SUNVESTA, INC. - FORM 10-Q

Attached files

file	filename
EX-32 - SUNVESTA CERTIFICATION - SUNVESTA, INC.	exhibit32.htm
EX-31 - SUNVESTA CERTIFICATION - SUNVESTA, INC.	exhibit31.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

OF 1934 for the quarterly period ended March 31, 2017.

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

OF 1934 for the transition period from

Commission file number: 000-28731

SUNVESTA, INC.

(Exact name of registrant as specified in its charter)

Florida

98-0211356

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

Seestrasse 97, Oberrieden, Switzerland CH-8942

(Address of principal executive offices) (Zip Code)

011 41 43 388 40 60

(Registrant’s telephone number, including area code)

n/a

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

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

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

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

for the past 90 days. Yes 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No o

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

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

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

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

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

Exchange Act). Yes o No þ

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

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

class of voting stock), at May 15, 2017, was 114,741,603.

TABLE OF CONTENTS

PART 1- FINANCIAL INFORMATION

Item1.

Financial Statements:

Consolidated Balance Sheets as of March 31, 2017 (unaudited) and December

31, 2016

Unaudited Consolidated Statements of Comprehensive Loss (unaudited) for the

three months ended March 31, 2017 and March 31, 2016

Unaudited Consolidated Statements of Stockholders’ Equity (unaudited) for the

three months ended March 31, 2017 andMarch 31, 2016

Unaudited Consolidated Statements of Cash Flows (unaudited) for the three

months ended March 31, 2017 and March 31, 2016

Notes to Unaudited Consolidated Financial Statements

Item 2.

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

Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Item 4.

Controls and Procedures

PART II-OTHER INFORMATION

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

Signatures

Index to Exhibits

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 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.

Due to rounding, the sum of individual positions may be higher or lower than 100%.

CONSOLIDATED BALANCE SHEETS

		March 31, 2017	December 31, 2016
		(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	2,557,181	806,440
Receivable from related parties		65,483	49,292
Other assets		460,977	456,099
Total current assets		3,083,641	1,311,830
Non-current assets
Property and equipment - net		67,725,234	66,216,658
Deposits related to construction work		214,545	190,549

Notes receivable		-	280,242
Restricted cash		1,669,064	1,667,052
Total non-current assets		69,608,843	68,354,502
Total assets	$	72,692,485	69,666,332

Liabilities and stockholders' deficit
Current liabilities
Accounts payable		1,979,141	3,311,512
Accrued expenses		2,810,375	3,160,723
Note payable		1,521,648	1,500,000
Notes payable to related parties		7,338,257	307,088
Other liabilities		1,641	120
Convertible CHF-Bond		-	6,202,921
EUR-Bond		-	484,463
Total current liabilities		13,651,063	14,966,826
Non-current liabilities
Convertible CHF-Bond		37,295,876	31,892,613
CHF-Bond		17,556,862	16,384,893
Liability related to conversion feature		5,336,233	5,936,378
Notes payable to related parties		53,205,093	51,473,793
Pension liabilities		187,516	184,469
Total non-current liabilities		113,581,579	105,872,146
Total liabilities	$	127,232,642	120,838,972

Stockholders' deficit
Preferred stock, $0.01 par value; 50,000,000 shares authorized, no shares issued and outstanding
Common stock, $0.01 par value; 200,000,000 shares
authorized; 101,841,603 shares issued and outstanding		1,018,416	959,416
Additional paid-in capital		23,450,566	23,238,526
Accumulated other comprehensive income / (loss)		1,717,066	2,997,562
Accumulated deficit		(80,726,195)	(78,368,143)
Total stockholders' deficit		(54,540,158)	(51,172,639)
Total liabilities and stockholders' deficit	$	72,692,485	69,666,332

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

SUNVESTA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three months ended

		March 31, 2017	March 31, 2016
		(Unaudited)	(Unaudited)
Revenues
Revenues, net	$	-	-
Cost of revenues		-	-
Gross profit		-	-

Operating expenses
General and administrative expenses	$	(1,375,970)	(6,072,790)
Impairment expenses		(280,242)	-
Total operating expenses		(1,656,212)	(6,072,970)

Loss from operations	$	(1,656,212)	(6,072,970)

Other income / - expenses
Interest income		17170	12,123
Interest expense		(791,303)	(1,721,796)
Change in Fair Value of Conversion Feature		662,601	408,697
Exchange differences		(584,554)	(169,952)

Other income / - expenses		(5,754)	(36,614)
Total other income / - expenses	$	(701,840)	(1,507,542)

Loss before income taxes	$	(2,358,053)	(7,580,512)
Income Taxes		-	-
Net loss	$	(2,358,053)	(7,580,512)

Comprehensive income /(loss)
Foreign currency translation		(1,280,496)	(1,945,564)
Comprehensive income / (loss)	$	(3,638,549)	(9,526,075)

Loss per common share
Basic and diluted	$	(0.02)	(0.08)

Weighted average common shares
Basic and diluted		108,234,104	98,506,438

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

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

		Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated deficit		Total Stockholders’ Deficit
December 31, 2016	$	959,416	$	23,238,526	$	2,997,562	$	(78,368,143)	$	(51,172,639)
Translation adjustments		-		-		(1,280,496)		-		(1,280,496)
Net loss		-		-		-		(2,358,052)		(2,358,052)
Stock based compensation expense		59,000		212,030		-		-		271,030
March 31, 2017	$	1,018,416	$	23,450,556	$	1,717,066	$	(80,726,195)	$	(54,540,158)

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

SUNVESTA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

		January 1 to March 31, 2017	January 1 to March 31, 2016
		Unaudited	Unaudited

Cash flows from operating activities
Net loss	$	(2,358,052)	(7,580,510)
Adjustments to reconcile net loss to net cash
Depreciation and amortization		10,024	16,513
Impairment expenses		269,695	-
Amortization of debt issuance cost and commissions		374,094	349,159
Accrued interest on debt		987,398	-
Unrealized exchange differences		604,839	108,344
Stock compensation expense		271,030	127,835
Change in Fair Value of Conversion Feature, net		(702,758)	173,143
- Increase / decrease in:
Other current assets		(170,509)	601,426
Accounts payable		(1,262,470)	(328,072)
Accrued expenses		(1,334,650)	5,603,355
Other Liabilities		1,529	-
Net cash used in operating activities		(3,309,830)	(928,807)

Cash flows from investing activities
Receivables from related parties		-	1,994
Purchase of property and equipment		(628,668)	(1,247,923)
Deposits related to construction		-	(641,818)
Proceeds from sale of property and equipment		32,260	-
Restricted cash		-	20
Net cash used in investing activities		(596,408)	(1,887,727)
Cash flows from financing activities
Decrease in bank liabilities		-	(179,313)
Proceeds from notes payable related parties		7,027,584	2,192,216
Repayment of notes payable related parties		-	(1,230,691)
Proceeds from bond issuance, net of commissions and debt issuance costs		908,705	2,156,758
Repayment of bonds		(2,305,714)	-
Proceeds from note payable and other debt		525,055	-
Repayments of note payable and other debt		(500,000)	-
Net cash provided by financing activities		5,655,631	2,905,132
Effect of exchange rate changes		1,348	6,250
Net increase / - decrease in cash		1,750,742	(94,848)
Cash and cash equivalents, beginning of period		806,440	111,830
Cash and cash equivalents, end of period	$	2,557,181	206,678

Additional information
Capitalized interest and debt issuance costs for construction (non-cash)		934,955	883,000
Interest paid		-	160,000

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

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

CORPORATE INFORMATION

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

SunVesta AG has three wholly-owned subsidiaries: SunVesta Projects and Management AG, a Swiss

company; SunVesta Costa Rica SA, a Costa Rican company and SunVesta Holding España SL, a

Spanish company.

In January 2005, the Company changed its business focus to the development of holiday resorts and

investments in the hospitality and related industry. The Company has one major project in Costa

Rica. Planning for this project has been fully completed, all consents have been granted, and

excavation work began in March 2013. The Company is 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

Company’s activities are subject to significant risks and uncertainties.

