
| Benefit payments and transfers |
| (12,127) |
| (13,378) |
| Actuarial gains/losses |
| 42,749 |
| 1,338 |
| Currency translation losses |
| (27,430) |
| 4,877 |
| Projected Benefit Obligations end of year | $ | 352,704 |
| 293,421 |
|
|
|
|
|
|
| Fair Asset Values beginning of year | $ | 202,896 |
| 164,970 |
| Expected returns |
| 5,558 |
| 5,017 |
| Contributions paid |
| 42,446 |
| 45,262 |
| Benefits paid and transfers |
| (12,127) |
| (13,378) |
| Actuarial gains/losses |
| (3,537) |
| (2,341) |
| Currency translation losses |
| (18,965) |
| 3,365 |
| Fair Asset Value of assets end of year | $ | 216,271 |
| 202,895 |
| Net liabilities | $ | (136,433) |
| (90,524) |
F-35
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
13.
PENSION PLAN - CONTINUED
The following were the primary assumptions:
Future benefits, to the extent that they are based on compensation, include salary increases, as
presented above, consistent with past experiences and estimates of future increases in the Swiss
labor market.
December 31, 2014
December 31, 2013
Assumptions at year end
Discount rate
1.50%
2.00%
Expected rate of return on plan assets
3.00%
3.00%
Future salary increases
1.50%
1.50%
Future pension increases
0.00%
0.00%
Net periodic pension costs have been included in the Company’s results as follows:
December 31, 2014
December 31, 2013
Pension expense
Current service cost
$
50,733
56,633
Net actuarial (gain) loss recorded
(606)
(1,115)
Interest cost
5,356
4,905
Expected return on assets
(5,558)
(5,018)
Employee contributions
(21,223)
(22,631)
Net periodic pension cost
$
28,701
32,776
For the years ended December 31, 2014 and December 31, 2013 the Company made cash
contributions of $21,200 and $22,600, respectively, to its defined benefit pension plan.
All of the assets are held under the collective contract by the plan’s re-insurance 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 contribution to
the pension plan for the year ended December 31, 2015 are $23,200.
F-36
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
14.
STOCK COMPENSATION
The Company has included share based compensation based on the Company’s SunVesta Inc.
Stock Option Plan 2013 (“the Plan”) as part of the total remuneration in certain new employment
and Board of Director’s contracts. The Company is authorized up to 50,000,000 shares under the
Plan.
The purpose of the Plan 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 Company’s common stock.
For all employees, fair value is estimated at the grant date. Compensation costs for unvested shares
are expensed over the requisite service period on a straight-line basis.
Share Grants – Mr. Hans Rigendinger
On January 1, 2013 the Company granted to Hans Rigendinger 3,500,000 common shares, valued
at $0.08 which was the share price and fair value of the shares on the grant date. These shares were
granted as a signing bonus with the Company. Additionally, the Company granted 2,500,000
common shares as a retention award due on each anniversary of his signing with the Company. The
employment contract was initially for three years with an additional bilateral option for an
additional two years. Therefore, the Company could be required to issue up to 12,500,000 common
shares through January 1, 2018. The 2,500,000 retention common shares vested were not issued as
of December 31, 2014 and the date of this filing.
Share Grants – Dr. Max Rössler
On July 3, 2013 the Company granted to Dr. Max Rössler 3,000,000 common shares, valued at
$0.07 which was the share price and fair value of the shares on the grant date. These were issued in
connection with his election to the Board of Directors. These shares were officially issued on
October 15, 2013.
Share Grants – Mr. Josef Mettler
On July 4, 2013 the Company granted 5,000,000 common shares to Josef Mettler, valued at $0.07,
which was the share price and fair value of the shares on the grant date. These were issued in
connection with his employment agreement. These shares were officially issued on October 15,
2013. Additionally the Company granted 3,000,000 common shares as a retention award for each
completed year of employment (e.g. first time as per July 4, 2014). The employment contract is for
an initial term of three years with an additional bilateral option for another two, two-year periods,
but a maximum of December 31, 2020. Therefore, in total the Company could be requested to issue
maximal 21,000,000 common shares up to December 31, 2020 related to the retention bonus. The
3,000,000 retention common shares vested were not issued as of December 31, 2014 and the date of
this filing.
F-37
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
14.
STOCK COMPENSATION - CONTINUED
Share Grants – Mr. José María Figueres Olsen
On March 10, 2014, the Company authorized the issuance of 500,000 common shares, valued at
$0.10 which was the share price and therefore the fair value on grant date, to José María Figueres
Olsen in connection with his appointment to the Board of Directors. These shares were not issued
as of December 31, 2014, and at the date of this report. Additionally, on March 10, 2014, the
Company agreed to a retention award of 200,000 common shares for each fully completed year of
service.
Share Grants – Mr. Howard M. Glicken
On March 10, 2014, the Company authorized the issuance of 500,000 common shares, valued at
$0.10, which was the share price and therefore the fair value on grant date, to Howard M. Glicken
in connection with his appointment to the Board of Directors. These shares were not issued as of
December 31, 2014, and at the date of this report. Additionally, on March 10, 2014, the Company
agreed to a retention award of 200,000 common shares for each fully completed year of service.
Based on these contracts the Company has included the following stock-based compensation in the
Company’s results:
Stock-based compensation (shares)
December 31, 2014
December 31, 2013
Shares granted
46,400,000 shares
45,000,000 shares
Fair Value respectively market price on grant date
$0.0744
$0.0734
Total maximal expenses (2013-2020)
$3,450,000
$3,310,000
Shares vested
18,000,000 shares
11,500,000 shares
Unvested shares
28,400,000 shares
33,500,000 shares
A total of 6,500,000 retention common shares vested were not issued as of December 31, 2014.
As of December 31, 2014, the Company expects to record compensation expense in the future up to
$1,762,666 as follows:
Stock-based
Year ending December 31,
compensation
2015
2016
2017
2018
2019
2020
(shares)
$
$
$
$
$
$
Unrecognized
compensation
417,666
410,000
410,000
210,000
210,000
105,000
expense
F-38
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
14.
STOCK COMPENSATION - CONTINUED
Stock Options – Mr. Hans Rigendinger
The Company granted to Hans Rigendinger, in connection with his employment contract,
10,000,000 options on January 1, 2013. Each option entitles Mr. Rigendinger to buy one Company
share at a strike price of $0.05. These options will be vested in two identical installments
(installment A and B) of 5,000,000 options.
