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EX-32 - SUNVESTA CERTIFICATION - SUNVESTA, INC. | exhibit32.htm |
EX-31 - SUNVESTA CERTIFICATION - SUNVESTA, INC. | exhibit31.htm |
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-Q
(Mark One)
r QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended June 30, 2016.
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 (State or other jurisdiction of incorporation or organization) | 98-0211356 (I.R.S. Employer Identification No.) |
Seestrasse 97, Oberrieden, Switzerland CH-8942
(Address of principal executive offices) (Zip Code)
011 41 43 388 40 60
(Registrants telephone number, including area code)
n/a
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
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 Noo
Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer o Non-accelerated filer oSmaller reporting company þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date. The number of shares outstanding of the issuers common stock, $0.01 par value (the only class of voting stock), at August 19, 2016, was 95,941,603.
1
TABLE OF CONTENTS
PART 1- FINANCIAL INFORMATION
Item1.
Financial Statements:
3
Consolidated Balance Sheets as of June 30, 2016 (unaudited) and December 31,
4
2015
Unaudited Consolidated Statements of Comprehensive Loss (unaudited) for the
5
three and six months ended June 30, 2016 and June 30, 2015
Unaudited Consolidated Statements of Stockholders Equity (unaudited) for the six
6
months ended June 30, 2016
Unaudited Consolidated Statements of Cash Flows (unaudited) for the six months
7
ended June 30, 2016 and June 30, 2015
Notes to Unaudited Consolidated Financial Statements
8
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of
38
Operations
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
48
Item 4.
Controls and Procedures
48
PART II-OTHER INFORMATION
Item 1.
Legal Proceedings
49
Item 1A.
Risk Factors
49
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
49
Item 3.
Defaults Upon Senior Securities
49
Item 4.
Mine Safety Disclosures
49
Item 5.
Other Information
49
Item 6.
49
50
Index to Exhibits
51
2
PART I FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
As used herein, the terms Company, we, our, and us refer to SunVesta, Inc., a Florida corporation,
and its predecessors and subsidiaries, unless otherwise indicated. In the opinion of management, the
accompanying unaudited, consolidated financial statements included in this Form 10-Q reflect all
adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of
operations for the periods presented. The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year.
3
SUNVESTA, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2016
December 31, 2015
(Unaudited)
Assets
Current assets
Cash and cash equivalents
42,927
111,830
Receivable from related parties
15,957
19,945
Other assets
389,591
158,574
Total current assets
$
448,475
290,349
Non-current assets
Property and equipment - net
63,678,244
61,271,424
Deposits related to construction work
642,388
798,874
Notes receivable
280,242
280,242
Down payment for property and equipment
2,369,816
2,972,083
Restricted cash
1,672,274
1,684,467
Total non-current assets
$
68,642,963
67,007,090
Total assets
$
69,091,438
67,297,439
Liabilities and stockholders' deficit
Current liabilities
Bank liabilities
219,479
179,313
Accounts payable
5,765,019
8,048,608
Accrued expenses
7,559,166
7,831,247
Note payable
2,706,861
2,736,912
Notes payable to related parties
2,287,688
1,130,978
Convertible CHF-Bond
3,754,253
0
EUR-Bond
8,611,940
8,347,717
Total current liabilities
$
30,904,404
28,274,776
Non-current liabilities
Convertible CHF-Bond
31,647,157
25,866,148
Liability related to conversion feature
7,313,982
6,976,322
Notes payable to related parties
47,288,260
47,198,362
Other long-term debts
25,210
36,140
Pension liabilities
213,716
210,680
Total non-current liabilities
$
86,488,325
80,287,652
Total liabilities
$
117,392,731
108,562,428
Stockholders' equity
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;
959,416
959,416
95,941,603 shares issued and outstanding
Additional paid-in capital
23,659,108
23,403,438
Accumulated other comprehensive income / (loss)
(1,042,522)
1,778,961
Accumulated deficit
(71,877,295)
(67,406,803)
Total stockholders' deficit
$
(48,301,293)
(41,264,988)
Total liabilities and stockholders' deficit
$
69,091,438
67,297,439
The accompanying notes are an integral part of these consolidated financial statements.
4
SUNVESTA, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME / (LOSS)
Three months ended June 30,
Six months ended June 30,
2016
2015
2016
2015
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Revenues
Revenues, net
-
-
-
-
Cost of revenues
-
-
-
-
Gross profit
$
-
-
-
-
Operating Expenses
General and administrative expenses
3,146,235
(1,369,582)
(2,926,735)
(3,226,049)
Impairment expenses
(296,663)
-
(296,663)
-
Total operating expenses
$
2,849,572
(1,369,582)
(3,223,397)
(3,226,049)
Income / (loss) from operations
$
2,849,572
(1,369,582)
(3,223,397)
(3,226,049)
Other income / (expense s)
Interest income
18,905
11,699
31,028
18,483
Interest expense
(1,654,599)
(1,309,308)
(3,027,510)
(2,638,219)
Amortization of debt issuance costs and
(634,762)
(695,579)
(983,648)
(1,141,783)
commissions
Change in Fair Value of Conversion Feature
771,529
-
1,180,226
-
Exchange differences
1,733,284
(1,168,861)
1,563,332
(705,420)
Other income / (expenses)
26,089
(23,685)
(10,525)
(49,326)
Total other expenses
$
260,446
(3,185,734)
(1,247,096)
(4,516,265)
Profit/ (loss) before income taxes
3,110,018
(4,555,316)
(4,470,493)
(7,742,314)
Income Taxes
-
-
-
(1,152)
Net income / (loss)
$
3,110,018
(4,555,316)
(4,470,493)
(7,743,464)
Comprehensive income / (loss)
Foreign currency translation
(875,919)
(1,434,959)
(2,821,483)
(2,485,163)
Comprehensive income / (loss)
$
2,234,099
(5,990,275)
(7,291,977)
(10,228,627)
Earnings / (loss) per common share
Basic and diluted
$
0.03
(0.05)
(0.05)
(0.08)
Weighted average common shares
Basic and diluted
98,841,603
92,941,603
98.674,021
92,775,305
The accompanying notes are an integral part of these consolidated financial statements.
5
SUNVESTA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Additional
Accumulated
Total
Common
Paid-in
Other
Accumulated
Treasury
Stockholders
Stock
Capital
Comprehensive
deficit
Stock
Equity
Income (Loss)
(Deficit)
December 31, 2015
$
959,416
$ 23,403,438
$
1,778,961
$ (67,406,803)
$
-
$ (41,264,988)
Translation adjustments
-
-
(2,821,483)
(0)
-
(2,821,483)
Net loss
-
-
-
(4,470,,493)
-
(4,470,493)
Stock basedcompensation expense
-
255,670
-
-
-
255,670
June 30, 2016
$
959,416
$ 23,659,108
$
(1,042,522)
$ (71,877,295)
$
-
$
(48,301,294)
The accompanying notes are an integral part of these consolidated financial statements.
6
SUNVESTA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
January 1
January 1
to June 30,
to June 30,
2016
2015
(Unaudited)
(Unaudited)
Cash flows from operating activities
Net loss
$ (4,470,493)
(7,743,464)
Adjustments to reconcile net loss to net cash
Depreciation and amortization
23,463
33,921
Impairment on Down Payment
296,663
-
Amortization of debt issuance costs and commissions
983,648
1,025,915
Accrued interest on debt
1,760,649
-
Unrealized exchange differences
(1,640,157)
494,736
Stock compensation expense
255,670
280,142
Expenses related to conversion feature
234,947
-
- Increase / decrease in:
Other current assets
695,424
(115,260)
Accounts payable
(2,356,519)
(898,510)
Accrued expenses
(183,512)
3,115,782
Net cash used in operating activities
$ (4,400,217)
(3,806,738)
Cash flow from investing activities
Other receivables from related parties
-
3,988
Receivables from related parties
-
(1,507,128)
Payments to Acquire Property, Plant and Equipment
(654,325)
(2,883,516)
Deposits related to construction
(641,818)
3,311
Down-payments and write off of non-refundable payments for property and
309,023
(307,841)
equiRestpmrictented cash
14,050
16
Net cash used in investing activities
$
(973,070)
(4,691,170)
Cash flows from financing activities
Increase/ (Decrease) in bank liabilities
42,047
(153,375)
Proceeds from notes payable related parties
4,031,006
1,344,348
Repayment of notes payable related parties
(7,112,077)
-
Proceeds from bond issuance, net of commissions and debt issuance costs
9,134,891
8,175,067
Repayment of bonds
(762,258)
-
Changes in note payable and other debt
(33,614)
(174,760)
Net cash provided by financing activities
$
5,299,996
9,191,280
Effect of exchange rate changes
4,388
1,109
Net increase / - decrease in cash
(68,903)
694,481
Cash and cash equivalents, beginning of period
111,830
14,347
Cash and cash equivalents, end of period
$
42,927
708,828
Additional information
Capitalized interest and debt issuance costs for construction (non-cash)
1,775,000
1,574,000
Assumption of payables due from AIRES by Global Care AG (non-cash)
7,621,345
0
Assumption of payables due from Global Care AG by Sportiva (non-cash)
1,533,150
0
Repayment of Specogna Holding AG loan by Aires
0
707,428
Interest paid
0
163,523
Assumption of receivables from Josef Mettler by AIRES (non-cash)
0
1,507,128
The accompanying notes are an integral part of these consolidated financial statements.