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

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

SIGNIFICANT ACCOUNTING POLICIES

New accounting standards – not adopted

In January 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards

Update 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement

of Financial Assets and Financial Liabilities. The update requires several changes with respect to

recognition and measurement as well as disclosure requirements with respect to financial

instruments). The amendments to (ASU) 2016-01 are effective for the annual period ending after

December 15, 2017, 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) 2016-01

will have on its balance sheet.

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.

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards

Updates ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit

Losses on Financial Instruments, requiring certain changes to the recognition and measurement as

well as disclosure of incurred and expected credit losses. The standard will become effective for the

Company beginning January 1, 2020. 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 November 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards

Updates ASU 2016-18, requiring that restricted cash and restricted cash equivalents be included with

cash and cash equivalents when reconciling the beginning-of-period and end-of- period total cash

amounts shown on the statement of cash flows. Consequently, transfers between cash and restricted

cash will not be presented as a separate line item in the operating, investing or financing sections of

the cash flow statement. The amendments are effective for public business entities for fiscal years

beginning after December 15, 2017, and interim periods within those fiscal years. The Company

considers that ASU 2016-18 will have a limited impact on the presentation of the statement of cash

flows.

In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards

Updates ASU 2017-07, requiring certain changes to the presentation of the expenses related to

postretirement benefits accounted for under Topic 715. The amendments are effective for public

business entities for fiscal years beginning after December 15, 2017, and interim periods within

those fiscal years. 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.

New accounting standard updates - adopted

In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards

Updates (ASU) 2014-15 requiring an entity’s management to evaluate whether there are conditions

or events, considered in aggregate, that raise substantial doubt about entity’s 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

has assessed that ASU 2014-15 has no effect on its financial statements, as a note with respect to the

going concern assumption is already presented.

In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards

Updates ASU 2016-9, Compensation—Stock Compensation (Topic 718): Improvements to

Employee Share-Based Payment Accounting, requiring certain changes to recognition and

measurement as well as disclosure of Share-Based Payments. The standard will become effective for

the Company beginning January 1, 2017. The Company has assessed the impact that adoption of this

standard has on its consolidated results of operations, financial condition, cash flows, and financial

statement disclosures. ASU 2016-9 is part of the FASB’s simplification initiative and offers certain

accounting policy choices and simplifications. Based on the current stock option plans, there is no

effect from ASU 2016-9 on the Company’s consolidated results of operations, financial condition,

cash flows, and financial statement disclosures.

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

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

242,000,000

b. Less: Proceeds from sale of villas

(25,000,000)

c. Net project cost

217,000,000

d. Overhead expenses

20,000,000

e. Total, excluding other potential projects

237,000,000

Seventy percent 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 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 Mr. Hans Rigendinger, shareholder, Company Director and

Chief Executive Officer, Dr. Max Rӧssler, controlling shareholder of Aires International Investment,

Inc. and Company Director.

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 project’s ongoing capital requirements.

On September 22, 2015, the signatories to the guaranty formally agreed to maintain the guaranty, as

necessary, until December 31, 2018.

On October 28, 2016, Hans Rigendinger and Dr. Max Rössler formally agreed to maintain the

guaranty, as necessary, until completion of the construction of Paradisus Papagayo Bay Resort &

Luxury Villas, 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 March

31, 2017 and the filing date, though future anticipated cash outflows for investing activities continue

to depend on the availability of financing.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents are available to the Company without any restriction or limitation on

withdrawal and/or use of these funds. The Company’s cash equivalents are placed with financial

institutions that maintain high credit ratings. The carrying amounts of these assets approximate their

fair value.

Cash and cash

USD

CHF

Other

Total

equivalents

March 31, 2017

December 31, 2016

original currency

16,316

2,535,861

11,599

in $

16,316

2,529,335

11,530

2,557,181

806,440

USD ($) =

US Dollar

EURO =

Euro

CHF

Swiss Francs

AUD

Australian Dollar

CRC

Costa Rican Colón

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

RESTRICTED CASH

As of March 31, 2017, the Company has the following restricted cash positions:

Restricted Cash

March 31, 2017

December 31, 2016

Credit Suisse in favor of BVK pension fund

127,412

125,399

Banco National de Costa Rica in favor of the Costa Rican Tourism Board

933,350

Banco Lafise in favor Costa Rican Environmental Agency – SETENA

608,302

Gross

1,669,064

1,667,051

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 pension

fund is a rental deposit related to a long term lease contract for office space. Therefore, this restricted

cash position is also classified as long term.

NOTE RECEIVABLE

On June 15, 2015, the Company loaned REP Caribbean Development Corporation (“REP

Caribbean”), a third party, $250,000 secured by a non-related Swiss individual. The loan was due on

November 30, 2015, in addition to a fixed interest payment of $5,000. On September 15, 2015, the

Company entered into an agreement with REP Caribbean and 4f Capital, a related party, netting

receivables due to the respective parties that resulted in the satisfaction of the full loan amount due

from REP Caribbean to the Company and a receivable against 4f Capital in the amount of

approximately $250,000 as of December 31, 2016 and $250,000 as of December 31, 2015. On

December 10, 2015, the Company loaned an additional unsecured amount of $25,000 to REP

Caribbean. The Company erroneously reported as of December 31, 2016 and December 31, 2015,

that the amount due from REP Caribbean was approximately $280,000. Since 4f Capital is in

liquidation, and the likelihood that REP Caribbean will repay the unsecured $25,000 due is in doubt,

the receivable erroneously reported as approximately $280,000 has been fully impaired as of March

31, 2017.

PROPERTY & EQUIPMENT

March 31, 2017

December 31, 2016

Land

19,700,000

IT Equipment

224,711

221,060

Other equipment and furniture

223,364

219,734

Leasehold improvements

75,226

74,004

Vehicles

74,000

Construction in-process

47,996,808

46,457,172

Gross

68,220,109

66,745,970

Less accumulated depreciation

(494,874)

(529,312)

Net

67,725,234

66,216,658

Depreciation expenses for the period ended March 31, 2017 and 2016

10,024

61,771

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

PROPERTY & EQUIPMENT – CONTINUED

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 concession land amounts to $19.7 million related to the concessions held by SunVesta

Costa Rica SA. $7 million (~84,000 m2) and $12.7 million (~120,000 m2).

The $7 million 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 $12.7 million 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 has approved the extension of both

concessions until 2052.

The construction in process through December 31, 2015 and March 31, 2017, is represented

primarily by architectural work related to the hotel and apartments as well as construction work.

Deposit related to construction work

During the quarter ended March 31, 2017, the Company made deposits with several contractors for

earth moving groundwork. These deposits will be offset against invoices as such groundwork is

completed. As of March 31, 2017 and December 31, 2016, the Company has deposits of $214,545

and $190,549 respectively, which have not yet been set off.

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

FAIR VALUE MEASUREMENT

The guidance on fair value measurements defines fair value as the exchange price that would be

received for an asset or paid to transfer a liability (an exit price) in the principal or most

advantageous market for the asset or liability in an orderly transaction between market participants.

This guidance also specifies a fair value hierarchy based upon the observability of inputs used in

valuation techniques. Observable inputs (highest level) reflect market data obtained from

independent sources, while unobservable inputs (lowest level) reflect internally developed market

assumptions. In accordance with this guidance, fair value measurements are classified under the

following hierarchy:

Level 1

Quoted prices for identical instruments in active markets.

Level 2

Quoted process for similar instruments in active markets, quoted prices for identical or similar

instruments in markets that are not active; and model-derived valuations in which significant inputs or

significant value drivers are observable in active markets.

Level 3

Model derived valuations in which one or more significant inputs or significant value-drivers are

unobservable.

When available, the Company uses quoted market prices to determine fair value, and classifies such

measurements within Level 1. In some cases, where market prices are not available, the Company

makes use of observable market based inputs to calculate fair value, in which case the measurements

are classified within Level 2. If quoted or observable market prices are not available, fair value is

based upon internally developed models that use, where possible, current market-based parameters

such as interest rates, yield curves and currency rates. These measurements are classified within

Level 3.

Fair value measurements are classified according to the lowest level input or value-driver that is

significant to the valuation. A measurement may therefore be classified within Level 3 even though

there may be significant inputs that are readily observable.