Installment A is contingent on obtaining a financing arrangement with a specific counterparty. As
of the grant date, the fair value was $300,000. As of July 4, 2013, the Company assessed that this
financing arrangement with the specific counterparty will not be completed. Therefore the
Company assessed the probability of completion to be zero and recognized no expense. On July 4,
2013, the Company authorized a revised stock option agreement. This removed the requirement for
financing with a specific counterparty and updated for any counterparty. As of date of the revised
stock option agreement, the fair value was $246,000. Installment A was modified on July 4, 2013,
since the initial performance condition was improbable to be met. Since the modification changed
the expectation that the options will ultimately vest and no expense had been recognized for the
original award, the fair value of the modified award has been expensed on a straight line basis over
the expected vesting period.
For installment B, it is required that Meliá Hotels International (“Melía”) assumes management
responsibilities for Paradisus Papagayo Bay Resort & Luxury Villas. As of grant date, the fair value
was $340,000 and the Company estimated that Meliá assumes responsibility as of July 1, 2015. As
of March 6, 2014 the Company still assesses the probability that this performance condition will be
met at 100%, but the date the performance condition will be achieved was postponed to the fourth
quarter 2015, as the opening date was postponed. As of April 14, 2015, the estimated opening date
was postponed to the first quarter 2017 The Company still assessed the probability that this
performance condition will be met at 100%. Hence, the remaining fair value of the award will be
expensed on a straight-line basis over the recalculated expected remaining vesting-period.
F-39
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
14.
STOCK COMPENSATION - CONTINUED
Stock Options – Dr. Max Rössler
The Company granted to Dr. Max Rössler, in connection with his appointment to the Board of
Directors, 10,000,000 options on July 3, 2013. Each option entitles Dr. Rössler to buy one
Company share at a strike price of $0.05. These options will be vested in two identical installments
(installment A and B) of 5,000,000 options.
For installment A (5,000,000 options), it is required to complete a financing arrangement for the
Project. As of grant date, the fair value was $249,835. The Company expensed the total fair value
on a straight-line basis over the expected vesting period.
For installment B (5,000,000 options), it is required that Meliá assumes management
responsibilities for Paradisus Papagayo Bay Resort & Luxury Villas. As of grant date the fair value
was $258,210 and the Company estimated that Meliá would assume responsibility as of July 1,
2015. As of March 6, 2014 the Company assessed the probability that this performance condition
will be met at 100%, but the date the performance condition will be achieved was postponed to the
fourth quarter 2015, as the opening date was postponed. As of April 14, 2015 the estimated opening
date was postponed to the first quarter 2017. The Company still assessed the probability that this
performance condition will be met at 100%. Hence, the remaining fair value of the award will be
expensed on a straight-line basis over the recalculated expected remaining vesting-period.
Stock Options – Mr. Josef Mettler
The Company granted to Josef Mettler, in connection with his employment contract, 12,000,000
options on July 4, 2013. Each option entitles Mr. Mettler to buy one share at a strike price of $0.05.
These options have three different performance conditions.
For installment A (3,000,000 options), it is required to complete a bridge financing arrangement.
As of grant date the fair value was $149,000. The Company expensed the total fair value on a
straight-line basis over the expected vesting period.
For installment B (4,000,000 options), it is required to complete a financing arrangement (main
financing arrangement for Paradisus Papagayo Bay Resort & Luxury Villas). As of grant date the
fair value was $200,000. The Company has expensed the total fair value on a straight-line basis
over the expected vesting period.
For installment C (5,000,000 options), it is required that Meliá assumes management
responsibilities for Paradisus Papagayo Bay Resort & Luxury Villas. As of grant date, the fair value
was $258,000 and the Company estimated that Meliá assumes responsibility as of July 1, 2015. As
of March 6, 2014 the Company still assesses the probability that this performance condition will be
met at 100%, but the date the performance condition will be achieved was postponed to the fourth
quarter 2015, as the opening date was postponed. As of April 14, 2015 the estimated opening date
was postponed to the first quarter 2017. The Company still assessed the probability that this
performance condition will be met at 100%. Hence, the remaining fair value of the award will be
expensed on a straight-line basis over the recalculated expected remaining vesting-period.
F-40
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
14.
STOCK COMPENSATION - CONTINUED
Summary
A summary of stock options outstanding as per December 31, 2014 is as follows:
Options outstanding
Number of
Weighted average
Weighted average
Options
exercise price
remaining
contractual life
Outstanding January 1, 2014
32,000,000
$ 0.05
8.92 years
Granted
0
Exercised
0
Forfeited or expired
0
Outstanding December 31, 2014
32,000,000
$ 0.05
8.42 years
Exercisable December 31, 2014
0
The following table depicts the Company’s non-vested options as of December 31, 2014 and
changes during the period:
Non-vested options
Shares under Options
Weighted average grant
date fair value
Non-vested at December 31, 2013
32,000,000
$ 0.053
Non-vested-granted
-
-
Vested
-
-
Non-vested, forfeited or canceled
-
-
Non-vested at December 31, 2014
32,000,000
$ 0.053
Under the provisions of ASC 718 Compensation – Stock Compensation, 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 assumptions are
based on historical and available market information. The following assumptions were used to
calculate the compensation expense and the calculated fair value of stock options granted:
Assumption
December 31, 2014
December 31, 2013
Dividend yield
None
None
Risk-free interest rate used (average)
1.62 %
1.62 %
Expected market price volatility
80.00%
80.00%
Average expected life of stock options
5.625 years
5.625 years
F-41
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
14.
STOCK COMPENSATION - CONTINUED
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.
As of December 31, 2014, the Company had unrecognized compensation expenses related to stock
options currently outstanding, to be recognized in future quarters respectively years as follows:
December 31, 2015
December 31, 2016
Stock-based compensation (options)
$
$
Unrecognized compensation expense
173,510
130,133
15.
SUMMARY OF STOCK AND OPTION COMPENSATION EXPENSE
The Company recorded the following amounts related to stock based compensation expense during
the periods ended December 31, 2014:
Summary of share and option based compensation
December 31, 2014
December 31, 2013
expense
$
$
Option grants
560,941
837,816
Share grants
542,334
1,145,000
Total (recorded under general & administrative expense)
1,103,275
1,982,816
F-42
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
16.
FUTURE LEASE COMMITMENTS
On December 1, 2012, the Company entered into a lease agreement for the premises for its Swiss
office with an unrelated entity. The annual rental expense amounts to approximately $130,000 on a
fixed term expiring on December 31, 2017.
Future lease commitments
December 31, 2014
December 31,
$
2013
$
2015
130,000
130,000
2016
130,000
130,000
2017
130,000
130,000
2018
-
-
2019*
-
-
F-43
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
17.