7
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
1.
CORPORATE INFORMATION
On August 27, 2007, SunVesta Inc. (SunVesta) acquired SunVesta Holding AG (SunVesta AG)
(collectively the Company). SunVesta AG held 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 SunVesta Holding España SL (España), a Spanish
company. Effective May 21, 2016, AdR absorbed Richland and SVCR and changed its name to
SunVesta Costa Rica SA.
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 securing financing for the project and
has not realized revenue to date. Since the financing of the project is not complete, the Companys
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).
The accompanying unaudited interim consolidated financial statements have been prepared by
management in accordance with the instructions in Form 10-Q and, therefore, do not include all
information and footnotes required by generally accepted accounting principles and should, therefore,
be read in conjunction with the Companys Form 10-K, for the year ended December 31, 2015, filed
with the Securities and Exchange Commission. These statements do include all normal recurring
adjustments which the Company believes necessary for a fair presentation of the statements. The
interim results of operations are not necessarily indicative of the results to be expected for the full year
ended December 31, 2016.
Except as indicated in the notes below, there have been no other material changes in the information
disclosed in the notes to the financial statements included in the Companys Form 10-K for the year
ended December 31, 2015, filed with the Securities and Exchange Commission.
8
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
2.
SIGNIFICANT ACCOUNTING POLICIES
New accounting standard updates not adopted yet
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Update 2016-02, Leases (Topic 842). The standard requires the recognition of lease assets and lease
liabilities by lessees for those leases classified as operating leases. Leases will be classified as either
finance or operating, with classification affecting the pattern of expense recognition. The standard
requires lessors to classify leases as either sales-type, finance or operating. A sales-type lease occurs
if the lessor transfers all of the risks and rewards, as well as control of the underlying asset, to the
lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as a
financing lease. If the lessor does not convey risks and rewards or control, an operating lease results.
The standard will become effective for the Company beginning January 1, 2019. The Company is
currently assessing the impact adoption of this standard will have on its consolidated results of
operations, financial condition, cash flows, and financial statement disclosures.
In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Updates (ASU) 2014-15 requiring an entitys management to evaluate whether there are conditions or
events, considered in aggregate, that raise substantial doubt about entitys ability to continue as a going
concern within one year after the date that the financial statements are issued (or within one year after
the date that the financial statements are available to be issued when applicable). The amendments to
(ASU) 2014-15 are effective for the annual period ending after December 15, 2016, and for annual
periods and interim periods thereafter. Early application is permitted. The Company is in the process
of evaluating the prospective impact that (ASU) 2014-15 will have on its balance sheet.
New accounting standard updates - adopted
In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Updates (ASU) 2015-03 which requires that debt issuance costs be reported in the balance sheet as a
direct deduction from the face amount of the related liability, consistent with the presentation of debt
discounts. Prior to the amendments, debt issuance costs were presented as a deferred charge (i.e., an
asset) on the balance sheet. The ASU provides examples illustrating the balance sheet presentation of
notes net of their related discounts and debt issuance costs. Further, the amendments require the
amortization of debt issuance costs to be reported as interest expense. Similarly, debt issuance costs
and any discount or premium is considered in the aggregate when determining the effective interest
rate on the debt. The amendments are effective for public business entities for fiscal years beginning
after December 15, 2015, and interim periods within those fiscal years. The application of this ASU
resulted in the reclassification of debt issuance cost and the relating amortization.
The Company had unamortized debt issuance costs of $2,700,664 and $2,995,209 as of June 30, 2016
and December 31, 2015 respectively. The Company reclassified amortization of debt issuance cost and
commissions in the amount of $297,040 and $446,204 to interest expense for the periods ended June
30, 2016 and 2015, respectively.
This ASU was applied retrospectively for all periods presented.
9
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
3.
GOING CONCERN
The Company is currently working on building a hotel in the Papagayo Gulf Tourism Project area of
Guanacaste, Costa Rica. The project is expected to open in the fourth quarter of 2018. Until the
completion of the project, the following expenditures are estimated to be incurred:
a. Gross project cost
$
217,000,000
b. Less: Proceeds from sale of villas
(25,000,000)
c. Net project cost
192,000,000
d. Overhead expenses
20,000,000
e. Total, excluding other potential projects
$
212,000,000
Seventy percent (70%) of the net project cost is intended to be financed through the issuance of secured
bonds, for which negotiations have been initiated. The remaining thirty percent (30%) 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 Rӧssler,
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 the Company. The purpose of the guaranty is to ensure
that until financing is secured for the entire project that they will act as guarantors to creditors to the
extent of the projects ongoing capital requirements. On September 22, 2015, the signatories to the
guaranty formally agreed to maintain the guaranty, as necessary, until December 31, 2018, after which
date the guaranty will expire.
The Guaranty Agreement requires that within 30 days of receiving a demand notice, requested funds
are made available by the guarantors to the Company. Based on this guaranty, management believes
that available funds are sufficient to finance cash flows for the twelve months subsequent to June 30,
2016 and the filing date, though future anticipated cash outflows for investing activities continue to
depend on the availability of financing.
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 Companys cash equivalents are placed with financial
institutions that maintain high credit ratings. The carrying amounts of these assets approximate their
fair value.
USD
EURO
CHF
AUD
CRC
Total
Total
Cash and cash
June 30, 2016
December 31,2015
equivalents
original currency
20,988 10,467
10,082
(0)
5,487
in $
20,988 11,624
10,305
(0)
10
42,927
111,830
USD ($) =
US Dollar
EURO =
Euro
CHF
=
Swiss Francs
AUD
=
Australian Dollar
CRC
=
Costa Rican Colón
10
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
5.
RESTRICTED CASH
As of June 30, 2016, the Company has the following restricted cash positions:
Restricted Cash
June 30, 2016
December 31, 2015
$
$
Credit Suisse in favor of BVK Personalvorsorge des
Cantons Zurich
130,622
128,805
HSBC in favor of Costa Rican Tourism Board
370,000
370,000
Banco Nacional de Costa Rica in favor of the Costa Rican
Environmental Agency SETENA
608,302
622,312
Banco National de Costa Rica in favor of the Costa Rican
Tourism Board
563,350
563,350
Gross
1,672,274
1,684,467
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 have 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.
6. NOTE RECEIVABLE
On June 15, 2015, the Company granted REP Caribbean Development Corporation, a third party, a
short term advance in the amount of $250,000. The repayment was due on November 30, 2015, with
a fixed interest payment of $5,000. The advance is secured by a non-related Swiss individual. On
December 10, 2015, the advance was increased by $25,000. Including accrued fixed interest, the
overdue amount at June 30, 2016, was approximately $280,000.
Dated April 27, 2016, a related party, QuadEquity Holdings AG signed a commitment to purchase
against cash this note receivable not later than June 30, 2016. As of the date of this report the
commitment to purchase has not been transacted.
11
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
7.
PROPERTY & EQUIPMENT
June 30, 2016 December 31, 2015
Land
$
19,700,000
19,700,000
IT Equipment
230,265
185,846
Other equipment and furniture
228,884
278,000
Leasehold improvements
77,085
66,617
Vehicles
139,000
139,000
Construction in-process
43,841,675
41,412,351
Gross
$
64,216,909
61,781,814
Less accumulated depreciation
-538,665
-510,390
$
Net
63,678,244
61,271,424
Depreciation expenses for the periods ending
June 30, 2016 and 2015
23,463
16,802
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 Rich Land concession is a right to use the property for a specific period of time of initially 20
years from the date of grant, which thereafter can 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 initially expired in June 2022.
The AdR concession is also a right to use the property for a specific period of time of initially 30 years
from the date of grant, which thereafter can 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 initially expired in November 2036.
On July 14, 2015 the Consejo del Polo de DesarrolloTuristico Papagayo at ICT (Council of Papagayo
Tourism Development Project), unanimously approved the extension of both concessions until 2052.
The construction in process through December 31, 2015 and June 30, 2016, is represented primarily
by architectural work related to the hotel and apartments as well as construction work.
Deposit related to construction work
For the quarter ended June 30, 2016, 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 June 30, 2016, and December 31, 2015, the Company has deposits of $642,388 and
$798,874 respectively, which have not yet been set off.
12
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
8.
DOWN PAYMENTS FOR PROPERTY & EQUIPMENT
June 30, 2016
December 31, 2015
La Punta (neighboring piece of land)
2,669,816
2,669.816
Hotel Engadina
-
302,267
Gross
$
2,669,816
2,972,083
Value adjustment on Down Payment La Punta
(300,000)
-
Total (net)
$
2,369,816
2,972,083
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 $23,395,806 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
development). Both of these properties are located in Costa Rica.