Fair value measurement includes the consideration of nonperformance risk. Nonperformance risk

refers to the risk that an obligation (either by counterparty or the Company) will not be fulfilled. For

financial assets traded in an active market (Level 1), the nonperformance risk is included in the

market price. For certain other financial assets and liabilities (Level 2 and 3), the Company’s fair

value calculations have been adjusted accordingly.

As of March 31, 2017 and December 31, 2016, 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:

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

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.

—

Notes receivable - carrying amount approximated fair value.

—

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.

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

FAIR VALUE MEASUREMENT – CONTINUED

The fair value of our financial instruments is presented in the table below:

March 31, 2017

December 31, 2016

Carrying

Fair Value $

Carrying

Fair Value $

Fair

Ref-

Amount $

Value

erence

Levels

Cash and cash equivalents

2,557,181

806,440

Note 4

Restricted cash

1,669,064

1,667,052

Note 5

Receivables from related parties –

other (current)

65,483

49,292

Note 10

Accounts Payable

1,979,141

3,311,512

Bank liabilities

Note 11

Note payable

1,521,648

1,500,000

Note 18

Notes payable to related parties –

other (current)

7,338,257

307,089

Note 10

Notes receivable

280,242

Note 6

EUR-bonds

484,463

Note 12

Convertible CHF-bonds

37,295,876

38,095,533

Note 12

CHF-bonds

17,556,862

16,384,893

Note 12

Notes payable to related parties –

Aires (non-current)

53,205,093

51,473,793

Note 10

Liability related to conversion feature

5,336,233

5,936,378

Note 12

The Company's financial liabilities measured at fair value on a recurring basis consisted of the

liability related to conversion feature as of the following date:

Balance at December 31, 2016

5,936,378

Additions / (Decrease)

(40,158)

Change in Fair Value of Conversion Feature

(662,601)

FX Revaluation

102,613

Balance at March 31, 2017

5,336,233

Total income (+) or expense (-) related to the conversion feature in the three months up to March 31,

2017, amounts to $600,145. The Company used a Black-Scholes model to value the liability related

to conversion feature as of March 31, 2017 and December 31, 2016. Increase of the conversion

feature due to increase of bond volume are accounted for within interest expense.

The assumptions as of March 31, 2017 are as follows:

Stock Price: CHF 5.08

Annualized Risk Free Rate: 0.001%

Exercise Price: CHF 8

Annualized Volatility: 80%

Time to Maturity: 1.5 years

The assumptions as of December 31, 2016 are as follows:

Stock Price: CHF 5.08

Annualized Risk Free Rate: : 0.001%

Exercise Price: CHF 8

Annualized Volatility: 80%

Time to Maturity: 1.75 years

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

RELATED PARTY TRANSACTIONS

The advances from (to) related parties are composed as follows:

Receivables

Payables

March 31,

December 31,

March 31,

December 31,

2017

2016

2017

2016

1 Aires International

53,205,093

51,473,793

2 Akyinyi Interior and Exterior

Decoration

290,000

3 Global Care AG

7,048,257

4 Late Josef Mettler

17,088

5 Turan Tokay

65,483

49,292

Total excluding interest

65,483

49,292

60,543,350

51,780,881

Accrued interest

Total

65,483

49,292

60,543,350

51,780,881

of which non-current

53,205,093

51,473,793

Related party

Capacity

Interest Repayment

Rate

Terms

Security

1 Aires International

Company owned by Dr. Rössler, a board member

7.25%

See below none

2 Akyinyi Interior and Company owned by the widow of the late Josef

Exterior Decoration Mettler

none

3 Global Care AG

Company owned by Dr. Rössler, a board member

7.25%

none

4 Late Josef Mettler

Former shareholder, CEO, CFO and Company

board member

none

5 Turan Tokay

Board Member

none

Loan agreement Aires International Investment Inc.

As of March 31, 2017, the Company owes Aires International Inc. the following:

Borrower

Debt instrument Amount in CHF Amount in USD

Annual

Repayment date *

denominated in

interest

CHF

rate

SunVesta Inc.

Promissory note

10,044,371

10,018,523 CHF 7.25 %

After Dec 31, 2020

SunVesta Inc.

Promissory note

10,000,000

9,974,266 USD 7.25 %

After Dec 31, 2020

SunVesta Inc.

Promissory note

10,000,000

9,974,266 USD 7.25 %

After Dec 31, 2020

SunVesta Inc.

Loan agreement

10,378,152

10,417,107 USD 7.25 %

After Dec 31, 2020

SunVesta Holding Loan agreement

12,854,008

7.25 %

After Dec 31, 2020

12,820,930 USD

Total

53,205,093 USD

The notes may be repaid in whole or in part.

Loan due to Global Care AG

During the first quarter of 2017, Global Care AG, a company owned by Dr. Rӧssler (a director of the

Company), provided $7,048,257 to the Company at 7.25% interest, repayable not before December

31, 2020.

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

10.

BONDS

Description

EUR (€) bond new I

EUR (€) bond new II (parallel)

(repaid)

Issuer:

SunVesta Holding AG

Type of securities:

Bond in accordance with Swiss law

Approval by SunVesta AG BOD:

October 31, 2013

May 19, 2014

Volume:

Up to EUR15,000,000

Up to EUR 15,000,000

Units:

EUR10,000

EUR 10,000

Offering period:

11/07/2013 – 03/31/2014

05/01/14 – 06/30/14

Due date:

December 2, 2016

December 02, 2016

Issuance price:

100%

100 %

Issuance day:

December 2, 2013

December 02, 2013 (retroactive)

Interest rate:

7.25% p.a.

7.25 % p.a.

Interest due dates:

December 2, 2013

December 02

Applicable law:

Swiss

EURO (€) Bond new I

EURO Bond

(New) 2017

(New) 2016

Balances January 1

31,541

6,871,630

Cash inflows

Cash outflows

(6,736,255)

Reclassification from / to Bond (net)

(32,271)

Foreign currency adjustments

730

(103,834)

Sub-total

31,541

Discounts (commissions paid to bondholders) and

debt issuance costs

(588,613)

Accumulated amortization of discounts and

debt issuance costs

588,613

563,636

Total accumulated unamortized discounts and

debt issuance costs

(24,977)

Balances March 31 and December 31 (Carrying value)

6,564

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

10. BONDS – CONTINUED

EURO (€) Bond new II

EUR Bond

new II

2017

2016

Balances January 1

511,805

1,658,300

Cash inflows

Cash outflows

(510,120)

(159,950)

Reclassification from / to Bond (net)

(9,761)

(953,683)

Foreign currency adjustments

8,075

(32,862)

Sub-total

511,805

Discounts (commissions paid to bondholders) and

debt issuance costs

(174,660)

Accumulated amortization of discounts and

debt issuance costs

174,660

140,754

Reclassification from / to Bond (net)

Total accumulated unamortized discounts and

debt issuance costs

(33,906)

Balances March 31 and December 31 (Carrying value)

477,899

On September 30, 2015, the Company approved the issuance of two new Convertible CHF-bonds.

The major terms and conditions are the following:

Description

Convertible CHF Bond I

Convertible CHF Bond II

Issuer:

SunVesta Holding AG

Type of securities:

Senior convertible bonds,

convertible into shares of the issuer,

in accordance with Swiss law

Approval by SunVesta AG BOD:

September 30, 2015

Volume:

Up to CHF 45,000,000

Up to CHF 15,000,000

Denomination:

CHF 5,000

Offering period:

October 01, 2015

Maturity date:

September 30, 2018

Issue price:

100 %

Redemption price:

100 %

Issuance date:

October 01, 2015

Coupon:

6.00 % p.a.

Interest due dates:

September 30 of each year, the

first time September 30, 2016

Reference price:

CHF 6.50

Initial conversion price:

CHF 8.00

Applicable law:

Swiss

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

10.