NOTES PAYABLE
December 31, 2014
December 31, 2013
$
$
Promissory note
2,000,000
2,000,000
Specogna Holding AG
707,428
-
R. Weimar (private investor)
316,331
-
Total
3,023,759
2,000,000
Promissory Note
As part of the completion of the purchase of Altos del Risco on March 9, 2013, the parties agreed
that $2,000,000 of consideration is converted into a non-interest bearing and uncollateralized loan
payable which was originally due for payment on March 8, 2014, then extended to March 8, 2015.
On March 16, 2015 the Company agreed with the counterparty to extend the due date through
March 16, 2016.
Loans Specogna Holding AG
On May 15, 2014 the Company entered into a short term loan agreement for CHF 1.0 million
($1.01 million) with Specogna Holding AG. This loan was repayable on July 31, 2014, and beared
a lump remuneration as interest of CHF 30,000 (approximately $30,300). This loan was repaid in
2014.
On September 16, 2014, the Company entered into a short term loan agreement for approximately
$736,000 with Specogna Holding AG (“Specogna“) repayable on October 31, 2014, with a fixed
interest payment of approximately $32,000. The loan was secured personally and jointly by Dr.
Max Rössler, Mr. Josef Mettler and Mr. Hans Rigendinger. The amounts due to Specogna had been
repaid on March 24, 2015 by Aires on behalf of SunVesta AG, with no penalties incurred.
Loan R. Weimar (private investor)
On May 23, 2014, the Company entered into a short term loan agreement for approximately
$376,800 with Roland Weimar (“Weimar”). The loan is repayable in five instalments, (four
payments of $84,700, one payment of $38,000), with the initial payment being due on June 2, 2014
and the latest one being due on June 1, 2015. The interest rate is 2 % per annum. The Company
repaid $159,017 as of the filing date of this report, whereas $205,000 should have been repaid. The
agreement does not stipulate any repercussions for the late payments.
Bruno Wernli
On September 16, 2014, the Company entered into a short term loan agreement for approximately
$568,000 with Bruno Wernli (“Wernli”), repayable on October 31, 2014, with a fixed interest
payment of approximately $53,000 (CHF 50,000). The loan was secured personally and jointly by
Dr. Max Rössler, Mr. Josef Mettler and Mr. Hans Rigendinger. The amounts due to Bruno Wernli
were repaid on December 19, 2014 by Aires on behalf of the Company.
F-44
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
18.
OPENING DATE “Paradisus Papagayo Bay Resort & Luxury Villas”
On June 2, 2014, the Company amended its agreement with Meliá (“Sixth addendum to the
management agreement of March 8, 2011”) to postpone the opening date as follows:
- The construction of the “Paradisus” will be completed by November 15, 2015
- Should the “Paradisus” not be completed by November 15, 2015, (subject to force majeure)
and should an extension date not be agreed, subsequent to November 15, 2015, the Company
will be obligated to pay Meliá a daily amount of $2,000 as liquidated damages.
- Should the Company be unable to complete the construction of the “Paradisus” by February
15, 2016, Meliá, can terminate the management agreement obligating the Company to
compensate Meliá in the amount of $5,000,000 unless the respective parties agree to extend
such date.
Since the completion date for the Paradisus Papagayo Bay Resort & Luxury Villas development is
now anticipated for the first quarter of 2017, the Company is in discussions with Meliá regarding
another addendum that would allow an extension of the deadlines stipulated in the Sixth
addendum. Should the Company not be successful, the penalty would be $5,000,000.
19.
SEGMENT INFORMATION
The chief operating decision maker (“CODM”) is the Company’s CEO. Neither the CODM nor the
Company’s directors receive disaggregated financial information about the locations in which
project development is occurring. Therefore, the Company considers that it has only one reporting
segment.
The following table presents the Company’s tangible fixed assets by geographic region:
December 31, 2014
December 31, 2013
Location of tangible assets
Switzerland
$
115,210
193,617
Costa Rica
51,086,142
43,178,597
Total
$
51,201,352
43,372,214
F-45
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
20.
EARNINGS PER SHARE
Basic earnings per share are the result of dividing the Company’s 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, basic 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
Year Ended
Year Ended
December 31, 2014
December 31, 2013
Company posted
Net loss
Net loss
Basic weighted average shares outstanding
88,325,165
76,171,495
Dilutive effect of common stock equivalents
None
None
Dilutive weighted average shares outstanding
88,325,165
76,171,495
A total of 6,500,000 common shares vested were not issued as per balance sheet date and included
in the basic weighted average shares outstanding.
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.
Earnings per share
Year Ended
Year Ended
December 31, 2014
December 31, 2013
Options to Hans Rigendinger
10,000,000
10,000,000
Options to Dr. M. Rössler
10,000,000
10,000,000
Options to Josef Mettler
12,000,000
12,000,000
Total Options
32,000,000
32,000,000
Shares to Hans Rigendinger
10,000,000
12,500,000
(retention bonus – non vested)
Shares to Josef Mettler (retention award)
18,000,000
21,000,000
Shares to Howard Glicken and José Maria Figueres
400,000
-
(retention award)
Total Shares
28,400,000
33,500,000
Total Options and Shares
60,400,000
65.500,000
F-46
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
21.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses according consolidated statement of comprehensive loss
include:
General and administrative expenses
December 31, 2014
December 31, 2013
$
$
Rental & related expenses
175,394
171,200
Audit
235,995
174,344
Consulting
1,908,621
1,586,226
Marketing, Investor & public relations
68,828
135,681
Travel expenses
492,323
635,382
Personnel costs including social security’s costs and share
based remuneration
2,904,293
3,268,279
Various other operating expenditures
949,037
778,434
Write-off Hotel Project Atlanta
-
1,573,957
Total according statements of comprehensive loss
6,734,491
8,323,503
22.
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:
The status of financing Vista Mar and Vista Bahia is as follows:
On March 10, 2015, the Company executed a letter of engagement with ISM Capital LLP, a
London based investment firm, for the purpose of conducting a $100 million asset backed bond
issuance. Despite the firm’s commitment to identify investors, the success of this proposed bond
issuance for the amount contemplated or any lesser amount, does not guarantee that all or part of
the amount offered will be subscribed.
The Company is also in negotiations to secure a $40 million credit facility from certain general
contractors that would be involved in the construction of the Paradisus Papagayo Bay Resort &
Luxury Villas. The terms of this credit facility are being discussed and would complement amounts
realized through ISM.
We are also in process of determining the means by which the Company can retire the current
CHF-bond that matures on August 31, 2015, which may include additional debt or equity
financings.
F-47
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A.
CONTROLS AND PROCEDURES
Management's Annual Report on Internal Control over Financial Reporting
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this annual report, an evaluation was carried out by the Company’s
management, with the participation of the Chief Executive Officer and chief financial officer, of the
effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) under the
Securities Exchange Act of 1934 (“Exchange Act”)). Disclosure controls and procedures are designed to
ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules
and forms, and that such information is accumulated and communicated to management, including the
Chief Executive Officer and chief financial officer, to allow timely decisions regarding required
disclosures.