On November 13, 2012, the above agreement was amended to decrease the total purchase price to
$17,200,200 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 the said properties. The original contract (including amendments) 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 was outstanding as per date of the new, revised
agreement.
Since the original seller owes a third party $8,000,000, the Company was to pay $8,000,000 of the
purchase price directly to this third party instead of the original seller. The remaining $8,130,184 were
to be paid directly to the original seller. Payment schedules were defined.
As of this balance sheet day, the following is the situation:
Original seller
Third party
Total
Description
$
$
$
Total commitment
9,500,000
8,000,000
17,500,000
Payments till 30 June 2016
1,669,816
1,000,000
2,669,816
Thereof refundable:
-1,669,816
-700,000
-2,369,816
thereof non-refundable
0
300,000
300,000
Total outstanding at 30 June 2016
7,830,184
7,000,000
14,830,184
Thereof overdue
-7,830,184
-7,000,000
-14,830,184
Thereof not overdue
0
0
0
13
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
8.
DOWN PAYMENTS FOR PROPERTY & EQUIPMENT - Continued
Agreement to purchase neighboring pieces of land - continued
In light of the above situation the Company is in discussions with the original seller regarding an
extension and adaptation of the current agreement, which, for all practical reasons, must be considered
obsolete.
Additionally, a failure to pay will lead to liquidated damages of 5% of any instalments paid toward the
purchase price. Should the Company not be successful in obtaining a time extension for the payment
of the purchase price or amendment to the purchase agreement, it will have to write-off $300,000 of
that purchase price paid in 2013 for the new, revised agreement and 5% of additional damages on the
additional $1,000,000 paid for a total of $50,000, which is not refundable as per contract terms.
Both, the $300,000 write-off as well as the $50,000 for additional damages have been provided for in the
results of the second quarter 2016.
Down payment for Purchase Four Hotels in the Canton of Graubünden, Switzerland
On September 19, 2015, the Company signed an option agreement to acquire four existing hotels in
the Canton of Graubünden, Switzerland with an un-related third party. The properties optioned comprise
an aggregate of 141 rooms. The consideration for the option is CHF 300,000, which amount was paid
on October 25, 2015.
Dated May 10, 2016, the Company, QuadEquity Holdings AG and the potential seller of the four hotels
concluded an agreement, whereby QuadEquity Holdings AG assumed all of the Companys rights and
obligations from the original contract. In return, QuadEquity Holdings AG will pay the Company the
amount of $302,000 (CHF 300,000) before May 30, 2016. This payment was received by the Company
on June 1, 2016.
14
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
9.
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 followinghierarchy:
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 Companys fair value
calculations have been adjusted accordingly.
As of June 30, 2016 and December 31, 2015, respectively, there are no financial assets or liabilities
measured on a recurring basis at fair value with the exception of the liability related to the conversion
feature.
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:
15
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
9.
FAIR VALUE MEASUREMENT - Continued
Cash and cash equivalents carrying amount approximated fair value.
Restricted cash carrying amount approximated fair value.
Receivables from related parties (current) carrying amount approximated fair value due to the short term
nature of the receivables.
Accounts Payable carrying amount approximated fair value.
Note payable carrying amount approximated fair value due to the short term nature of the note payable.
Bank liabilities - carrying amount approximated fair value due to the short term nature of bank liabilities.
Notes receivable - carrying amount approximated fair value.
Notes payable to related parties - Dr. M. Rӧssler (current) The fair value was calculated based on the
underlying publicly 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.
Convertible CHF-bonds The fair values of the convertible bonds payable are classified as level 3 fair
values. The fair values of the convertible bonds have been determined by discounting cash flow
projections discounted at the respective interest rates of 6.00% for convertible CHF bonds, which
represents the current market rate based on the creditworthiness of the Company. Hence, the carrying
values approximate fair value.
Liability related to conversion feature - The fair value of the liability related to conversion feature is
classified as level 3 in the fair value hierarchy. The fair value of the liability is determined using a Black
Scholes model to calculate the option value at each reporting date and multiplied by the number of
potentially convertible shares. Hence the carrying value of the obligation approximates the fair value.
16
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
9.
FAIR VALUE MEASUREMENT - Continued
The fair value of our financial instruments is presented in the table below:
June 30, 2016
December 31, 2015
Carrying
Fair Value $
Carrying
Fair Value $ Fair Value Reference
Amount $
Amount $
Levels
Cash and cash equivalents
42,927
42,927
111,830
111,830
1
Note 4
Restricted cash
1,672,274
1,672,274
1,684,467
1,684,467
1
Note 5
Receivables from related parties
other (current)
15,957
15,957
19,945
19,945
3
Note 10
Accounts Payable
5,765,020
5,765,020
8,048,608
8,048,608
1
-
Bank liabilities
219,479
219,479
179,313
179,313
1
Note 11
Note payable
-
-
-
-
1
Note 17
Notes payable to related parties Dr.
-
-
-
-
1
Note 10
M. Rӧssler (current)
Notes payable to related parties
Rigendinger (current)
2,001
2,001
1,973
1,973
3
Note 10
Notes payable to related parties other
(current)
2,285,687
2,285,687
1,129,005
1,129,005
3
Note 10
Notes receivable
280,242
280,242
280,242
280,242
3
EUR-bonds
8,611,940
8,611,940
8,488,631
8,488,631
3
Note 12
Convertible CHF-bonds
35,401,410
35,401,410
28,720,443
28,720,443
3
Note 12
Notes payable to related parties
Aires (non-current)
47,288,260
47,288,260
47,198,362
47,198,362
3
Note 10
Liability related to conversion feature
7,313,982
7,313,982
6,976,322
6,976,322
3
Note 12
The Company's financial liabilities measured at fair value on a recurring basis consisted of the
liability relates to conversion feature as of the following date:
Balance at December 31, 2015
6,976,322
Additions
1,415,173
Change in Fair Value of Conversion Feature
(1,180,226)
FX Revaluation
102,712
Balance at June 30, 2016
7,313,982
The Company used a Black-Scholes model to value the liability related to conversion feature as of
June 30, 2016 and December 31, 2015.
The assumptions as of December 31, 2015 are as follows:
Stock Price: CHF 5.08
Annualized Risk Free Rate: 0.72%
Exercise Price: CHF 8
Annualized Volatility: 80%
Time to Maturity: 2.75 years
The assumptions as of June 30, 2016 are as follows:
Stock Price: CHF 5.08
Annualized Risk Free Rate: 0.71%
Exercise Price: CHF 8
Annualized Volatility: 80%
Time to Maturity: 2.25 years
17
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
10.
RELATED PARTY TRANSACTIONS
The notes payable to and receivables from related parties are composed of the follows:
Receivables
Payables
December
December 31,
June 30, 2016
31, 2015
June 30, 2016
2015
1 Hans Rigendinger
-
-
2,001
1,973
2 Aires International
-
-
47,288,260
47,198,362
3 Akyinyi Interior and Exterior
Decoration
-
-
290,000
290,000
4 Global Care AG
-
-
1,434,118
240,210
5 Geoffrey Long
15,957
19,945
-
-
6 Sportiva participations ag
-
-
561,569
528,660
7 Josef Mettler
-
-
-
70,135
8 QuadEquity Holdings
-
-
-
-
9 4f capital ag
-
-
-
-
10 Dr. Max Rössler
-
-
-
-
Total excluding interest
15,957
19,945
49,575,948
48,329,340
Accrued interest
-
-
4,489,666
6,370,579
Total
15,957
19,945
54,065,614
54,699,919
of which non-current
-
-
47,288,260
47,198,362
Related party
Capacity
Interest Repayment
Rate
Terms
Security
1 Hans Rigendinger Shareholder, COO and Company board member
3%
none
none
2 Aires International Company owned by Dr. Max Rössler, a board member
Akyinyi Interior
3 and Exterior
Company owned by the wife of Josef Mettler
none
none
none
Decoration
4 Global Care AG
Company owned by Dr. Max Rössler, a board
member
none
none
none
5 Geoffrey Long
Head of Accounting The Americas
none
none
none
6 Sportiva
participations ag
Company owned by Josef Mettler
3%
none
none
7 Josef Mettler
Shareholder, CEO, CFO and Company board member
3%
none
none
8 QuadEquity
Holdings
Company owned by Josef Mettler (see above)
none
none
none
9 4f capital ag
Company owned by Josef Mettler (see above)
none
none
none
18
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
10.
RELATED PARTY TRANSACTIONS - Continued
Loan agreement Aires International Investment Inc.
As of June 30, 2016 the Company owes Aires International Inc. the following:
Borrower
Debt instrument
Amount in CHF
Amount in
Annual
Repayment date
denominated in
USD
interest
*
CHF
rate
SunVesta Inc.
Promissory note
10,044,370
10,266,118
7.25 %
Dec 31, 2017
SunVesta Inc.
Promissory note
10,000,000
10,220,769
7.25 %
Dec 31, 2017
SunVesta Inc.
Promissory note
10,000,000
10,220,769
7.25 %
Dec 31, 2017
SunVesta Inc.