BONDS – CONTINUED

Convertible CHF BOND I

Convertible CHF

Bond I 2017

Bond I 2016

Balances January 1

3,648,383

2,250,048

Cash inflows

1,640,887

Cash outflows

(103,008)

Foreign currency adjustments

60,262

(105,058)

Reclassification from / to Bond (net)

(34,486)

Sub-total

3,708,645

3,648,383

Discounts (commissions paid to bondholders) and debt

issuance costs

(240,760)

(136,722)

Accumulated Amortization of discounts and debt issuance

costs

133,496

117,652

Reclassification from / to Bond (net)

(104,038)

Total Accumulated Unamortized discounts and debt issuance

costs

(107,264)

(123,108)

Balances March 31 and December 31 (Carrying value)

3,601,381

3,525,275

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 3.6 million ($3.6

million) related to the CHF Convertible Bond I.

Convertible CHF BOND II

Convertible CHF

Bond II 2017

Bond II 2016

Balances January 1

36,770,369

26,470,395

Cash inflows

20,079

7,142,850

Cash outflows

(1,795,594)

(787,371)

Foreign currency adjustments

618,871

(1,187,441)

Reclassification from / to Bond (net)

5,131,937

Sub-total

35,613,725

36,770,369

Discounts (commissions paid to bondholders) and debt

issuance costs

(4,788,078)

(4,890,690)

Accumulated Amortization of discounts and debt issuance

costs

2,868,848

2,586,541

Reclassification from / to Bond (net)

104,038

Total Accumulated Unamortized discounts and debt issuance

costs

(1,919,230)

(2,200,111)

Balances March 31 and December 31 (Carrying value)

33,694,495

34,570,258

In April 2016, Global Care AG (a related party controlled by Dr. Rössler, a Company board member)

assumed a liability of CHF 4.5 million due to Aires International Investment Inc., (also a related party

controlled by Dr. Rössler). This CHF 4.5 million was subsequently subscribed into bonds of the

Convertible Bond II issue. As the conversion inclues a significant conversion option, the exchange is

treated as an extinguishment of debt and an amount of $1,071,317 has been reclassified in the

comprehensive statements of loss from revaluation of conversion feature to extinguishment of debt.

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

10.

BONDS – CONTINUED

As per date of this report the Company has realized a cumulative amount of CHF 32.7 million ($32.9

million) related to the Convertible Bond II.

The Company initiated a new offering of senior unsecured CHF bonds on September 21, 2016, of up

to CHF 20,000,000 in units of CHF 5,000 that bear interest at 6.50% per annum payable each August

15, over a four-year term that matures on August 15, 2020, with the following conditions:

Description

CHF Bond III

Issuer:

SunVesta Holding AG

Type of securities:

Senior bonds

Approval by SunVesta AG BOD:

July 7, 2016

Volume:

Up to CHF 20,000,000

Denomination:

CHF 5,000

Offering period:

November 30, 2016

Maturity date:

August 15, 2020

Issue price:

100 %

Redemption price:

100 %

Issuance date:

September 21, 2016

Coupon:

6.50 % p.a.

Interest due dates:

August 15 of each year, the first

time August 15, 2017

Applicable law:

Swiss

CHF BOND III original

CHF Bond III

2017

2016

Balances January 1

15,601,389

Cash inflows

943,704

699,650

Cash outflows

Foreign currency adjustments

251,571

(290,665)

Reclassification from / to Bond (net)

15,192,404

Sub-total

16,796,665

15,601,389

Discounts (commissions paid to bondholders) and debt

issuance costs

(160,270)

(56,643)

Accumulated Amortization of discounts and debt issuance

costs

13,835

3,814

Reclassification from / to Bond (net)

(49,975)

Total Accumulated Unamortized discounts and debt issuance

costs

(146,435)

(102,804)

Balances March 31 and December 31 (Carrying value)

16,650,230

15,498,586

During the year 2016 an amount of $15,192,404 (CHF 15.2 million) was subscribed into this CHF

Bond III from loans from related parties. Since the new debt was not significantly different from the

old debt and did not include a conversion feature deemed substantive, the exchange was not treated as

an extinguishment of debt.

As per date of this report the Company has realized a cumulative amount of CHF 16.7 million ($16.8

million) related to the CHF Bond III original. Within the abovementioned facility, the Company

initiated a new parallel offering of senior unsecured CHF bonds on September 21,

2016. An amount of $979,510 of which was reclassified from EUR Bond II.

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

10.

BONDS – CONTINUED

Within the CHF Bond III, the Company initiated a new parallel offering of senior unsecured CHF

bonds on September 21, 2016.

CHF BOND III parallel

CHF Bond III

2017

2016

Balances January 1

961,595

Cash inflows

Cash outflows

Foreign currency adjustments

15,883

(17,915)

Reclassification from / to Bond (net)

979,510

Sub-total

977,478

961,595

Discounts (commissions paid to bondholders) and debt

issuance costs

(79,289)

Accumulated Amortization of discounts and debt issuance

costs

8,443

4,001

Reclassification from / to Bond (net)

Total Accumulated Unamortized discounts and debt issuance

costs

(70,846)

(75,288)

Balances March 31 and December 31 (Carrying value)

906,632

886,307

As per date of this report the Company has realized a cumulative amount of CHF 0.9 million ($0.9

million) related to the CHF Bond III parallel.

On March 6, 2017, the Company approved the issuance of a new bond with the following conditions.

Description

CHF Bond IV

Issuer:

SunVesta Holding AG

Type of securities:

Senior bonds

Approval by SunVesta AG BOD:

March 6, 2017

Volume:

Up to CHF 50,000,000

Denomination:

CHF 1,000

Offering period:

May 1^st – November 1^st, 2017

Maturity date:

May 1, 2022

Issue price:

100 %

Redemption price:

100 %

Issuance date:

May 1, 2017

Coupon:

6.50 % p.a.

Interest due dates:

May 1^st of each year, the first

time May 1^st, 2018

Applicable law:

Swiss

There were no amounts outstanding as of March 31, 2017.

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

11.

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 Company’s results as follows:

Three months ended

Pension expense

March 31, 2017

March 31, 2016

Current service cost

14,055

15,607

Net actuarial (gain) loss recognized

649

Interest cost

577

961

Expected return on assets

(1,431)

(1,948)

Employee contributions

(5,020)

(5,973)

Net periodic pension cost

8,182

9,297

During the three-month periods ended March 31, 2017 and March 31, 2016, the Company made cash

contributions of $27,494 and $5,973, respectively, to its defined benefit pension plan.

All of the assets are held under a collective contract by the plan’s re-insurance company and are

invested in a mix of Swiss and international fixed-income and equity securities within the limits set

out by the Swiss pension law.

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

the pension plan for the year ended December 31, 2017 are $20,079.

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

12.

STOCK COMPENSATION

The Company has included share based compensation under the SunVesta Inc. Stock Option Plan

2013 (“Plan”) as part of the total remuneration in certain employment and Board of Director’s

contracts. The Company is authorized to grant up to 50,000,000 stock options under the Plan to

acquire shares of its common stock.

The purpose of the Plan is to advance the interests of the Company by encouraging its employees to

remain associated with the Company and to assist it in building value.

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 3,500,000 common shares to Hans Rigendinger, valued at

$0.08 an amount equal to the share price and fair value of the shares on the grant date in connection

with his employment agreement with the Company. His employment agreement obligates the

Company to issue 2,500,000 common shares as a retention award on each anniversary of the

employment agreement. The employment agreement has an initial term of three years with the

option to extend for an additional two years. Mr. Rigendinger’s employment agreement was renewed

on January 1, 2016. Therefore, the Company may issue up to 12,500,000 common shares, of which

10,000,000 have been earned, 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 in connection

with his appointment to the Board of Directors.

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 with the Company. His employment agreement obligated the Company

to issue 3,000,000 common shares as a retention award on each anniversary of the employment

agreement. The employment agreement had an initial term of three years with the option to extend

for two additional two-year periods. Mr. Mettler’s employment agreement was renewed on July 4,

2016. Therefore, in total the Company could have issued up to 21,000,000 common shares, of which

9,000,000 were earned prior to his death, through December 31, 2020.

Josef Mettler died during the third quarter of 2016. Subsequently, the necessary accrual up until his

death was reversed as of September 30, 2016.