Based on that evaluation, the Company’s management concluded, as of the end of the period covered by
this report, that the Company’s disclosure controls and procedures were ineffective in recording,
processing, summarizing, and reporting information required to be disclosed, within the time periods
specified in the Commission’s rules and forms, and such information was not accumulated and
communicated to management, including the Chief Executive Officer and the chief financial officer, to
allow timely decisions regarding required disclosures.
Management’s Report on Internal Control over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control
over financial reporting. The Company’s internal control over financial reporting is a process, under the
supervision of the Chief Executive Officer and the chief financial officer, designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of the Company’s financial
statements for external purposes in accordance with United States generally accepted accounting principles
(GAAP). Internal control over financial reporting includes those policies and procedures that:
— pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the Company’s assets
— provide reasonable assurance that transactions are recorded as necessary to permit preparation of the
financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures are being made only in accordance with authorizations of management and the
Board of Directors
— provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the Company’s assets that could have a material effect on the financial
statements
24
Due to its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions or that the degree of compliance
with the policies or procedures may deteriorate.
The Company’s management conducted an assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated
Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission,
which assessment identified material weaknesses in internal control over financial reporting.
A material weakness is a control deficiency, or a combination of deficiencies in internal control over
financial reporting that creates a reasonable possibility that a material misstatement in annual or interim
financial statements will not be prevented or detected on a timely basis. Since the assessment of the
effectiveness of our internal control over financial reporting did identify material weaknesses, management
considers its internal control over financial reporting to be ineffective.
The matters involving internal control over financial reporting that our management considered to be
material weaknesses were:
Lack of Appropriate Independent Oversight. The Board of Directors has not provided an appropriate level
of oversight over the Company’s consolidated financial reporting and procedures for internal control since
its independent directors have not provided an appropriate level of oversight, including challenging
management’s accounting for and reporting of transactions. Accordingly we determined that this control
deficiency as of December 31, 2014, constituted a material weakness.
Failure to Segregate Duties. The Board of Directors has not maintained any segregation of duties within the
Company’s management, instead relying on a single individual to fill the role of Chief Executive Officer,
chief financial officer and principal accounting officer, responsible for a broad range of duties that cannot
be properly reconciled with a singular management resource. Accordingly we determined that this control
deficiency as of December 31, 2014, constituted a material weakness.
Insufficient Accounting Resources. The Board of Directors has engaged insufficient internal accounting
resources, with an acceptable knowledge of US GAAP processes, to oversee the Company’s consolidated
financial reporting and procedures for internal control. Accordingly, we determined that this control
deficiency as of December 31, 2014, constituted a material weakness.
US GAAP Knowledge. The Board of Directors has engaged an external consultant to counter the internal
lack of US GAAP knowledge however the effectiveness of the external consultant is affected by the
Company’s lack of sufficient internal accounting resources. Accordingly, we determined as of December
31, 2014, that the internal lack of US GAAP knowledge is part of the material weaknesses as stated above.
As a result of the material weaknesses in internal control over financial reporting described above, the
Company’s management has concluded that, as of December 31, 2014, that the Company’s internal control
over financial reporting was not effective based on the criteria in Internal Control – Integrated Framework
issued by the COSO. The Company intends to remedy its material weaknesses by:
— forming an audit committee made up of non-managerial directors that will oversee management
— engaging an individual to serve as chief financial officer and principal accounting officer to segregate
the duties of Chief Executive Officer and chief financial officer
— engaging a new accounting officer that has a working knowledge of GAAP accounting.
25
Over the current reporting period the Company has appointed two independent directors to provide
oversight to the Board of Directors, who might serve as a basis around which to form an audit committee.
The Company also expects to segregate the duties of Chief Executive Officer and chief financial officer in
the next annual reporting period.
This annual report does not include an attestation report of our independent registered public accounting
firm regarding internal control over financial reporting. We were not required to have, nor have we,
engaged our independent registered public accounting firm to perform an audit of internal control over
financial reporting pursuant to the rules of the Commission that permit us to provide only management’s
report in this annual report.
Changes in Internal Controls over Financial Reporting
During the quarter ended December 31, 2014, 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.
9B.
OTHER INFORMATION
None.
26
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Officers and Directors
The following table sets forth the name, age and position of the director and executive officers of the
Company:
Name
Age
Year
Positions Held
Appointed
Josef Mettler
54
2008
CEO, CFO, PAO and Director
Hans Rigendinger
69
2013
COO and Director
Dr. Max Rössler
75
2013
Director
José Maria Figueres
61
2014
Director
Howard Glicken
72
2014
Director
Josef Mettler was appointed Chief Executive Officer, chief financial officer, principal accounting officer,
and director of the Company on September 16, 2008.
Mr. Mettler also serves as a director and employee of SunVesta AG.
Business Experience
From 1995 until 2005 Mr. Mettler was co-owner and managing director of Bonne Ville Group AG, a Swiss
company specializing in information technology services. Mr. Mettler was responsible for marketing,
business development, and IT project management. While at Bonne Ville he co-founded OpenLimit
Holding AG, a Swiss IT company specializing in encryption and digital signature technologies. Between
2005 and 2007 Mr. Mettler formed SunVesta AG and developed the SunVesta business model. In 2008 Mr.
Mettler launched QuadEquity SPC, a private equity hedge fund.
Officer and Director Responsibilities and Qualifications
Mr. Mettler is responsible for the overall management of the Company and is involved in many of its
day-to-day operations, finance and administration.
Mr. Mettler earned a BA in Economics from OEKREAL Business & Management School, Zurich
(Switzerland). He also graduated as a Business Data Processing Specialist.
Other Public Company Directorships in the Last Five Years
None.
27
Hans Rigendinger was appointed as Chief Operating Officer and as a director on January 1, 2013.
Mr. Rigendinger also serves as a director and employee of SunVesta AG.
Business Experience
Since early 1972 to present, Mr. Rigendinger has led his own engineering firm in the planning and
implementation of a variety of commercial projects employing a staff of up to 40 employees. Over this time
span Mr. Rigendinger and his company have been responsible for the planning and implementation of over
300 bridge structures, approximately 500 buildings and a few dozen large industrial plants. Since 1995, Mr.
Rigendinger has been involved in several real estate projects that have included commercial, residential and
tourist properties. He has also spent the last 15 years supporting the development and expansion of an
industrial waste glass recycling company. Mr. Rigendinger has been actively involved in the development
of SunVesta AG since 2007.