Promissory note
3,985,006
4,072,982
7.25 %
Dec 31, 2017
SunVesta Holding
Loan agreement
12,237,457
12,507,622
7.25 %
Dec 31, 2017
Total
47,288,260
*
The notes may be repaid in whole or in part.
Loans Dr. Max Rӧssler
In 2012, Dr. Max Rössler, a related party, provided loans totaling $0.8 million that were initially
repayable in December 2012, but were extended through December 2015. These loans were to be
repaid in cash or with the delivery of certain shares of equity in two public companies. The Company
had the right of settlement and carried the loans at their fair values, which was the amount of cash paid
in without considerations for the change in value of the underlying securities. In December 2015, Dr.
Rössler and the Company settled these loans through a transfer to a separate debtor - Aires - of
$1,551,669 (CHF 1,535,900). The Company assessed this debt modification to be an extinguishment
under the guidance prescribed in ASC 470-50 and correspondingly recognized a Loss on
Extinguishment in its statements of comprehensive loss for $748,466 for the year ended December 31,
2015.
In the second quarter 2016, Dr. Max Rössler provided $2,698,283 (CHF 2640000). Interest of
$16,567 was recorded in this period. Effective June 30, 2016 both amounts were transferred to the loan
account with Global Care AG.
Loan Global Care AG
During 2014, Global Care AG loaned the Company $190,270 (CHF 185,000), which amount was
repayable on October 31, 2014. The loan includes a fixed interest payment of $20,570 (CHF 20,000).
As of the date of this report, both amounts are overdue. According to the agreement, there are no
penalties for late payment.
As explained in the preceding note, effective June 30, 2016, an amount of $2,714,850 (CHF 2,656,083)
was transferred from the loan account Dr. Max Rössler to the loan account Global Care AG.
Payable to Josef Mettler
As of June 30, 2016, there is neither a receivable from nor payable to Josef Mettler.
19
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
10.
RELATED PARTY TRANSACTIONS - Continued
Current account sportiva participations ag (a Josef Mettler company)
During the three-month period ended June 30, the following transactions occurred on the current
account sportiva participations ag:
CHF
USD
Balance March 31, 2016
-268,593
-274,529
Cash received from Company
1,043,958
1,067,043
Credited to the account Josef Mettler
175,195
179,067
Amount absorbed by Global Care AG
-1,500,000 -1,533,150
Balance June 30, 2016
-549,440
-561,569
Commissions paid or payable to related parties
During the periods ended June 30, 2016, and June 30, 2015, the Company paid commissions to 4f
Capital AG in the amount of $0 and $803, respectively, for services related to financing the Company.
These costs are capitalized as debt issuance costs and presented net with the corresponding debt
obligation. 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.
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 March 31, 2016 was $2,001.
Mr. Rigendinger also held bonds denominated in Euros and Swiss Francs valued at approximately
$460,000 as of June 30, 2016 and $492,000 as of December 31, 2015.
Service fees paid or payable to Akyinyi Interior and Exterior Decoration
During the periods ended June 30, 2016, and June 30, 2015, the Company paid or accrued 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
$0 and $30,000 respectively. These costs have been capitalized to property and equipment.
Consulting Fees paid or payable to Cambridge Limited Corp.
During the three months periods ended June 30, 2016, and June 30, 2015, the Company paid fees to
Cambridge Limited Corporation, which is a company owned by the father-in-law of the Chief
Executive Officer of the Company. These fees related to accounting and consulting services rendered
to the Company in the amount of approximately $44,700 and $43,500, respectively.
11.
BANK LIABLITIES
The bank liability of $219,479 and $179,313 at June 30, 2016 and December 31, 2015, respectively,
represented a temporary, secured overdraft facility, bearing an interest rate of some 9%.
20
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
12.
BONDS
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 EUR15,000,000
CHF 15,000,000
Units:
EUR10,000
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
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
21
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
12.
BONDS - Continued
On September 30, 2015, the Company approved the issuance of two new CHF-bonds. The major terms
and conditions are the following:
Description
Convertible CHF Bond I
Convertible CHF Bond II
Issuer:
SunVesta Holding AG
SunVesta Holding AG
Type of securities:
Senior convertible bonds,
Senior convertible bonds,
convertible into shares of the issuer,
convertible into shares of the issue
accordance with Swiss law
accordance with Swiss law
Approval by SunVesta AG BOD:
September 30, 2015
September 30, 2015
Volume:
Up to CHF 45,000,000
Up to CHF 15,000,000
Denomination:
CHF 5,000
CHF 5,000
Offering period:
October 01, 2015
October 01, 2015
Maturity date:
September 30, 2018
September 30, 2018
Issue price:
100 %
100 %
Redemption price:
100 %
100 %
Issuance date:
October 01, 2015
October 01, 2015
Coupon:
6.00 % p.a.
6.00 % p.a.
Interest due dates:
September 30 of each year, the first
September 30 of each year, the firs
September 30, 2016
September 30, 2016
Reference price:
CHF 6.50
CHF 6.50
Initial conversion price:
CHF 8.00
CHF 8.00
Applicable law:
Swiss
Swiss
In October 2015, Sunvesta Holding AG, a wholly owned subsidiary of the Company settled
approximately $27,300,000 worth of old CHF-Bonds which had matured on August 31, 2015 and were
extended through September 30, 2015 (i.e. unpaid). These were rolled forward/exchanged into two
substantially different convertible bonds of Sunvesta Holding AG. One is a $45,000,000 Convertible
Bond and the other a $15,000,000 Convertible Bond as is discussed in tables above. These new
Convertible bonds are substantially different than the previous CHF bonds that matured in the third
quarter of 2015 and this is subsequently accounted for as an extinguishment. The Company has
recorded a loss on extinguishment equal to the fair value of the conversion feature. Third party issuance
costs totaling $3,100,000 have been capitalized and amortized over the life of the bonds under the
effective interest rate method. Finally, the change of the fair value of the liability related to conversion
feature was expensed in the period.
The nominal amounts have changed as follows:
CHF Bond
CHF Bond
CHF BOND I
2016
2015
$
$
Balances January 1
-
10,999,192
Cash inflows
-
-
Cash outflows
-
(5,913,796)
Foreign currency adjustments
-
159,884
Reclassifications to CHF Bond II
-
-
Reclassifications to Convertible CHF Bond I
-
(2,005,548)
Reclassifications to Convertible CHF Bond II
-
(3,239,732)
Sub-total
-
-
Discounts (commissions paid to bondholders)
-
(670,764)
Accumulated amortization of discounts
-
670,764
Unamortized discounts
-
-
Balances June 30 and December 31(Carrying value)
-
-
22
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
12.
BONDS - Continued
From the CHF Bond I issue in this roll-forward, $2,005,548 was reclassified to the Convertible CHF
Bond I in the fourth quarter of 2015. Additionally, $3,239,732 was reclassified to the Company's CHF
Convertible Bond II.
EURO Bond (New)
EURO Bond
EURO Bond
(New) 2016
(New) 2015
$
$
Balances January 1
6,871,630
7,355,572
Cash inflows
-
281,754
Cash outflows
-
-
Foreign currency adjustments
123,147
(765,696)
Sub-total
6,994,777
6,871,630
Discounts (commissions paid to bondholders) and
debt issuance costs
(597,095)
(588,613)
Accumulated Amortization of discounts and
debt issuance costs
503,411
432,128
Total Accumulated Unamortized discounts and
debt issuance costs
(93,684)
(156,485)
Balances June 30 and December 31 (Carrying value)
6,901,094
6,715,145
As per date of this report the Company has realized a cumulative amount of EUR 6.89 million ($7.65
million) related to the EURO Bond I.
CHF Bond
CHF Bond II
CHF BOND II
II
2016
2015
$
$
Balances January 1
-
15,304,228
Cash inflows
-
10,819,209
Cash outflows
-
(3,923,675)
Foreign currency adjustments
-
(51,779)
Reclassifications from CHF Bond I
-
-
Reclassifications to Convertible CHF Bond I
-
(185,127)
Reclassifications to Convertible CHF Bond II
-
(21,962,856)
Sub-total
-
-
Discounts (commissions paid to bondholders)
-
(1,578,825)
Accumulated amortization of discounts
-
1,578,825
Unamortized discounts
-
-
Balances June 30 and December 31(Carrying value)
-
-
From the CHF Bond II issue in this roll-forward, $185,127 was reclassified to the Convertible CHF
Bond I in Q4 2015. Additionally, $21,962,856 was reclassified to the Company's CHF Convertible
Bond II.
23
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
12.
BONDS - Continued
EUR Bond
EURO BOND NEW II
EUR Bond
new II
new II
2015
2016
$
$
Balances January 1
1,658,300
1,761,258
Cash inflows
-
-
Cash outflows
-
-
Foreign currency adjustments
58,262
(102,958)
Sub-total
1,716,562
1,658,300
Discounts (commissions paid to bondholders) and
debt issuance costs
(177,177)
(174,660)
Accumulated Amortization of discounts and
171,462
148,932
debt issuance costs
Total Accumulated Unamortized discounts and
debt issuance costs
(5,715)
(25,728)
Balances June 30 and December 31 (Carrying value)
1,710,846
1,632,572
As per date of this report the Company has realized a cumulative amount of EUR 1.65 million ($1.83
million) related to the EURO Bond new II.