Share Grants – Mr. José María Figueres

On March 10, 2014, the Company granted 500,000 common shares to José María FigueresShare

Grants – Mr. , valued at $0.10, an amount equal to the share price and therefore the fair value on

grant date, in connection with his appointment to the Board of Directors. His appointment obligates

the Company to issue 200,000 common shares for each fully completed year of service.

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

12.

STOCK COMPENSATION – CONTINUED

Howard Glicken

On March 10, 2014, the Company granted 500,000 common shares to Howard Glicken, valued at

$0.10, an amount equal to the share price and therefore the fair value on grant date, in connection

with his appointment to the Board of Directors. His appointment obligates the Company to issue

200,000 common shares for each fully completed year of service.

Share Grants – Third party

On November 1, 2016, the Company granted 10,000,000 common shares to a non-related individual,

valued at a total of $240,947 (CHF 240,000) the fair value on grant date, in connection with his

consulting services for the Company. His engagement obligates the Company to issue 1,666,667

common shares for each fully completed month of service. From November 1, 2016 to March 31,

2017, the individual earned a total of 8,333,335 shares, creating an expense for the Company in the

amount of $200,789 (CHF 200,000).

Based on these contracts, the Company has included the following stock-based compensation in the

Company’s results:

Stock-based compensation

Three months

(shares)

ended March 31, 2017

ended March 31, 2016

Shares granted

57,200,000 shares

46,800,000 shares

Fair Value respectively

market price on grant date

$0.0659

$0.0744

Total maximal expenses

(2013-2020)

$3,770,947

$3,450,000

Shares vested

41,033,335 shares

26,800,000 shares

Shares forfeited

12,000,000 shares

Unvested shares

4,166,665 shares

20,000,000 shares

Of the granted shares, 12,000,000 were forfeited due to the death of Josef Mettler during the third

quarter 2016.

As of March 31, 2017, the Company expects to record compensation expense in the future of up to

$220,158 as follows:

Year ending December 31,

Stock-based

Through

compensation

December 31,

(shares)

2017

2018

2019

2020

Unrecognized

compensation

220,158

expense

Stock Options – Mr. Hans Rigendinger

The Company granted 10,000,000 stock options to Hans Rigendinger on January 1, 2013, in

connection with his employment contract. Each option entitles Mr. Rigendinger to buy one Company

share at an exercise price of $0.05. These options vest in two identical installments (Installment A

and Installment B) of 5,000,000.

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

12.

STOCK COMPENSATION – CONTINUED

Stock Options – Mr. Hans Rigendinger - Continued

Installment A vesting was contingent on realizing 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 would 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 that removed

the requirement for financing with a specific counterparty and updated for any counterparty. As of

the date of the revised stock option agreement, the fair value was $246,000. Since the modification

changed the expectation that the options would 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 recalculated expected remaining vesting period.

Installment B vesting is contingent on Meliá Hotels International (“Melía”) assuming management

responsibilities for the Paradisus Papagayo Bay Resort & Luxury Villas. As of the grant date, the fair

value was $340,000 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

would be met to be 100%, but the date on which the performance condition would have to be

achieved was postponed to the fourth quarter 2015, in line with the expected opening date. As of the

date of this report, the estimated opening date has been postponed to the fourth quarter 2018, being

the required date of the performance condition. The Company still assesses the probability that this

performance condition will be met at 100%. Hence, the remaining fair value of the award has been

expensed on a straight-line basis over the recalculated expected remaining vesting period.

Stock Options – Dr. Max Rӧssler

The Company granted 10,000,000 stock options to Dr. Max Rӧssler on July 3, 2013, in connection

with his appointment to the Board of Directors. Each option entitles Dr. Rӧssler to buy one

Company share at an exercise price of $0.05. These options vest in two identical installments

(Installment A and Installment B) of 5,000,000 options.

Installment A vesting is contingent on realizing a financing arrangement to complete the

development of the Paradisus Papagayo Bay Resort & Luxury Villas. As of the grant date, the fair

value was $249,835. The Company has expensed the total fair value of the award on a straight-line

basis over the expected vesting period.

Installment B vesting is contingent on Meliá assuming management responsibilities for the Paradisus

Papagayo Bay Resort & Luxury Villas. As of the 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 would be met to be 100%, but

the date on which the performance condition would have to be achieved was postponed to the fourth

quarter 2015, in line with the expectedopening date.

As of the date of this report, the estimated opening date has been postponed to the fourth quarter

2018, being the required date of the performance condition. The Company still assesses the

probability that this performance condition will be met at 100%. Hence, the remaining fair value of

the award has been expensed on a straight-line basis over the recalculated expected remaining

vesting period.

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

12.

STOCK COMPENSATION – CONTINUED

Stock Options – Mr. Josef Mettler

The company granted several installments of stock options in connection with his employment

contract.

Due to his passing away during the third quarter 2016, the probability that any of the corresponding

performance conditions will be met is 0%. Therefore, all previously recognized expenses in the

amount of $561,064 – corresponding to options that had not yet vested – was reversed as of

September 30, 2016.

Stock Options – Summary

A summary of stock options outstanding as per March 31, 2017 is as follows:

Options outstanding

Number of

Weighted average

Options

exercise price

remaining

contractual life

Outstanding January 1, 2017

20,000,000

$ 0.05

7.42 years

Granted

Exercised

Forfeited or expired

Outstanding March 31, 2017

20,000,000

$ 0.05

6.13 years

Exercisable March 31, 2017

The following table depicts the Company’s non-vested options as of March 31, 2017 and changes

during the period:

Non-vested options

Shares under Options

Weighted average grant date

fair value

Non-vested at January 1, 2017

20,000,000

$ 0.075

Non-vested-granted

Vested

Non-vested, forfeited or cancelled

Non-vested at March 31, 2017

20,000,000

$ 0.075

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 March 31, 2017 and March

31, 2016.

Assumption

March 31, 2017

March 31, 20176

Dividend yield

Risk-free interest rate used (average)

Expected market price volatility

Average expected life of stock options

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.

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

12.

STOCK COMPENSATION – CONTINUED

As of March 31, 2017, the Company had unrecognized compensation expenses related to stock

options currently outstanding, to be recognized in future quarters or years, respectively as follows:

Through to December 31,

Year ending December 31,

Stock-based compensation (options)

2017

2018

Unrecognized compensation expense

30,723

13.

SUMMARY OF SHARE AND OPTION COMPENSATION EXPENSE

The Company recorded the following amounts related to stock based compensation expense during

the periods ended March 31, 2017 respectively March 31, 2016:

Summary of share and option based

Three months ended

compensation expense

March 31, 2017

March 31, 2016

Share grants (see Note 14 for details)

260,789

112,500

Option grants (see Note 14 for details)

10,241

15,335

Total

271,030

127,835

(recorded under general &

administrative expense)

14.

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. The company has been invited by the landlord to discuss

a continuation or termination of the rental agreement. The objective is to come to a decision before

the middle of the calendar year 2017.

Future lease commitments

March 31, 2017

2017

97,500

15.

NOTE PAYABLE

March 31, 2017

December 31, 2016

Promissory note

1,000,000

1,500,000

Total

1,000,000

1,500,000

Promissory Note

On September 19, 2016, the Company signed an agreement with the counterparty, which stipulated

payment terms of four quarterly instalments of $500,000 each starting on November 21, 2016.

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

16.

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 was signed between the Company and Melía with the

following major conditions:

New completion date: September 15, 2018 (subject to force majeure)

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 Melía a daily amount of $2,000 as liquidated damages.

Should the completion not occur by November 15, 2018, Melía shall be entitled to

terminate the agreement unless the parties agree in writing to extend the completion date

and the Company shall be obliged to pay Melía $5,000,000 as liquidated damages solely to

compensate the Manager.

17.

EARNINGS PER SHARE

Basic earnings per share are the result of dividing the Company’s net income (or net loss) by the

weighted average number of shares outstanding for the contemplated period. Diluted earnings per

share are calculated applying the treasury stock method. When there is a net income dilutive effect,

all stock-based compensation awards or participating financial instruments are considered. When the

Company posts a loss, basic loss per share equals diluted loss per share. The following table depicts

how the denominator for the calculation of basic and diluted earnings per share was determined

under the treasury stock method.