Officer and Director Responsibilities and Qualifications
Mr. Rigendinger’s knowledge, experience and solid know-how in the field of civil engineering and real
estate is extremely valuable to the Company’s operations as it moves forward with the development of the
Paradisus Papagayo Bay Resort & Luxury Villas.
Mr. Rigendinger earned a Master’s Degree in Civil Engineering, with an emphasis on supporting structures
and foundations (Civil and Structural Engineering) at the Swiss Federal Institute of Technology in 1969.
Other Public Company Directorships in the Last Five Years
None.
Dr. Max Rössler was appointed as a director of the Company on July 3, 2013.
Dr. Rössler also serves as a director of SunVesta AG.
Business Experience
Dr. Rössler has lectured and been involved in research as a professor at ETH in the fields of applied
mathematics and operations research. During his tenure with ETH, Dr. Rössler began to apply
mathematical methods to problems related to financial investments. Dr. Rössler joined Credit Suisse in
1978 as head analyst of the department for fixed income products. Since 1997, Dr. Rössler has worked with
SUVA (Swiss National Accident Insurance Fund) as a manager of a portion of their fixed-income
investments and currently holds advisory board mandates for two Swiss private banks.
Officer and Director Responsibilities and Qualifications
Dr. Rössler’s knowledge, and experience with fixed income investments is extremely valuable to the
Company’s Board of Directors as it moves forward with financing its business model.
Dr. Rössler studied mathematics at the Swiss Federal Institute of Technology Zurich (ETH) and
earned his doctorate at Harvard University.
Other Public Company Directorships in the Last Five Years
None.
28
José Maria Figueres was appointed as a director of the Company on March 10, 2014.
Business Experience
Following his graduate studies at Harvard, Mr. Figueres was elected as the President of Costa Rica in 1994,
a position in which he served for four years. When his service as President came to an end, Mr. Figueres
was appointed to the Board of Directors of Terremark Worldwide, Inc., a global IT company that provided
industry managed services such as cloud computing, collocation and web hosting solutions for enterprise IT
infrastructures. A year after joining Terremark, Mr. Figueres joined the World Economic Forum in Davos,
Switzerland. Five years later, Mr. Figueres undertook a one year assignment as managing director of the
Talal Abu-Ghazaleh Organization, a global consulting group headquartered in Amman, Jordon. Between
2006 and 2009, Mr. Figueres served on the International Advisory Board of Abraaj Capital, a private equity
firm with over $6 billion in assets under management. He then went on to join the Advisory Board of Grupo
Arcano, a financial services firm based in Madrid, Spain, a leading boutique for investment banking and
asset management services. Mr. Figueres joined IJ Partners in Geneva, Switzerland, as a managing partner
in 2010. Since 2010, Mr. Figueres has served as the Chairman of the Carbon War Room, an independent
non-profit organization focused on the global transition to a low carbon economy. Mr. Figueres was
appointed President of the Carbon War Room in 2012.
Officer and Director Responsibilities and Qualifications
Mr. Figueres’s knowledge, experience and business acumen on a global level in addition to his direct
connection to Costa Rica is extremely valuable to the Company’s Board of Directors as it moves forward
with its hotel development in Costa Rica.
Mr. Figueres completed his undergraduate studies at the United States Military Academy (West Point) and
completed his Master’s Degree in Public Administration at the John F. Kennedy School of Government at
Harvard University.
Other Public Company Directorships in the Last Five Years
None.
Howard H. Glicken was appointed as a director of the Company on March 10, 2014.
Business Experience
Between 1972 and 1981 Mr. Glicken served as the Chief Executive Officer and Chairman of the Board of
MGI Industries, which company controlled the design and manufacture of extrusion tools for the metals
industry in Latin America. Mr. Glicken joined Jillian’s Entertainment Corporation in 1983 to serve as its
Chairman and Chief Executive Officer until 1992. Over this period Jillian’s became one of the largest
United States purchasers of Latin American gold ore. Following his tenure at Jillian’s, Mr. Glicken was
appointed Chairman of the Commonwealth Group, a Washington, D.C. public policy and consulting firm
with extensive business activities in Latin America. Mr. Glicken worked with the Commonwealth Group
until 1996 before forming the America’s Group. He currently serves as Chairman and Chief Executive
Officer of the America’s Group, a Miami based consulting/merchant banking firm focused solely on Latin
America, Mexico and the Caribbean.
29
Officer and Director Responsibilities and Qualifications
Mr. Glicken years of business and political experience in Latin America is extremely valuable to the
Company’s Board of Directors as it seeks to garner the attention of those in the region that might assist in
the development of its hotel project in Costa Rica.
Mr. Glicken attended the University of Florida, the American Banking Institute and the Harvard University
Advanced Institute on Negotiation.
Other Public Company Directorships in the Last Five Years
None.
Family Relationships
There are no family relationships between or among the directors or executive officers.
Involvement in Certain Legal Proceedings
During the past ten years there are no events that occurred related to an involvement in legal proceedings
that are material to an evaluation of the ability or integrity of the Company’s directors, or persons
nominated to become directors or executive officers.
Term of Office
Our directors were appointed for a one (1) year term to hold office until the next annual meeting of our
shareholders or until removed from office in accordance with our bylaws. Our officers were appointed by
our Board of Directors and will hold office until the expiration of their employment contracts or removal by
the board.
No other persons are expected to make any significant contributions to the Company’s executive decisions
who are not executive officers or directors of the Company.
Compliance with Section 16(A) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires officers and directors and persons who own
more than ten percent of a registered class of our equity securities to file reports of ownership and changes
in their ownership with the Commission, and forward copies of such filings to us. Based solely upon a
review of Forms 3, 4 and 5 furnished to us, we are not aware of any persons who, during the period ended
December 31, 2014, failed to file, on a timely basis, reports required by Section 16(a) of the Exchange Act
except the following:
-
Jose Maria Figueres failed to file a Form 3 in connection with his appointment to the Board of Directors
-
Howard H. Glicken failed to file a Form 3 in connection with his appointment to the Board of Directors
30
Code of Ethics
We have adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-K of the Securities
Exchange Act of 1934 that applies to directors and senior officers, such as the principal executive officer,
principal financial officer, controller, and persons performing similar functions. The Company has
incorporated a copy of its Code of Ethics as Exhibit 14 to this Form 10-K. Further, our Code of Ethics is
available in print, at no charge, to any security holder who requests such information by contacting us.
Board of Directors Committees
The Board of Directors has not established an audit committee. An audit committee typically reviews, acts
on and reports to the Board of Directors with respect to various auditing and accounting matters, including
the recommendations and performance of independent auditors, the scope of the annual audits, fees to be
paid to the independent auditors, and internal accounting and financial control policies and procedures.