Convertible CHF BOND I
Convertible
Convertible
CHF Bond I
CHF Bond I
2016
2015
$
$
Balances January 1
2,250,048
-
Cash inflows
1,640,887
100,990
Cash outflows
(103,008)
-
Foreign currency adjustments
33,312
(41,617)
Reclassifications to CHF Bonds
(634,186)
2,190,675
Sub-total
3,187,054
2,250,048
Discounts (commissions paid to bondholders) and debt issuance
costs
(241,923)
(136,219)
Accumulated Amortization of discounts and debt issuance costs
77,050
57,896
Total Accumulated Unamortized discounts and debt issuance
costs
(164,873)
(78,323)
Balances June 30 and December 31 (Carrying value)
3,022,181
2,171,725
In the fourth quarter of 2015, the Company issued this Convertible CHF Bond I with funds received
from new bondholders totaling $100,990. Additionally, $2,005,548 was reclassified from CHF Bond
I and $185,127 was reclassified from CHF Bond II. In the first quarter of 2016, the Company
reclassified $634,186 to Convertible CHF Bond II.
As per date of this report, the Company has realized a cumulative amount of CHF 3.12 million
($3.19million) related to the Convertible Bond I.
24
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
12.
BONDS Continued
Convertible
Convertible
Convertible CHF BOND II
Bond II
Bond II
June 30,
December 31;
2016
2015
Balances January 1
26,470,395
0
Cash inflows
8,835,531
1,747,122
Cash outflows
(659,250)
0
Foreign currency adjustments
344,187
(479,315)
Reclassifications to CHF Bonds
634,186
25,202,588
Sub-total
35,625,049
26,470,395
Discounts (discounts to bondholders) and debt issuance costs)
(4,256,315)
(2,977,065)
Accumulated Amortization of discounts and debt issuance costs
1,010,496
201,093
Total Accumulated Unamortized discounts and debt issuance costs
(3,245,819)
(2,775,972)
Balances June 30 and December 31 (Carrying value)
32,379,230
23,694,423
In the fourth quarter of 2015, the Company issued this Convertible CHF Bond II with funds received
from new bondholders totaling $1,747,122. Additionally, $3,239,732 was reclassified from CHF Bond
I and $21,962,856 was reclassified from CHF Bond II. In the first quarter of 2016, the Company
reclassified $634,186 from Convertible CHF Bond I.
As per date of this report the Company has realized a cumulative amount of CHF 35.39 million ($36.17
million) related to the Convertible Bond II.
Included in the above is an amount of approx. $4.3 Mio. (CHF 4,2 Mio.), which, by agreement between
the Company and the bondholders and as a deviation from the standard terms, are repayable as of
February 28, 2017. As these are due within 12 months from the reporting date, these funds are classified
within current liabilities on the consolidated balance sheet.
25
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
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.
Actuarial valuation
Net periodic pension cost has been included in the Companys results as follows:
Three months
Six months
Three months
Six months
Pension expense
ended
ended
ended June 30,
ended
June 30, 2016
June 30, 2016
2015
June 30, 2015
$
$
$
$
Current service cost
15,357
30,713
14,648
29,296
Net actuarial (gain) loss recognized
-
-
-
-
Interest cost
945
1,891
1,348
2,696
Expected return on assets
(1,916)
(3,833)
(1,659)
(3,318)
Employee contributions
(5,877)
(11,754)
(5,963)
(11,926)
Net periodic pension cost
9,148
18,295
8,374
16,748
During the three month periods ended June 30, 2016 and June 30, 2015 the Company made cash
contributions of $5,877 and $6,104, respectively, to its defined benefit pension plan.
All of the assets are held under the collective contract by the plans re-insurer Company and are
invested in a mix of Swiss and international bond and equity securities within the limits prescribed by
the Swiss Pension Law.
The expected future cash flows to be paid by the Company in respect of employer contributions to the
pension plan for the year ended December 31, 2016 are $11,754.
26
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
14.
STOCK COMPENSATION
The Company has included share based compensation under the SunVesta Inc. Stock Option Plan 2013
(the Plan) as part of the total remuneration in certain employment and Board of Directors contracts.
The Company is authorized to grant 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 Companys 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 an amount equal to 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.
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
an amount equal to the share price and fair value of the shares on the grant date. These were issued in
connection with his appointment 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, an
amount equal to the share price and fair value of the shares on the grant date, 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 up to 21,000,000
common shares through December 31, 2020 related to the retention bonus.
27
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
14.
STOCK COMPENSATION - Continued
Share Grants Mr. José María Figueres
On March 10, 2014, the Company authorized the issuance of 500,000 common shares, valued at $0.10,
an amount equal to the share price and therefore the fair value on grant date, and a retention award of
200,000 common shares for each fully completed year of service to José María Figueres in connection
with his appointment to the Board of Directors.
Share Grants Mr. Howard M. Glicken
On March 10, 2014, the Company authorized the issuance of 500,000 common shares, valued at $0.10,
an amount equal to the share price and therefore the fair value on grant date, and a retention award of
200,000 common shares for each fully completed year of service to Howard Glicken in connection
with his appointment to the Board of Directors.
Based on these contracts the Company has included the following stock-based compensation in the
Companys results:
Stock-based compensation
Three months
Six months
Three months
Six months
(shares)
ended June 30,
ended June 30,
ended June 30,
ended June 30,
2016
2016
2015
2015
Shares granted
46,800,000 shares 46,800,000 shares 46,400,000 shares 46,400,000 shares
Fair Value respectively
$0.0767
$0.0767
$0.0744
$0.0744
market price on grant date
Total maximal expenses
$3,590,000
$3,590,000
$3,450,000
$3,450,000
(2013-2020)
Shares vested
26,800,000 shares 26,800,000 shares 20,900,000 shares 20,900,000 shares
Unvested shares
20,000,000 shares 20,000,000 shares 25,900,000 shares 25,900,000 shares
As of December 31, 2016, the Company expects to record compensation expense in the future up to
$1,140,000 as follows:
Year ending December 31,
Stock-based
Through
compensation
December 31,
(shares)
2016
2017
2018
2019
2020
$
$
$
$
$
Unrecognized
compensation
205,000
410,000
210,000
210,000
105,000
expense
28
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
14.
STOCK COMPENSATION - Continued
Stock Options Mr. Hans Rigendinger
The Company granted to Hans Rigendinger, in connection with his employment contract, 10,000,000
stock 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. Asof
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 the date of this report, the estimated opening date was
postponed to the fourth quarter 2018. 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.
29
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
14.
STOCK COMPENSATION Continued
Stock Options Dr. Max Rӧssler
The Company granted to Dr. Max Rӧssler, in connection with his appointment to the Board of
Directors, 10,000,000 stock options on July 3, 2013. Each option entitles Dr. Rӧssler 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 the date of this report, the estimated opening date was postponed
to the fourth quarter 2018. 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 stock
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 the date of this report, the estimated opening date was postponed
to the fourth quarter 2018. 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.
30
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
14.
STOCK COMPENSATION Continued
Stock Options Summary
A summary of stock options outstanding as per June 30, 2016 is as follows:
Options outstanding
Number of
Weighted average
Weighted average
Options
exercise price
remaining
contractual life
Outstanding January 1, 2016
32,000,000
$ 0.05
7.42 years
Granted
-
Exercised
-
Forfeited or expired
-
Outstanding June 30, 2016
32,000,000
$ 0.05
6.92 years
Exercisable June 30, 2016
-
The following table depicts the Companys non-vested options as of June 30, 2016 and changes during
the period:
Non-vested options
Shares under Options
Weighted average grant date
fair value
Non-vested at December 31, 2015
32,000,000
$ 0.053
Non-vested-granted
-
-
Vested
-
-
Non-vested, forfeited or cancelled
-
-
Non-vested at June 30, 2016
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. No stock options were granted for the periods ended June 30, 2016 and June 30, 2015.
Assumption
June 30, 2016
June 30, 2015
Dividend yield
Risk-free interest rate used (average)
Expected market price volatility
Average expected life of stock options
n.a
n.a
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.
31
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
14.
STOCK COMPENSATION - Continued
Stock Options Summary - Continued
As of June 30, 2016, the Company had unrecognized compensation expenses related to stock options
currently outstanding, to be recognized in future quarters respectively years as follows:
Through to
Year ending
Year ending
Stock-based compensation (options)
December 31,
December 31,
December 31,
2016
2017
2018
$
$
$
Unrecognized compensation expense
30,670
61,340
46,005
15.
SUMMARY OF SHARE AND OPTION COMPENSATION EXPENSE
The Company recorded the following amounts related to stock based compensation expense during
the periods ended June 30, 2016 respectively June 30, 2015:
Three
Six months
Three
Summary of share and option
months June
June 30,
months
Six months
based compensation expense
30, 2016
2016
June 30,
June 30,
$
$
2015
2015
$
$
Share grants (see Note 14 for
112,500
225,000
102,500
212,666
details)
Option grants (see Note 14 for
15,335
30,670
33,738
67,476
details)
Total
(recorded under general &
127,835
255,670
136,238
280,142
administrative expense)
16.