Three-month

Earnings per share

period ended

March 31,

2017

2016

Company posted

Net loss

Basic weighted average shares

outstanding

108,234,104

98,506,438

Dilutive effect of common

stock equivalents

None

Dilutive weighted average

shares outstanding

108,234,104

98,506,438

A total of 11,233,335 common shares vested have not been issued as per balance sheet date but are

included in the basic weighted average shares outstanding.

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

17.

EARNINGS PER SHARE - CONTINUED

The following table shows the number of stock equivalents of SunVesta Inc. 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

Earnings per share

period ended

March 31, 2017

March 31, 2016

Options to Hans Rigendinger

10,000,000

Options to Dr. M. Rössler

10,000,000

Options to Josef Mettler

12,000,000

Total Options

20,000,000

32,000,000

Shares to Hans Rigendinger

2,500,000

5,000,000

(retention bonus – non vested)

Shares to Josef Mettler (retention award)

15,000,000

Shares to third party

1,666,665

400,000

Shares to Howard Glicken and José Maria Figueres

(retention award)

400,000

Total Shares

4,566,665

20,400,000

Total Options and Shares

24,566,665

52,400,000

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.

A number of 4,343,840 stock equivalents of SunVesta Holding AG associated with the Convertible

CHF Bond were excluded from the computation of diluted earnings per share for the three-month

period ended March 31, 2017 because the effect would have been anti-dilutive (3,877,625 for the

three-month period ended March 31, 2016).

18.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses according to the consolidated statement of comprehensive loss

include:

Three-month

period ended

March 31, 2017

March 31, 2016

Rental & related expenses

39,120

54,617

Audit

99,610

(12'777)

Consulting

695,751

211,319

Marketing, Investor & public relations

10,500

28,777

Travel expenses

133,958

103,746

Personnel costs including social security’s costs and

share based remuneration

283'533

463,701

Expense for penalty on management agreement

5,000,000

Office Expenses

203

Various other operating expenditures

113,295

223,588

Total according statement of comprehensice loss $

1,375,970

6,072,970

SUNVESTA, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017

19.

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 the following events that warrant disclosure or recognition in the financial

statements.

Litigation

The Company initiated legal proceedings on April 21, 2017, against the seller of the additional

concession properties in Polo Papagayo, Costa Rica.The claim is based on the seller’s alleged failure

to perform according to the terms of a purchase and sale agreement dated April 24, 2013, pursuant to

which the seller was to return deposits in the amount of $1,669,701 on receiving notice of

cancellation minus 5% in liquidated damages.

As of March 31, 2017, no gain has been recognized with respect to the claim against the seller of the

additional concession properties.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

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

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

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

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

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

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

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

Future Results and Financial Condition below. The following discussion should be read in

conjunction with our financial statements and notes hereto included in this report. All information

presented herein is based on our three-month periods ended March 31, 2017 and March 31, 2016. Our

fiscal year end is December 31.

Discussion and Analysis

Business Overview

We are in the business of developing high-end luxury hotels and resorts in countries that are emerging

as popular tourist destinations. Our intention is to develop luxury hotel products located in countries

such as Costa Rica that are emerging as popular tourist destinations. Our first hospitality

development, to be constructed on 20.5 hectares of prime land located in Guanacaste Province, Costa

Rica is the Paradisus Papagayo Bay Resort & Luxury Villas, a five-star luxury hotel. 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 at the beginning of the second quarter of 2017, while the opening of the

Paradisus Papagayo Bay Resort & Luxury Villas is scheduled for the fourth quarter 2018. The

estimated commencement of construction and opening dates are subject to securing sufficient capital

commitments to complete the development.

Specifications

Paradisus Papagayo Bay Resort & Luxury Villas’ initial specifications are to be as follows:

— eco-luxury all-inclusive resort

— 382-keys

— direct beach access

— five restaurants and five bars

— Yhi Spa and Health Club

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

— Paradisus’ “Family Concierge” program

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

Vista Mar

Family Concierge

The Family Concierge will be a family orientated part of the Paradisus Papagayo Bay Resort &

Luxury Villas. The accommodations will be designed to satisfy the needs of the modern family.

The Family Concierge area will include:

— 166 Junior Suites Deluxe

(47* square meters)

— 34 Suites Deluxe

(87* square meters)

— 33 Suites Premium

(93* square meters)

— 6 Handicapped Junior Suites Deluxe

(47* square meters)

— 1 Bridal Suites

(93* square meters)

— 2 Deluxe Suites Presidential

(88* square meters)

— 1 Presidential Suite

(194* square meters)

Room size does not include balconies and terraces.

All ground floor suites will have direct access to swim-up pools. Each of the suites and villas will

have a full view of the sea. Family Concierge guests will furthermore have access to restaurants, bars,

and lounges. The planned Onyx Night Club and the Gabi Club will be located near the beach.

Vista Bahia

Royal Service

Our Royal Service will include an extensive range of services such as a butler service, private pools

for each Garden Villa and/or a Jacuzzi in every suite.

The Royal Service area will include:

— 108 Junior Suites Grand Deluxe

(43-60* square meters)

— 2 Junior Suites Grand Deluxe for Handicapped Guests

(53* square meters)

— 6 Grand Master Suites

(87* square meters)

— 2 Deluxe Suites Presidential

(60 square meters)

— 1 Grand Presidential Suite (4 bedrooms)

(145* square meters)

— 20 one or two-bedroom Garden Villas

(91–212* square meters)

— Room size does not include balconies and terraces.

* Room size does not include balconies and terraces.

All ground floor suites will have direct access to swim-up pools. Each of the suites and villas will

have a full view of the sea. Royal Service guests will furthermore have access to restaurants, bars,

lounges, fitness equipment, spas and outside massage areas.

The Paradisus Papagayo Bay Resort & Luxury Villa’s will feature other highlights including:

— more than 65 private, swim up and resort pools including the world’s second largest Infinity Pool all

within idyllic landscaped grounds

— a wedding chapel with a stunning ocean view

— rain forest walkways that permit guests to experience the flora and fauna of the rain forest

— a multipurpose convention hall with over 2,000 square meters of space that can be utilized as a

whole or divided to create smaller meeting rooms

— a full service spa committed to providing for the wellbeing of our guests. The spa will be located

with a 180-degree sea view within approximately 1,000 square meters that will include 12 large

treatment rooms, a hairdresser, relaxation areas, pools, saunas and steam rooms

— the 20 private villas will be located within the Royal Service area of the resort. The present intention

being that these villas will be sold to individuals who will then lease them back to the resort when

not occupied by the owners.

Management

Overall project development is led by Hans Rigendinger, our Chairman of the Board and Chief

Executive Officer, Charles Fessel, Project Director Paradisus Papagayo Bay Resort & Luxury Villas

and Ernst Rosenberger, the Company’s Corporate Controller. The lead architect is Ossenbach,

Pendones & Bonilla, one of Costa Rica’s largest architectural offices with over 45 architects and

designers. Civil engineering services are provided by DEHC Engineers and structural engineering

services by IEAC. Landscape architects are TPA and interior designers are led by Laboratorio

Quattro.

Resort management is to be provided by Melía Hotels International (“Melía”). “Paradisus” is Meliá’s

five-star all-inclusive luxury hotel brand that is well recognized in the hospitality industry around the

world. Melía was founded in 1956 in Palma de Mallorca, Spain and is today one of the world’s largest

resort hotel chains, as well as Spain’s leading hotel chain for business or leisure. Melía 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 has

been delayed to the fourth quarter of 2018, the Company reached an agreement dated April 28, 2016,

to amend the original agreement with Meliá dated March 8, 2011. The current agreement stipulates

the following major conditions:

New completion date: September 15, 2018 (subject to force majeure)

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 Owner shall

pay

the Manager a daily amount of $ 2,000 as liquidated damages.

Should the completion not occur by November 15, 2018, and should the parties to the

management agreement not agree to an extension, the Company will be obligated to pay

Meliá $5,000,000 as liquidated damages.