Certain stock exchanges currently require companies to adopt a formal written charter that establishes an
audit committee that specifies the scope of an audit committee’s responsibilities and the means by which it
carries out those responsibilities. In order to be listed on any of these exchanges, the Company would be
required to establish an audit committee.
The Board of Directors has not established a compensation committee, nominating committee or
compliance and ethics committee.
Director Compensation
Our directors are currently not reimbursed for out-of-pocket costs incurred in attending meetings though
same are compensated for services as a director of the Company in the form of stock options through our
2013 Stock Option Plan and stock awards. Cash compensation is also paid in certain instances to directors
of our subsidiary companies, including our Chief Executive Officer.
The Company has compensated directors in the past and may adopt additional provisions for compensating
directors for their services in the future.
ITEM 11.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Chief Executive Officer
Our chief executive officer has an employment agreement dated July 4, 2013, with the Company and an
employment agreement dated January 5, 2011with SunVesta AG pursuant to which he receives a base
salary and is entitled to receive a bonus for his service in addition to certain benefits including per diem
allowances, car allowances, housing allowances, and representation allowances. The employment
agreement with the Company also provides for a signing bonus payable in cash and Company stock, stock
options and an annual retention award. The initial term of the Company employment agreement expires on
December 31, 2016, and can be renewed for two successive two year terms. The total compensation
package is deemed appropriate for our chief executive officer and was approved by the Company’s and
SunVesta AG’s board of directors respectively.
31
For the year ended December 31, 2014, $1,293,968 was paid to or accrued for our chief executive officer of
which $537,314 was salary, $546,269 was a bonus, and $210,385 in all other compensation of which
$123,000 was commission paid to 4f capital ag, $19,666 was out of pocket expenses, $51,331 was car
allowances and $16,388 was board of directors fees for service to both SunVesta AG and SunVesta Projects
& Management AG.
For the year ended December 31, 2013, $2,998,000 was paid to our chief executive officer of that amount
$432,000 was salary, $72,000 a signing bonus, $291,740 was commission paid to 4f capital ag, $1,820,000
was restricted common stock, $607,000 was stock options and $67,000 in all other compensation of which
$1,000 was for housing benefits in Costa Rica, $18,000 for out of pocket expenses, and $48,000 for car
allowances.
The decrease in 2014 annual compensation over that compensation realized by our chief executive officer
in 2013 can be primarily attributed to the decrease in fair value attributed to non-cash items such as
restricted common stock and stock options. Otherwise, our chief executive’s cash compensation over the
period slightly increased. We expect annual compensation to remain relative consistent over the term of the
respective employment agreements.
Chief Operating Officer
Our Chief Operating Officer has an employment agreement dated December 31, 2012, with the Company
and an employment agreement dated January 17, 2013 with SunVesta AG, pursuant to which he receives a
base salary and is entitled to receive a bonus for his service to the Company in addition to certain benefits
including per diem allowances, car allowances, housing allowances, and representation allowances. The
employment agreement with the Company also provides for a signing bonus payable in Company stock,
stock options and an annual retention award. The initial term of the employment agreement expires on
December 31, 2015, and can be renewed for two successive one year terms. The compensation package is
deemed appropriate for our chief operating officer and was approved by the Company’s and SunVesta
AG’s Board of Directors respectively.
For the year ended December 31, 2014, $317,284 was paid to or accrued for our chief operating officer, of
that amount $256,657 was salary, $38,776 in car allowances and $21,851 was board of directors’ fees for
service to both SunVesta AG and SunVesta Projects & Management AG.
For the year ended December 31, 2013, $2,196,000 was paid to our chief operating officer of that amount
$240,000 was salary, $1,280,000 in restricted common stock, $640,000 in stock options and $36,000 in all
other compensation all of which was for car allowance.
The decrease in 2014 annual compensation over that compensation realized by our chief operating officer in
2013 can be primarily attributed to the decrease in fair value attributed to non-cash items such as restricted
common stock and stock options. Otherwise, our chief operating officer’s cash compensation over the
period slightly increased. We expect annual compensation to remain relative consistent over the term of the
respective employment agreements.
While we believe that our current approach to executive compensation is appropriate at this time, we expect
to expand our executive compensation program to other individuals as our business develops.
32
Summary
The following table provides summary information for the years ended December 31, 2014 and 2013
concerning cash and non-cash compensation paid or accrued by the Company to or on behalf of (i) the Chief
Executive Officer and (ii) any other employee to receive compensation in excess of $100,000:
Executive Summary Compensation Table
Name and
Year
Salary
Bonus
Stock
Option
Non-Equity
Change in
All Other
Total
Principal
($)
($)
Awards
Awards
Incentive Plan
Pension Value
Compensation
($)
Position
($)
($)(1)
Compensation
and
($)
($)
Nonqualified
Deferred
Compensation
($)
Josef Mettler
2014
537,314
546,269
-
-
210,385 1,293,9687
CEO, CFO,
2013
432,000
72,000
1,820,000 607,000
-
-
67,000 2,998,000
PAO
Hans
2014
256,657
-
-
-
60,627
317,284
Rigendinger
2013
240,000
-
1,280,000 640,000
-
-
36,000 2,196,000
COO
(1) See Note 13 to the audited financial statements included in this Form 10-K for the year ended December 31, 2014, for further
information concerning the Company’s reliance on the Black Sholes option-pricing model to calculate the fair value of stock
options
Outstanding Equity Awards
The following table provides summary information for the period ended December 31, 2014, concerning
unexercised options, stock that has not vested, and equity incentive plan awards by the Company to or on
behalf of (i) the Chief Executive Officer and chief financial officer and (ii) the three most highly
compensated individuals whose total compensation exceeds $100,000:
Outstanding Equity Awards at Fiscal Year-End
Option awards
Stock awards
Equity
incentive
plan
Equity
awards:
incentive
market or
plan
Number
Equity
payout
awards:
of
Market
incentive plan value of
Number of
number of
shares
value of
awards:
unearned
securities
Number of
securities
or units
shares or
number of
shares,
underlying
securities
underlying
of stock units of
unearned
units or
unexercised underlying
unexercised Option
that
stock that shares, units or other rights
options
unexercised
unearned
exercise Option
have not have not
other rights that that have
(#)
options
options
price
expiration vested
vested(6)
have not vested not vested
Name
exercisable (#) exercisable
(#)
($)
date
(#)
($)
(#)
($)
Josef Mettler
0 12,000,000(1)
-
0.05 July 2, 2023
-
0.06 18,000,000(4))
-
Hans
Rigendinger
0 10,000,000(2)
-
0.05 December
31, 2022
-
0.06 10,000,000(5)
-
33
(1) Mr. Mettler’s stock options vest on the completion of certain business development milestones as follows: 3,000,000 stock
option on that date on which the Company or a related entity completes a bridge financing for the Papagayo Bay Resort & Luxury
Villas; 4,000,000 stock options on that date on which the Company or related entity completes a financing sufficient to complete the
Papagayo Bay Resort & Luxury Villas; and 5,000,000 stock options on that date on which Meliá assumes management
responsibility for the Papagayo Bay Resort & Luxury Villas.