FUTURE LEASE COMMITTMENTS
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.
December 31,
December 31,
Future lease commitments
2016
2015
$
$
2016
65,000
130,000
2017
130,000
130,000
32
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
17.
NOTE PAYABLE
June 30, 2016
December 31, 2015
$
$
Promissory note
2,000,000
2,000,000
Specogna Holding AG
630,859
605,743
R. Weimar (private investor)
76,002
131,169
Total
2,706,861
2,736,912
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.
On April 21, 2016, the Company signed a new agreement, which stipulated new payment terms. The
total amount of $2,000,000 is now repayable in four quarterly instalments of $500,000 each, starting
on August 21, 2016.
Loans Specogna Holding AG
On December 31, 2015, the Company entered into a short term loan agreement for approximately
$607,000 with Specogna repayable on February 29, 2016, with an interest payment of 8 % per annum.
The loan is secured personally and jointly by Dr. Rössler, Mr. Mettler and Mr. Rigendinger.
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. The loan was repayable in five installments, (four payments of $84,700, one
payment of $38,000), with the initial payment due on June 2, 2014 and the latest one due on June 1,
2015. The interest rate is 2 % per annum. The Company has repaid $24,685 during first quarter 2016
and an additional $30,482 in the second quarter 2016, whereas the entire loan amount should have
been repaid. The agreement does not stipulate any repercussions for late payments.
33
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
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.
Dated April 27, 2016, a seventh addendum has been signed between the Company and Meliá with
the following major conditions:
a.
New completion date: September 15, 2018 (subject to force majeure)
b.
Should the completion not occur by September 15, 2018, and should the parties not have
agreed in writing an extension to such date, after September 15, 2018, the Company shall pay Meliá
a daily amount of USD $2,000 as liquidated damages.
c.
Should the completion not occur by November 15, 2018, the Meliá will be entitled to
terminate the agreement unless the parties agree in writing to extend such date. The Company shall
be obliged to pay Meliá an amount of USD $5,000,000 as liquidated damages solely to compensate
Meliá.
As the seventh addendum was not in place at March 31, 2016, the provisions of the sixth addendum
had to be taken into consideration. Consequently, an accrual in the amount of $5 million was charged
against general and administrative expenses in the first quarter 2016. In light of the signed seventh
addendum, this accrual has been reversed in the second quarter of 2016 under general and
administrative expenses within the statement of comprehensive loss.
34
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
19.
EARNINGS PER SHARE
Basic earnings per share are the result of dividing the Companys net income (or net loss) by the
weighted average number of shares outstanding for the contemplated period. Diluted earnings per
share are calculated applying the treasury stock method. When there is a net income dilutive effect all
stock-based compensation awards or participating financial instruments are considered. When the
Company posts a loss, 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.
Three-month
Six-month
Three-month
Six-month
Earnings per share
period ended
period ended
period ended
period ended
June 30, 2016
June 30, 2016
June 30, 2015
June 30, 2015
Company posted
Net profit
Net loss
Net loss
Net loss
Basic weighted average shares
outstanding
98,841,603
98,674,021
92,941,603
92,775,305
Dilutive effect of common stock
equivalents
None
None
None
None
Dilutive weighted average shares
outstanding
98,841,603
98,674,021
92,941,603
92,775,305
A total of 2,900,000 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.
Three-month
Six-month
Three-month
Six-month
Earnings per share
period ended
period ended
period ended
period ended
June 30, 2016
June 30, 2016
June 30, 2015
June 30, 2015
Options to Hans Rigendinger
10,000,000
10,000,000
10,000,000
10,000,000
Options to Dr. M. Rössler
10,000,000
10,000,000
10,000,000
10,000,000
Options to Josef Mettler
12,000,000
12,000,000
12,000,000
12,000,000
Total Options
32,000,000
32,000,000
32,000,000
32,000,000
Shares to Hans Rigendinger
5,000,000
5,000,000
7,500,000
7,500,000
(retention bonus non vested)
Shares to Josef Mettler (retention
15,000,000
15,000,000
18,000,000
18,000,000
award)
Shares to Howard Glicken and
400,000
400,000
400,000
400,000
José Maria Figueres (retention
award)
Shares associated with
4,746,720
4,746,720
-
-
Convertible CHF Bonds
Total Shares
25,146,720
25,146,720
25,900,000
25,900,000
Total Options and Shares
57,146,720
57,146,720
57,900,000
57,900,000
Options related to Convertible CHF bonds: Each bond in the principal amount of CHF 5,000 can be
converted on any business day during the conversion period into 625 common shares of SunVesta Holding
AG at a conversion price equal to CHF 8.
35
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
20.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses according to the consolidated statement of comprehensive loss
include:
Three month
Six month
Three month
Six month
period ended period ended
period ended period ended
June 30, 2016
June 30, 2016
June 30, 2015
June 30, 2015
$
$
$
$
Rental & related expenses
50,171
104,787
49,951
101,629
Audit
200,416
187,639
127,720
177,530
Consulting
750,486
961,805
317,042
592,381
Marketing, Investor & public relations
12,531
41,309
29,121
43,762
Travel expenses
93,166
196,913
112,818
287,751
Personnel costs including social security costs
and share based remuneration
442,454
906,155
509,862
1,711,031
Expense for penalty on management agreement
(5,000,000)
-
-
-
Various other operating expenditures
304,539
528,127
223,068
311,965
Total according statement of
$
(3,146,235)
2,926,735
1,369,582
3,226,049
comprehensive loss
21.
OTHER EVENTS
On May 9, 2016, the Company signed an agreement with Median Trust SA, by which this service
provider is mandated to set-up a special purpose vehicle (SPV), to be called Compartment in
accordance with Luxembourg law. The objective of the SPV is to obtain an investment grade rating
and to make a bond offering of not less than $100 million. The SPV will be the issuer, however, the
responsibility to place the bonds remains with the Company. As of the date of this report, the SPV has
not yet been established.
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.
36
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Managements Discussion and Analysis of Financial Condition and Results of Operations and other
parts of this quarterly report contain forward-looking statements that involve risks and uncertainties.
Forward-looking statements can be identified by words such as anticipates, expects, believes, plans,
predicts, and similar terms. Forward-looking statements are not guarantees of future performance and our
actual results may differ significantly from the results discussed in the forward-looking statements. Factors
that might cause such differences include but are not limited to those discussed in the subsection entitled
Forward-Looking Statements and Factors That May Affect Future Results and Financial Condition below.
The following discussion should be read in conjunction with our financial statements and notes hereto
included in this report. All information presented herein is based on our three and six month periods ended
June 30, 2016 and June 30, 2015. Our fiscal year end is December 31.
Discussion and Analysis
Business Overview
We are in the process of developing high-end luxury hotels and resorts worldwide. Our initial focus is
concentrated on offering luxury hotel products located in attractive, top-class coastal vacation destinations in
countries 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 on 20.5 hectares of prime land located in Guanacaste Province, Costa
Rica, is the Paradisus Papagayo Bay Resort & Luxury Villas project includes two concepts; i.e. the Vista
Mar (Family Concierge) and the Vista Bahia (Royal Service), a five-star luxury hotel. All permitting for the
project is in place, including permission to incorporate the beachfront adjacent to the two concessions into
the development and all significant site work completed. Vertical construction is expected to commence in
the first quarter of 2017, while the opening of the Paradisus Papagayo Bay Resort & Luxury Villas is
scheduled for the fourth quarter 2018, subject to the procurement of the requisite financing.
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
37
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
(91212* square meters)
Room size does not include balconies and terraces.
* Room size does not include balconies and terraces.
All ground floor suites will have direct access to swim-up pools. Each of the suites and villas will have a full
view of the sea. Royal Service guests will furthermore have access to restaurants, bars, lounges, fitness
equipment, spas and outside massage areas.
The Paradisus Papagayo Bay Resort & Luxury Villas will feature other highlights including:
more than 65 private, swim up and resort pools including the worlds second largest Infinity Pool
all within idyllic landscaped grounds
a wedding chapel with a stunning ocean view
rain forest walkways that permit guests to experience the flora and fauna of the rain forest
a multipurpose convention hall with over 2,000 square meters of space that can be utilized as a
whole or divided to create smaller meeting rooms
a full service spa committed to providing for the wellbeing of our guests. The spa will be located
with a 180-degree sea view within approximately 1,000 square meters that will include 12 large
treatment rooms, a hairdresser, relaxation areas, pools, saunas and steam rooms
the 20 private villas will be located within the Royal Service area of the resort. The present
intention being that these villas will be sold to individuals who will then lease them back to the
resort when not occupied by the owners.
38
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 Companys Corporate Controller. The
lead architect is Ossenbach, Pendones & Bonilla, one of Costa Ricas largest architectural offices with over
45 architects and designers. Civil engineering services are provided by DEHC Engineers and structural
engineering services by IEAC. Landscape architects are TPA and interior designers are led by Laboratiro
Quattro.