Additional Concession Properties

The Company entered into a Purchase and Sale Agreement dated April 24, 2013, with Meridian IBG,

Inc., (“Meridian”) to purchase Marina Rose Ltda. (“Marina Rose”), a Costa Rican company that held

certain concessions located in the Gulf of Papagayo, Guanacaste Province, Costa Rica (“Meridian

Agreement”) for $17,500,000. One of the concessions lies adjacent to the SunVesta Costa Rica SA

concessions (La Punta) and the other is in close proximity. The Meridian Agreement caused the

Company to enter into a Purchase and Sale Agreement dated April 24, 2013, with RBAT Costa Rica

LLC, an entity controlled by Varde Investment Partners LP (“Varde”) to pay $8,000,000 of the

purchase price payable to Meridian to Varde (“Varde Agreement”). Varde delivered a notice of

termination of the Varde Agreement to the Company on January 4, 2014, and the Company noticed

cancellation of the Meridian Agreement to Meridian on February 24, 2017.

The Meridian Agreement entitled the Company to reimbursement for all amounts paid as deposits

against the purchase of Marina Rose less a liquidated damages penalty of 5% on providing notice of

cancellation. The Varde Agreement entitled the Company to reimbursement for all amounts paid as

deposits minus a non-refundable payment of $300,000 and a 5% liquidated damages penalty on

receiving notice of termination, the company entered into a new Stock Purchase Agreement with RBAT Costa Rica pursuant to which amounts refundable from the Varde Agreement were no longer refundable.

The Company delivered notice of its claims for reimbursement to the respective parties and has since

period end initiated legal proceedings to recoup amounts it believes to be due.

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 $217 million (excluding non-

recuperated overhead expenses), of which approximately $67 million has been expended as of March

31, 2017. We aim to realize a minimum of $140 million in new funding over the next nine months.

New funding over the next nine 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 Swiss Francs (CHF).

Swiss Francs (CHF) Convertible Bonds

The Company initiated an offering of senior unsecured CHF bonds on October 1, 2015, of up to CHF

15,000,000 in 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 $3,708,645 as of March 31, 2017 and

$3,648,383 as of December 31, 2016 in connection with this offering.

The Company initiated a parallel offering of senior unsecured CHF bonds on October 1, 2015, of up

to CHF 45,000,000 in 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 $35,613,725 as of March 31, 2017 and

$36,770,369 as of December 31, 2016, in connection with this offering. Included in these amounts

was approximately $6.2 million (CHF 6.32 million) that by agreement with certain bondholders

deviated from the standard terms to provide for repayment by February 28, 2017. An amount of

$1,795,594 was repaid as of March 31, 2017. The remaining amount was rolled forward unchanged

from the original conditions of the offering.

Swiss Francs (CHF) Bonds

The Company initiated a new offering of senior unsecured CHF bonds on September 21, 2016, of up

to CHF 20,000,000 in units of CHF 5,000 that bear interest at 6.50% per annum payable each August

15, over a four-year term that matures on August 15, 2020. We had realized $16,796,665 as of March

31, 2017 and $15,601,389 as of December 31, 2016.

The Company initiated a new parallel offering of senior unsecured CHF bonds on September 21,

2016, of up to CHF 20,000,000 in units of CHF 5,000 that bear interest at 6.50% per annum payable

each August 16, over a four year term that matures on August 15, 2020. We had realized $977,478 as

of March 31, 2017 and $961,595 as of December 31, 2016.

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 credit

line was amended and then replaced by a new loan agreement on December 31, 2016, that includes

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, 2020 and before December 31, 2022.

— After December 31, 2020, the lender has the option to cancel the loan agreement with a prior

notice period of 90 days, requiring repayment of the loans in full.

— The borrower has the right to repay the loan at any time with a prior notice period of 90 days.

— Loan amounts outstanding including any additional amounts and additions are subordinated.

— Interest on the loan amounts is 7.25% per annum, which is accrued to the loan account.

The Company had borrowed $53,205,093 from Aires as of March 31, 2017 and $51,473,793 as of

December 31, 2016.

Loan Global Care AG

During the first quarter of 2017, Global Care AG, a company owned by Dr. Rӧssler (a director of the

Company), provided $7,048,257 to the Company at 7.25% interest, repayable not before December

31, 2020.

Loan Blue Dot SA (formerly DIA S.A)

On March 8, 2013, the Company entered into an interest free loan agreement with Blue Dot SA

(formerly DIA SA) (“Blue Dot”) in connection with the purchase of the land concession for the

Paradisus Papagayo Bay Resort & Luxury Villas project.

On September 21, 2016, the Company signed a new agreement, which stipulates that the total

amount of $2,000,000 is repayable in four quarterly installments of $500,000 each, starting on

November 21, 2016.

Blue Dot was due $1,000,000 as of March 31, 2017 and $1,500,000 as of December 31, 2016.

Timeline

Our expected timeline for developing the Paradisus Papagayo Bay Resort & Luxury Villas is as

follows:

— commence onsite vertical construction in the second quarter of 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 period ended March 31, 2017, 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; and (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.

Comprehensive Losses

The variance in losses over the comparative three- month periods is reconciled:

Three months January to March 2016

(9,526,075)

Variances during the 3 months

Decrease in general and administrative expenses

4,696,999 Decrease was due to the accrual of a

penalty in 2016.

Increase in impairment expenses

(280,242) Impairment of REP Caribbean receivable

Increase in interest income

5,047 Increase in deposits

Decrease in interest expenses

930,493 Primarily increase in volume of

conversion feature in 2016 and decrease

in 2017.

Change in fair values of conversion features

253,903 Primarily decrease in time value of

conversion feature

Decrease in unrealized exchange gains

(414,602) Currency fluctuations

Decrease in other income / (expenses)

30,860 Not material

Decrease in foreign currency translation losses

665,068 Currency fluctuations

Total variances

5,887,526

Three months January to March 2017

(3,638,549)

The penalty accounted for during the period ended March 31, 2016 was in respect to the management

agreement with Meliá dated March 8, 2011. The amended agreement stipulated that if the Papagayo

Bay Resort & Luxury Villa’s would not be 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. Consequently, an accrual in the amount of $5 million was charged against

operating expenses. In light of the seventh addendum to the management agreement that was signed

on April 27, 2016, this accrual was reversed in the second quarter of 2016.

We did not generate revenue during this period and we expect to continue to incur losses through the

year ended December 31, 2017.

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

March 31, 2017, 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.

Liquidity and Capital Resources

Since inception the Company has experienced significant changes in liquidity, capital resources, and

stockholders’ equity.

As of March 31, 2017 and December 31, 2016, the following were working capital items:

March 31, 2017

December 31, 2016

Current assets

Cash and cash equivalents

2,557,181

806,440

Receivable from related parties

65,483

49,292

Other assets

460,977

456,099

Total current assets

3,083,641

1,311,830

Current liabilities

Accounts payable

1,979,141

3,311,512

Accrued expenses

2,810,375

3,160,722

Notes payable

1,521,648

1,500,000

Notes payable to related parties

7,338,257

307,088

Other liabilities

1,641

120

Bonds

6,687,384

Total current liabilities

13,651,063

14,966,825

Net working capital

(10,567,422)

(13,654,994)

As of March 31, 2017, and December 31, 2016, the following were the items making up the total

stockholders’ deficit:

March 31, 2017

December 31, 2016

Assets

Current assets

3,083,641

1,311,830

Non-current assets

69,608,843

68,354,502

Total assets

72,692,485

69,666,332

Liabilities

Current liabilities

13,651,063

14,966,825

Non-current liabilities

113,581,579

105,872,146

Total liabilities

127,232,642

120,838,971

Total stockholders’ deficit

(54,540,158)

(51,172,639)

The Company’s negative net working capital of $10,567,422 is a concern going forward. However,

based on the guaranty signed by certain principals, the Company is convinced that it can address

liquidity problems.

Net cash flow used in operating activities for the three-month period ended March 31, 2017, was

$3,309,830, as compared to $928,807 for the three-month period ended March 31, 2016.

We expect 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.