(2) Mr. Rigendinger’s stock options vest on the completion of certain business development milestones as follows: 5,000,000
stock options on that date on which the Company or related entity completes a financing sufficient to complete the Papagayo Bay
Resort & Luxury Villas; and 5,000,000 stock options on that date on which Meliá assumes management responsibility for the
Papagayo Bay Resort & Luxury Villas.
(3) Mr. Mettler’s equity incentive shares are characterized as a retention award of which 3,000,000 shares are earned on each
anniversary of his term of employment over an initial term of three years that will automatically renew for two successive two
year terms to a maximum of 21,000,000 shares subject to earlier termination.
(4) Mr. Rigendinger’s equity incentive shares are characterized as a retention award of which 2,500,000 shares are earned on each
anniversary of his term of employment over an initial term of three years that will automatically renew for two successive one
year terms to a maximum of 12,500,000 shares subject to earlier termination.
(5) The per share value at December 31, 2014, was $0.06.
2013 SunVesta Stock Option Plan
Our Board of Directors adopted and approved the 2013 SunVesta Stock Option Plan (“Plan”) on January
1, 2013, which provides for the granting and issuance of up to 50,000,000 million shares of our common
stock. The Company has granted 32,000,000 stock options from the Plan at a $0.05 exercise price per
share for ten years. The Stock Option Plan has 18,000,000 options available for future grant.
Our Board of Directors administers our Plan, however, they may delegate this authority to a committee
formed to perform the administration function of the Plan. The Board of Directors or a committee of the
board has the authority to construe and interpret provisions of the Plan as well as to determine the terms of
an award. Our Board of Directors may amend or modify the Plan at any time. However, no amendment or
modification shall adversely affect the rights and obligations with respect to outstanding awards unless the
holder consents to that amendment or modification.
We have no agreement that provides for payments to our Chief Executive Officer or Chief Operating
Officer at, following, or in connection with his resignation or retirement except any accrued obligations and
the continuation of health insurance or pension benefits. However, both employment agreements do
provide for a severance payment in the event of a change of control, a change in our officer’s
responsibilities within the Company, either before or after a change in control, and their resignation for
what is defined in his employment agreement as “good reason”
We do maintain a pension plan covering all employees in Switzerland. Our model allocates pension costs
over the service period of employees eligible for the plan.
34
The following table provides summary information for the year ended December 31, 2014, concerning cash
and non-cash compensation paid or accrued by the Company to or on behalf of its directors.
Director Summary Compensation Table
Name
Fees earned
Stock
Option
Non-equity
Nonqualified
All other
Total
or paid in
awards
Awards
incentive plan
deferred
compensation
($)
cash
($)
($)
compensation
compensation
($)
($)
($)
($)
Dr. Max Rössler
-
-
-
-
-
-
-
Jose Maria
- 70,000
-
-
-
-
70,000
Figueres
Howard H.
- 70,000
-
-
-
-
70,000
Glicken
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information concerning the ownership of the Company’s 83,541,603
shares of common stock issued and outstanding as of April 15, 2015 with respect to: (i) all directors; (ii)
each person known by us to be the beneficial owner of more than five percent of our common stock; and
(iii) our directors and executive officers as a group.
Names and Addresses of Managers and
Beneficial Owners
Title of Class
Number of Shares
Percent of
Class
Joseph Mettler
CEO, CFO, PAO and Director
97 Seestrasse, CH-8942
Common
8,191,514(1)
10.0%
Oberrieden, Switzerland
Hans Rigendinger
COO and Director
97 Seestrasse, CH-8942
Common
25,216,084(2)
30.2%
Oberrieden, Switzerland
Dr. Max Rössler
Director
97 Seestrasse, CH-8942
Common
3,000,000(3)
3.6%
Oberrieden, Switzerland
José Maria Figueres
Director
97 Seestrasse, CH-8942
Common
0(4)
0.0%
Oberrieden, Switzerland
Howard M. Glicken
Director
97 Seestrasse, CH-8942
Common
700,000(5)
0.8%
Oberrieden, Switzerland
Officer and directors (5) as a group
Common
36,407,598
43.69%
Zypam Ltd.
Jasmin Court 35A, Regent Street
Common
2,418,180
2.9%
P.O. Box 1777, Belize City, Belize
35
(1) Common stock attributed to Mr. Mettler includes 2,418,180 shares held by Zypam Ltd., a related entity. Mr. Mettler also holds
12,000,000 unvested stock options granted pursuant to the 2013 SunVesta Stock Option Plan, to purchase additional shares of the
Company’s common stock at an exercise price of $0.05, subject to vesting based on the achievement of certain milestones tied to
the development of the Paradisus Papagayo Bay Resort & Luxury Villas and the right to earn up to an additional 21,000,000 shares
as a retention award of 3,000,000 shares issued on each anniversary of his employment agreement to earlier termination.
(2) Mr. Rigendinger also holds 10,000,000 unvested stock options granted pursuant to the 2013 SunVesta Stock Option Plan, to
purchase additional shares of the Company’s common stock at an exercise price of $0.05, subject to vesting based on the
achievement of certain milestones tied to the development of the Paradisus Papagayo Bay Resort & Luxury Villas and the right to
earn up to an additional 12,500,000 shares as a retention award of 2,500,000 shares issued on each anniversary of his employment
subject to earlier termination.
(3) Dr. Rössler also holds 10,000,000 unvested stock options granted pursuant to the 2013 SunVesta Stock Option Plan, to purchase
additional shares of the Company’s common stock at an exercise price of $0.05, subject to vesting based on the achievement of
certain milestones tied to the development of the Paradisus Papagayo Bay Resort & Luxury Villas.
(4) José Maria Figueres is entitled to 500,000 shares in connection with his appointment to the Board of Directors and he can earn an
additional 200,000 shares on each anniversary of service as a director.
(5) Howard M. Glicken is entitled to 500,000 shares in connection with his appointment to the Board of Directors and he can earn an
additional 200,000 shares on each anniversary of service as a director.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND
DIRECTOR INDEPENDENCE
Neither our directors or executive officers, nor any proposed nominee for election as a director, nor any
person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights
attached to all of our outstanding shares, nor any members of the immediate family (including spouse,
parents, children, siblings, and in−laws) of any of the foregoing persons has any material interest, direct or
indirect, in any transaction since the beginning of our last fiscal year or in any presently proposed
transaction which, in either case, has or will materially affect us except as follows:
Over our last fiscal year, the Company paid or accrued fees of approximately $ 123,000 to 4f Capital AG for
commission based financing services rendered by an entity related to Josef Mettler, one of our directors and
Chief Executive Officer.