Resort management is to be provided by Melía Hotels International (Melía). Paradisus is Meliás 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 worlds largest resort hotel
chains, as well as Spains leading hotel chain for business or leisure. The company currently offers more than
300 hotels in 26 countries over four continents under its Gran Sol 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.
Since the completion date for the Paradisus Papagayo Bay Resort & Luxury Villas development is now
anticipated for the fourth quarter of 2018, the Company reached an an agreement dated April 28, 2016, to
further amend the management agreement with Meliá dated March 8, 2011. The amended agreement
presently stipulates that if the Papagayo Bay Resort & Luxury Villas is not completed by November 15,
2018, and if an extension date is not agreed, then Meliá could terminate the management agreement and
cause the Company to pay a penalty of $5 million. As the seventh addendum was not in place at June 30,
2016, the provisions of the sixth addendum had to be taken into consideration. Consequently, an accrual in
the amount of $5 million was charged against operating expenses. In light of the seventh addendum to the
management agreement, this accrual was reversed in the second quarter of 2016.
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. One of the
concessions lies adjacent to the existing concessions (La Punta) and the other is in close proximity to the
Paradisus Papagayo Bay Resort & Luxury Villas development.
The Company had paid down-payments on the purchase of these properties of $2,669,816 as of June 30,
2016, and is in discussions with Meridian regarding an amendment to the agreement. Should the Company
not be successful in obtaining an amendment to the agreement, it would have to write-off $300,000 of that
purchase price already paid in addition to a 5% penalty.
Both, the $300,000 write-off as well as the $50,000 for additional damages have been provided for in the
results of the second quarter 2016.
Swiss Hospitality Project
On September 19, 2015, the Company signed an option agreement to acquire four existing hotels in the
Canton of Graubünden, Switzerland with an unrelated third party. The properties optioned comprise an
aggregate of 141 rooms. The consideration for the option is CHF 300,000, which amount was paid on
October 25, 2015.
Dated May 10, 2016, the Company, QuadEquity Holdings AG and the potential Seller of the four hotels
concluded an agreement, whereby QuadEquity Holdings AG assumed all of the Companys rights and
obligations from the original contract. In return, QuadEquity Holdings AG will pay the Company the amount
of $302,000 (CHF 300,000) before May 30, 2016. This payment was received on June 1, 2016.
39
Finance
The anticipated completion of the Paradisus Papagayo Bay Resort & Luxury Villas in the fourth quarter of
2018 will require a net investment of approximately $212 million (including non-recuperated overhead
expenses), of which approximately $60 million has been expended as of June 30, 2016. We expect to realize
a minimum of $140 million in new funding over the next twelve months. New funding over the next twelve
months is expected to be raised from debt financing through bonds, shareholder loans and, if necessary, the
guaranty agreement borne by certain principal shareholders and participants in management. Detailed below
is a brief description of material debt obligations as of period end.
Bonds
The Company has four bond issues outstanding, denominated in EUR () or Swiss Francs (CHF).
EUR () Bonds
The Company initiated an unsecured EUR bonds offering 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
matures on December 2, 2016. We had realized carrying values of $6,715,145 as of the year ended
December 31, 2015, and $6,901,094 as of June 30, 2016, for a cumulative amount of $7.65 million as of the
date of this report.
The Company initiated a parallel 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 matures on December 2, 2016. We had realized carrying values of $1,632,572 as of the
year ended December 31, 2015 and $1,710,846 as of June 30, 2016, for a cumulative amount of $1.83
million as of the date of this report.
Swiss Francs (CHF) Bonds
The Company initiated a new offering of senior unsecured CHF bonds on October 1, 2015, of up to CHF
45,000,000 units of CHF 5,000 that bear interest at 6.00% per annum payable each September 30, over a
three-year term that matures on September 30, 2018 which are convertible into shares of SunVesta Holding
AG at CHF 8.00. We had realized carrying values of $2,171,725 as of the year ended December 31, 2015
and $3,022,180 as of June 30, 2016, for a cumulative amount of $3.19 million as of the date of this report.
The Company initiated a new parallel offering of senior unsecured CHF bonds on October 1, 2015, of up to
CHF 15,000,000 units of CHF 5,000 that bear interest at 6.00% per annum payable each September 30, over
a three-year term that matures on September 30, 2018 which are convertible into shares of SunVesta Holding
AG at CHF 8.00. We had realized carrying values of $23,694,423 as of the year ended December 31, 2015
and $32,379,230 as of June 30, 2016, for a cumulative amount of $35.39 million 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. Rӧssler (a director of the Company). The loan agreement was
amended on May 11, 2012 and on June 21, 2012 and then 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.
40
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 had borrowed $46,266,183 from Aires as of June 30, 2016 and $47,198,362 as of December
31, 2015.
During the second quarter of 2016 Aires assigned the amount of approximately $4.6 million of its
receivable from SunVesta to Global Care AG. Global Care AG, also a related party of Dr. Max Rössler,
acquired with this amount convertible bonds in the same amount (CHF 4,5 Mio.)
Loans Dr. Max Rӧssler
In 2012, Dr. Max Rössler, a related party, provided loans totaling $0.8 million that were initially repayable in
December 2012, but were extended through December 2015. These loans were to be repaid in cash or with
the delivery of certain shares of equity in two public companies. The Company had the right of settlement
and carried the loans at their fair values, which was the amount of cash paid in without considerations for the
change in value of the underlying securities. In December 2015, Dr. Rössler and the Company settled these
loans through a transfer to a separate debtor - Aires - of $1,551,669 (CHF 1,535,900). The Company assessed
this debt modification to be an extinguishment under the guidance prescribed in ASC 470-50 and
correspondingly recognized a Loss on Extinguishment in its statements of comprehensive loss for $748,466
for the year ended December 31, 2015.
In the second quarter 2016, Dr. Max Rössler provided $2,698,283 (CHF 2,640,000). Interest of $16,567 was
recorded in this period. Effective June 30, 2016 both amounts were transferred to the loan account with
Global Care AG.
Loan Global Care AG
During 2014, Global Care AG loaned the Company $190,270 (CHF 185,000), which amount was repayable
on October 31, 2014. The loan includes a fixed interest payment of $20,570 (CHF 20,000). As of the date of
this report, both amounts are overdue. According to the agreement, there are no penalties for late payment.
As explained in the preceding note, effective June 30, 2016 an amount of $2,714,850 (CHF 2,656,083) was
transferred from the loan account Dr. Max Rössler to the loan account Global Care AG.
Payable to Josef Mettler
As of June 30, 2016, there is neither a receivable from nor payable to Josef Mettler.
Current account sportiva participations ag (a Josef Mettler company)
During the three-month period ended June 30, 2016, the following transactions occurred on the current
account sportiva participations ag:
CHF
USD
-268,958
-274,529
Cash received from Company
1,043,958
1,067,043
Credited to the account Josef Mettler
175,195
179,067
Amount absorbed by Global Care AG
-1,500,000 -1,533,150
Balance June 30, 2016
-549,440
-561,569
41
DIA S.A. and his successor Blue Dot S
On March 8, 2013, the Company entered into an interest free loan agreement with DIA S.A. and his
successor Blue Dot SA respectively in the amount of $2,000,000 payable on March 8, 2014, in connection
with the purchase of land concession being part of the Paradisus Papagayo Bay Resort & Luxury Villas
project 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.
On April 21, 2016, the Company signed a new agreement, which stipulated new payment terms. The total
amount of $2,000,000 is now repayable in four quarterly instalments of $500,000 each, starting on August
21, 2016.
Timeline
Our expected timeline for developing the Paradisus Papagayo Bay Resort & Luxury Villas is as follows:
commence onsite vertical construction in the first quarter of 2017
complete construction in the fourth quarter of 2018
handover to Melía in the fourth quarter of 2018
Results of Operations
During the three-month and six-month periods ended June 30, 2016, our operations were focused on (i)
completing earth work excavations on the Paradisus Papagayo Bay Resort & Luxury Villas property; (ii)
furthering discussions with prospective project development partners; (iii) pursuing additional debt financing
to fund the construction of the project.
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 primarily to the development of the
Costa Rican property, including the purchase of the land and general and administrative costs.
42
Comprehensive Losses
The variance in losses over the comparative three- month periods is reconciled below:
Three months April 1 to June 30, 2015
(5,990,275)
Variances during the 3 months
Decrease in general and administrative expenses
4,515,817 Prima rily:
Reversal of previous quarters accruals
Increase in impa irme nt expenses
(296,663) Prima rily on down payments "La
Punta"
Increase in interest income
7,206 Increase in deposits
Increase in interest expenses
(345,291) Significantly higher debt
Decrease in amor tization of debt issuance
60,816 Reclassification
Change in fair values of conversion features
771,529 Prima rily periodic amor tization
Increase in unrealized exchange gains
2,902,145 Currency fluctuations
Decrease in other income / (expenses)
49,774 Prima rily reversal of previous
quarters
accrual for penalty on ma nageme nt
Income Taxes
-
Decrease in foreign currency translation
559,039 Currency fluctuations
Total varian ces
8,224,374
Three months April 1 to June 30, 2016
2,234,099
We did not generate revenue during this period and we expect to continue to incur losses through the year
ended December 31, 2016.