Net cash used in investing activities for the three-month period ended March 31, 2017, was $596,408

as compared to $1,887,727 for the three-month period ended March 31, 2016. Net cash used in

investing activities in the current three-month period is comprised of the purchase of property and

equipment, offset by the sale of equipment. Net cash used in investing activities in the prior

comparable three-month period was comprised of the purchase of property and equipment, and

deposits related to construction, offset by receivables from related parties 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 three-month period ended March 31, 2017, was

$5,655,631 as compared to $2,905,132 for the three-month period ended March 31, 2016. Net cash

provided by financing activities in the current three-month period is comprised of proceeds from notes

payable to related parties, proceeds from bond issuances net of commissions, and proceeds from other

debt, offset by repayments of bonds and other debt. Net cash provided by financing activities in the

prior comparable three-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 and

the repayment of 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, current bond offerings 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 March 31, 2017.

We have commitments that include an award letter issued in favor of certain general contractors

together with purchase orders and related agreements for $130 million as of March 31, 2017, in

connection with the development of the Paradisus Papagayo Bay Resort & Luxury Villas, which

commitments are included in the required estimated net financing of $217 million to complete the

project.

We maintain a defined benefit plan that covers all of our Swiss employees.

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 March 31, 2017.

Future Financings

As of March 6, 2017, the Company has approved issuance of a new 6.5% bond. There were no

amounts outstanding as of March 31, 2017.

Off-Balance Sheet Arrangements

As of March 31, 2017, 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 $237 million.

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

242,000,000

b. Less: Proceeds from sale of villas

(25,000,000)

c. Net project cost

217,000,000

d. Overhead expenses

20,000,000

e. Total, excluding other potential projects

237,000,000

Seventy percent 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 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 committements, i.e. Mr. Hans Rigendinger, shareholder, interim Chief Executive Officer

and Company Board Member and Dr. Max Rössler, Company Board Member and controlling

shareholder of Aires.

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 project’s 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.

On September 12, 2016, the signatories to the guaranty formally agreed to maintain the guaranty, as

necessary, until completion of the construction of Paradisus Papagayo Bay Resort & Luxury Villas,

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 March 31, 2017, and the filing date, though future

anticipated cash outflows for investing activities will continue to depend on the availability of

financing.

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

Condition

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

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

historical facts, are forward-looking statements. Forward-looking statements reflect our current

expectations and beliefs regarding our future results of operations, performance, and achievements.

These statements are subject to risks and uncertainties and are based upon assumptions and beliefs

that may or may not materialize. These statements include, but are not limited to, statements

concerning:

— our anticipated financial performance and business plan

— the sufficiency of existing capital resources

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

— uncertainties related to our future business prospects

— our ability to generate revenues to fund future operations

— the volatility of the stock market

— general economic conditions

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

could cause our actual results to differ materially from those discussed or anticipated elsewhere in this

report. We also wish to advise readers not to place any undue reliance on the forward-looking

statements contained in this report, which reflect our beliefs and expectations only as of the date of

this report. We assume no obligation to update or revise these forward-looking statements to reflect

new events or circumstances or any changes in our beliefs or expectations, other than as required by

law.

Recent Accounting Pronouncements

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

pronouncements.

ITEM 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 current report, an evaluation was carried out by the

Company’s management, with the participation of its chief executive officer and chief financial

officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules

13a-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)). Disclosure controls and

procedures are designed to ensure that information required to be disclosed in reports filed or

submitted under the Exchange Act is recorded, processed, summarized, and reported within the time

periods specified in the Commission’s rules and forms, and that such information is accumulated and

communicated to management, including the chief executive officer and chief financial officer, to

allow timely decisions regarding required disclosures.

Based on that evaluation, the Company’s management concluded, as of the end of the period covered

by this report, that the Company’s disclosure controls and procedures were not effective in recording,

processing, summarizing, and reporting information required to be disclosed, within the time periods

specified in the Commission’s 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 March 31, 2017, 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.

PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

The Company initiated legal proceedings against Meridian IBG, Inc. (“Meridian”) on April 21, 2017,

in the Hennepin County District Court, Fourth Judicial District. The claim is based on Meridian’s

alleged failure to perform according to the terms of a purchase and sale agreement dated April 24,

2013, pursuant to which Meridian was to return deposits in the amount of $1,669,701 paid against the

purchase of certain properties in Guanacaste, Costa Rica on providing notice of cancellation minus

5% in liquidated damages. The Company seeks return of the deposits, interest on the deposits and

expenses accrued in pursuing its claim. Meridian is yet to respond to the Company’s complaint.

ITEM 1A.

RISK FACTORS

Not required of smaller reporting companies.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF

PROCEEDS

On November 1, 2016, the Company granted 10,000,000 shares of restricted common stock valued

at $0.024 a share to a consultant, to be earned in connection with his services to be rendered, in reliance upon the exemptions from registration provided by Section 4(2) and

Regulation S of the Securities Act of 1933, as amended (“Securities Act). His engagement obligates

the Company to issue 1,666,667 common shares for each fully completed month of service. The

consultant had earned a total of 8,333,335 shares of this grant as of March 31, 2017.

The Company complied with the exemption requirements of Section 4(2) of the Securities Act

based on the following factors: (1) the grant was an isolated private transaction which did not

involve a public offering; (2) the offeree had access to the kind of information which registration

would disclose; (3) the offeree was financially sophisticated; and (4) the offeree works directly with

the officers and directors of the Company.

The Company complied with the exemption requirements of Regulation S by having directed no

offering efforts in the United States, by offering securities only to an offeree who was outside the

United States at the time of the offering, and ensuring that the offeree to whom the securities were

offered and authorized was a non-U.S. offeree with an addresses in a foreign country.

ITEM 3.

DEFAULTS ON SENIOR SECURITIES

None

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

None

ITEM 6.

EXHIBITS

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

page 43 of this Form 10-Q, and are incorporated herein by this reference.

SIGNATURES

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

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

SunVesta, Inc.

Date

/s/ Hans Rigendinger

May 15, 2017

Hans Rigendinger

Chief Executive Officer, Chief Financial Officer

Principal Accounting Officer and Director

INDEX TO EXHIBITS

Exhibit

Description

3.1.1*

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

December 31, 1999).

3.1.2*

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

Commission on April 9, 2003)

3.1.3*

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

Commission on November 17, 2003).

3.1.4*

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

Commission on September 27, 2007).

3.2.1*

Bylaws (incorporated by reference from the Form 10-SB filed with the Commission on December 31,

1999).

3.2.2*

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

November 17, 2003).

10.1*

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

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

the Commission on June 21, 2007).

10.2*

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

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

10.3*

Debt Settlement Agreement dated March 1, 2010, between the Company and Zypam, Ltd. (incorporated

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

10.4*

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

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

10.5*

Guaranty Agreement dated July 16, 2012, between SunVesta AG, Jthe late osef Mettler, Hans

Rigendinger and 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 the late Josef Mettler

(incorporated by reference to the Form 10-Q filed with the Commission on October 10, 2013).

10.8*

Assignment of Debt Agreement dated December 31, 2012, between the Company, SunVesta AG and

Aires International Investments, Inc. (incorporated by reference to the Form 10-Q filed with the

Commission on December 13, 2013).

10.9*

Debt Settlement Agreement dated December 31, 2012, between the Company and Hans Rigendinger

(incorporated by reference to the Form 10-Q filed with the Commission on December 13, 2013).

10.10*

Loan Agreement dated October 31, 2013, between SunVesta AG and Aires International Investments,

Inc. (incorporated by reference to the Form 10-Q filed with the Commission on December 13, 2013).

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 the late 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 the Form

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 of 2002.

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

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

99*

SunVesta, Inc. 2013 Stock Option Plan (incorporated by reference to the Form 10-Q filed with the

Commission on October 10, 2013).

101. INS

XBRL Instance Document^†

101. PRE

XBRL Taxonomy Extension Presentation Linkbase^†

101. LAB

XBRL Taxonomy Extension Label Linkbase^†

101. DEF

XBRL Taxonomy Extension Label Linkbase^†

101. CAL

XBRL Taxonomy Extension Label Linkbase^†

101. SCH

XBRL Taxonomy Extension Schema^†

Incorporated by reference to previous filings of the Company.

^†

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed “furnished” and not

“filed” or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities

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

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

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