Over our last fiscal year, the Company paid or accrued fees of approximately $120,000 to Akyinyi Interiors
and Exterior Decoration for interior design based consulting services rendered by an entity related to the
wife of Josef Mettler, one of our directors and Chief Executive Officer.
Over the last fiscal year, the Company paid fees of approximately $166,851 to Cambridge Limited
Corporation, related to accounting and consulting services rendered in Costa Rica, which entity is owned by
the father-in-law of Josef Mettler, one of our directors.
Over the last fiscal year, the Company obtained a loan in the amount of $186, 963 from Global Care AG, an
entity related to Dr. Max Rössler, one of our directors.
Over the last fiscal year, the Company decreased its loan obligation to Aires International Investment, Inc.
on settlement of receivable due from Josef Mettler and 4f Capital in the aggregate amount of $2,597,895
and an exchange difference on the Swiss Franc portion of the loan obligation.
Over the last fiscal year, the Company obtained loans and proffered loans to Josef Mettler, one of our
directors and Chief Executive Officer. The Company expensed no interest and earned no interest for these
loans and receivables.
36
Over the last fiscal year, the Company advanced funds against future commissions to 4f Capital AG, for
commission based financing services rendered by an entity related to Josef Mettler, one of our directors and
Chief Executive Officer. The Company expensed no interest and earned no interest for these loans and
receivables.
Over the last fiscal year, the Company entered into a compensation arrangement with Jose Maria Figueres
in connection with his service to the Board of Directors pursuant to which it authorized the issuance of five
hundred thousand (500,000) shares of restricted common stock to Mr. Figueres and retention compensation
of two hundred thousand (200,000) shares of restricted common stock paid on each annual anniversary of
Mr. Figueres’ service to the Board of Directors.
Over the last fiscal year, the Company entered into a compensation arrangement with Howard H. Glicken in
connection with his service to the Board of Directors pursuant to which it authorized the issuance of five
hundred thousand (500,000) shares of restricted common stock to Mr. Glicken and retention compensation
of two hundred thousand (200,000) shares of restricted common stock paid on each annual anniversary of
Mr. Glicken’s service to the Board of Directors.
Director Independence
The Company is quoted on the Over the Counter inter-dealer quotation system, which does not have
director independence requirements. However, for purposes of determining director independence, we have
applied the definitions set out in NASDAQ Rule 4200(a)(15) which states that a director is not considered
to be independent if he or she is also an executive officer or employee of the corporation. Accordingly, as of
December 31, 2014, we consider two of our directors independent since neither is employed by the
Company.
37
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees and Services
BDO Visura International AG (“BDO”) has provided audits of our annual financial statements and a review
of our quarterly financial statements for the periods ended December 31, 2014 and December 31, 2013
respectively. The following is an aggregate of fees billed during each of the last fiscal years for professional
services rendered by each of our principal accountants.
BDO Fees and Services
2014
Audit fees
$
212,600
Audit-related fees
-
Tax fees - preparation and filing of three major tax-related forms and tax planning.
-
All other fees - other services provided by our principal accountants.
-
Total fees paid or accrued to our principal accountants
$
212,600
BDO Fees and Services
2013
Audit fees
$
262,169
Audit-related fees
-
Tax fees - preparation and filing of three major tax-related forms and tax planning.
-
All other fees - other services provided by our principal accountants.
-
Total fees paid or accrued to our principal accountants
$
262,169
Audit Committee Pre-Approval
We do not have a standing audit committee. Therefore, all services provided to us by BDO, as detailed
above, were pre-approved by our Board of Directors. BDO performed all work with their permanent
full-time employees.
38
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Consolidated Financial Statements
The following documents are filed under “Item 8. Financial Statements and Supplementary Data,” pages
F-1 through F-47, and are included as part of this Form 10-K:
Financial Statements of the Company for the years ended December 31, 2014 and 2013:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders’ Deficit
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(b) Exhibits
The exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits on
page 41 of this Form 10-K, and are incorporated herein by this reference.
(c) Financial Statement Schedules
We are not filing any financial statement schedules as part of this Form 10-K because such schedules are
either not applicable or the required information is included in the financial statements or notes thereto.
39
Pursuant to the requirements of Section 13 or 15(d) 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.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SUNVESTA, INC.
/s/ Josef Mettler April 15, 2015
Josef Mettler
Chief Executive Officer, Chief Financial Officer
Principal Accounting Officer and Director
/s/ Hans Rigendinger April 15, 2015
Hans Rigendinger
Chief Operating Officer and Director
Signature
Title
Date
/s/ Josef Mettler
Director, Chief Executive Officer,
April 15, 2015
Josef Mettler
Chief Financial Officer, and
Principal Accounting Officer
/s/ Hans Rigendinger
Director, Chief Operating Officer
April 15, 2015
Hans Rigendinger
/s/ Dr. Max Rossler
Director
April 15, 2015
Dr. Max Rössler
/s/ Jose Maria Figueres
Director
April 15, 2015
Jose Maria Figueres
/s/ Howard H. Glicken
Director
April 15, 2015
Howard H. Glicken
40
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 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).
10.4*
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).
10.5*
Guaranty Agreement dated July 16, 2012, between SunVesta AG, Josef Mettler, Hans Rigendinger and Max
Rössler.
10.6*
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.
10.7*
Employment Agreement dated July 4, 2013 between the Company and Josef Mettler (incorporated by reference
to the Form 10-Q filed with the Commission on October 10, 2013).
10.8*
Assignment of Debt Agreement dated December 31, 2012, between the Company, SunVesta AG and Aires
International Investments, Inc. (incorporated by reference to the Form 10-Q filed with the Commission on
December 13, 2013).
10.9*
Debt Settlement Agreement dated December 31, 2012, between the Company and Hans Rigendinger
(incorporated by reference to the Form 10-Q filed with the Commission on December 13, 2013).
10.10*
Loan Agreement dated October 31, 2013, between SunVesta AG and Aires International Investments, Inc.
(incorporated by reference to the Form 10-Q filed with the Commission on December 13, 2013).
14*
Code of Ethics adopted March 1, 2004 (incorporated by reference from the 10-KSB filed with the Commission
on April 14, 2004).
Subsidiaries of the Company.
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.
99*
SunVesta, Inc. 2013 Stock Option Plan (incorporated by reference to the Form 10-Q filed with the Commission
on October 10, 2013).
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.
41