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 June
30, 2016, in connection with the purchase of land concessions in Costa Rica, as well as the planning and
construction of the project and expects to incur future cash outflows on capital expenditure as discussed in
the "Liquidity and Capital Resources" and the "Going Concern" paragraphs below.
43
Liquidity and Capital Resources
Since inception the Company has experienced significant changes in liquidity, capital resources, and
stockholders equity.
As of June 30, 2016 and December 31, 2015, the following were working capital items:
June 30,
December 31
2016
2015
Current assets
Cash and cash equivalents
42,927
111,830
Receivable from related parties
15,957
19,945
Other assets
389,591
158,574
Accounts receivable
-
-
Total current assets
448,475
290,349
Current liabilities
Bank liabilities
219,479
179,313
Accounts payable
5,765,019
8,048,608
Accrued expenses
7,559,166
7,831,247
Notes payable
2,706,861
2,736,912
Notes payable to related parties
2,287,688
1,130,978
Bonds
12,366,193
8,347,717
Total current liability
30,904,404
28,274,775
Net working capital
(30,455,930)
(27,984,426)
As of June 30, 2016 and December 31, 2015, the following were the items making up the total stockholders
deficit:
June 30,
December 31
2016
2015
Assets
Current assets
448,475
290,349
Non-current assets
68,642,963
67,007,090
Total assets
69,091,438
67,297,439
Liabilities
Current liabilities
30,904,405
28,274,775
Non-current liabilities
86,488,325
80,287,652
Total liabilities
117,392,731
108,562,427
Total stockholders,
deficit
(48,301,293)
(41,264,988)
The Companys negative net working capital of $30,904,404 is of concern; however, based on the guaranty
signed by certain principals, the Company believes that it can address liquidity problems.
Net cash flow used in operating activities for the six-month period ended June 30, 2016, was $6,499,363, as
compared to $3,806,738 for the six-month period ended June 30, 2015.
The Company expects to continue to use net cash flow in operating activities until we complete the Paradisus
Papagayo Bay Resort & Luxury Villas project, which completion is projected for the fourth quarter of 2018.
44
Net cash used in investing activities for the six-month period ended June 30, 2016, was $973,070 as
compared to $4,691,170 for the six-month period ended June 30, 2015. Net cash used in investing activities
in the current six-month period is comprised of the purchase of property and equipment, and deposits related
to construction, offset by receivables from related partys collection of cash for a down payment and
restricted cash. Net cash used in investing activities in the prior comparable six-month period was comprised
of the purchase of property and equipment, down-payments for property and equipment offset by receivables
from related parties, deposits related to construction 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 six-month period ended June 30, 2016, was $7,399,141 as
compared to $9,191,280 for the six-month period ended June 30, 2015. Net cash provided by financing
activities in the current six-month period is comprised of proceeds from notes payable to related parties, and
proceeds from bond issuances net of commissions, offset by a decrease in bank liabilities repayment of notes
payable to related parties, the payment of debt issuance costs, and changes in other debt. Net cash provided
by financing activities in the prior comparable six-month period was comprised of proceeds from notes
payable related parties, and proceeds from bond issuances net of commissions, offset by the decrease in bank
liabilities, the payment of debt issuance costs, and changes in other debt. We expect net cash flow provided
by financing activities to continue due to the financing necessary to complete the development of the
Paradisus Papagayo Bay Resort & Luxury Villas.
Management believes that 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 formal lines of credit or other bank financing arrangements as of June 30, 2016. However, the
Companys main bank allowed a short term overdraft.
We have commitments for executed purchase orders and agreements in the amount of $57 million as of June
30, 2016, in connection with the development of the Paradisus Papagayo Bay Resort & Luxury Villas, which
commitments are included in the required estimated net financing of $192 million (excluding overhead
expenses) to complete the project. Most material commitments are not contractually agreed as of the end of
the period. We have cancellable commitments to Meridian 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
June 30, 2016, 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 June 30, 2016.
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.
We have no current plans to make any changes in the number of our employees as of June 30, 2016.
Future Financings
A letter of engagement was executed with ISM Capital LLP (ISM), a London based investment firm, on
March 10, 2015, for the purpose of conducting a $100 million asset backed bond issuance. On October 4,
2015, the bilateral agreement with ISM was extended into a multilateral agreement, by incorporating Stifel
Ncolaus Europe Ltd, to enlarge the territories in which the offering could be effectively presented to include
North America. In June 2016, the respective parties agreed to terminate the cooperation, which did not
provide the anticipated results. A formal termination letter has been prepared and a termination fee of
$100,000 was agreed by the parties and charged to the consolidated statements of comprehensive loss.
45
On May 9, 2016, the Company signed an agreement with Median Trust SA, by which this service provider
is mandated to set-up a special purpose vehicle (SPV), as a Compartment in accordance with
Luxembourg law. The objective of the SPV is to obtain an investment grade rating and to make a bond
offering of not less than $100 million. The SPV will therefore be the issuer, however, the responsibility to
place the bonds remains with the Company.
Off-Balance Sheet Arrangements
As of June 30, 2016, 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 $212 million.
The project is expected to open in the fourth quarter of 2017. Until the completion of the project, the
following expenditures are estimated to be incurred:
a. Gross project cost
$
217,000,000
b. Less: Proceeds from sale of villas
(25,000,000)
c. Net project cost
192,000,000
d. Overhead expenses
20,000,000
e. Total, excluding other potential projects
$
212,000,000
Seventy percent (70%) of the Net project cost is intended to be financed through the issuance of secured
bonds, for which negotiations have been initiated. The remaining thirty percent (30% 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 in the absence of alternative financing
commitments, 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 favor of SunVesta AG. The purpose of the guaranty is to ensure that until such
time as financing is secured for the entire project that they will act as a guarantor to creditors to the extent of
the projects ongoing capital requirements.
On September 22, 2015, the signatories to the guaranty formally agreed to maintain the guaranty, as
necessary, until December 31, 2018, after which date the guaranty will expire. 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.
Based on this Guaranty Agreement, management believes that available funds are sufficient to finance cash
flows for the twelve months subsequent to June 30, 2016, and the filing date, though future anticipated cash
outflows for investing activities will continue to depend on the availability of financing.
46
Forward-Looking Statements and Factors That May Affect Future Results and Financial Condition
The statements contained in the section titled Managements Discussion and Analysis of Financial Condition
and Results of Operations and elsewhere in this current report, with the exception of historical facts, are
forward-looking statements. 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.
47
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this annual report, an evaluation was carried out by the Companys
management, with the participation of its chief executive officer and chief financial officer, of the
effectiveness of the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) under the
Securities Exchange Act of 1934 (Exchange Act)). Disclosure controls and procedures are designed to
ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified in the Commissions rules
and forms, and that such information is accumulated and communicated to management, including the chief
executive officer and chief financial officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, the Companys management concluded, as of the end of the period covered by this
report, that the Companys disclosure controls and procedures were not effective in recording, processing,
summarizing, and reporting information required to be disclosed, within the time periods specified in the
Commissions rules and forms, and that such information was not accumulated and communicated to
management, including the chief executive officer and the chief financial officer, to allow timely decisions
regarding required disclosures.
Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2016, 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.
48
PART II OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
None.
ITEM 1A.
RISK FACTORS
Not required of smaller reporting companies.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3.
DEFAULTS ON SENIOR SECURITIES
None
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.
OTHER INFORMATION
None
ITEM 6.
Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits on page 51
of this Form 10-Q, and are incorporated herein by this reference.
49
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
SunVesta, Inc.
Date
/s/ Hans Rigendinger
August 19, 2016
Hans Rigendinger
Chief Executive Officer, Chief Financial Officer,
Principal Accounting Officer Chief Operating
Officer and Director
50
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 December31, 1999).
3.2.2*
Amended Bylaws (incorporated by reference from the Form 10-QSB filed with the Commission onNovember
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 Rigendingerand Max
Rӧssler.
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 andHans 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).
10.11*
Assignment of Debt Agreement dated December 31, 2013, between the Company, SunVesta AG and Aires
International Investments, Inc.(incorporated by reference to the Form 10-Q filed with the Commission on May
20, 2014).
10.12*
Assignment of Debt Agreement dated December 31, 2014, between the Company, SunVesta AG and Aires
International Investments, Inc. (incorporated by reference to the Form 10-Q filed with the Commission on
August 19, 2015).
10.13*
Addendum to Employment Agreement dated March 6, 2015, between the Company and Josef Mettler
(incorporated by reference to the Form 10-Q filed with the Commission on May 5, 2015).
14*
Code of Business Conduct and Ethics adopted on July 16, 2015 (incorporated by reference to theForm 10-Q
filed with the Commission on August 19, 2015).
21*
Subsidiaries of the Company (incorporated by reference from the Form 10-K filed with the Commission on April
15, 2015).
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 of2002.
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 notfiled 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.
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