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0001211524-13-000254.txt : 20131010 0001211524-13-000254.hdr.sgml : 20131010 20131010163943 ACCESSION NUMBER: 0001211524-13-000254 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20130331 FILED AS OF DATE: 20131010 DATE AS OF CHANGE: 20131010 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUNVESTA, INC. CENTRAL INDEX KEY: 0001060409 STANDARD INDUSTRIAL CLASSIFICATION: MAGNETIC & OPTICAL RECORDING MEDIA [3695] IRS NUMBER: 980211356 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-28731 FILM NUMBER: 131146298 BUSINESS ADDRESS: STREET 1: SEESTRASSE 97, SEEPARK CITY: OBERRIEDEN STATE: V8 ZIP: CH-8942 BUSINESS PHONE: 01141433884060 MAIL ADDRESS: STREET 1: SEESTRASSE 97, SEEPARK CITY: OBERRIEDEN STATE: V8 ZIP: CH-8942 FORMER COMPANY: FORMER CONFORMED NAME: OPENLIMIT INC DATE OF NAME CHANGE: 20031201 FORMER COMPANY: FORMER CONFORMED NAME: JURE HOLDINGS INC DATE OF NAME CHANGE: 20021216 FORMER COMPANY: FORMER CONFORMED NAME: THOR VENTURES CORP DATE OF NAME CHANGE: 19991203 10-Q 1 sunvests10qmar2013.htm SUNVESTA 10-Q MARCH 2013 Converted by EDGARwiz

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2013.

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 o No þ

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

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

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

was required to submit and post such files). Yes þ No o

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

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

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

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

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

Act). Yes o No þ

Indicate the number of shares outstanding of each of the 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 October 10, 2013, was 75,541,600.

TABLE OF CONTENTS

PART 1- FINANCIAL INFORMATION

Item1.

Financial Statements:

Consolidated Balance Sheets as of March 31, 2013 (Unaudited) and December 31,

2012

Unaudited Consolidated Statements of Comprehensive Loss for the

three months ended March 31, 2013 and March 31, 2012 and cumulative amounts

Unaudited Consolidated Statements of Stockholders’ Equity (Deficit)

Unaudited Consolidated Statements of Cash Flows for the three months ended

March 31, 2013 and March 31, 2012 and cumulative amounts

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

Other Information

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

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

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

SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

March 31, 2013

December 31, 2012

(Unaudited)

Assets

Current assets

Cash and cash equivalents

178,990 $

260,520

Other assets

55,876

39,238

Receivable from related parties

290,971

Total current assets

525,837

299,758

Non-current assets

Property and equipment - net

30,610,366

16,799,540

Debt issuance costs - net

1,464,576

1,649,216

Down payment for property and equipment

1,869,836

10,320,144

Restricted cash

980,327

241,500

Total non-current assets

34,925,105

29,010,400

Total assets

35,450,942

29,310,158

Liabilities and stockholders' equity (deficit)

Current liabilities

Accounts payable

1,638,571

827,102

Accrued expenses

2,175,163

3,868,914

Note payable

2,000,000

Notes payable to related parties

3,247,740

3,432,064

EUR-Bond

12,056,458

14,216,707

Total current liabilities

21,117,932

22,344,787

Non-current liabilities

CHF-Bond

5,566,811

5,689,364

Notes payable to related parties

16,947,284

11,125,741

Fair value of conversion feature

50,181

Pension liabilities

70,756

74,075

Total non-current liabilities

22,635,032

16,889,180

Total liabilities

43,752,964

39,233,967

Stockholders' equity (deficit)

Preferred stock, $0.01 par value;

50,000,000 share authorized no shares issued

and outstanding

Common stock, $0.01 par value;

200,000,000 shares authorized; 75,541,600 and

54,092,186 shares issued and outstanding

755,416

540,922

Additional paid-in capital

20,319,850

19,446,367

Accumulated other comprehensive gain/loss

178,997

(1,102,408)

Retained earnings prior to development stage

1,602

Deficit accumulated during the development stage

(29,534,132)

(28,786,537)

Treasury stock, 157,220 and 157,220 shares

(23,755)

Total stockholders' equity (deficit)

(8,302,022)

(9,923,809)

Total liabilities and stockholders' equity (deficit) $

35,450,942

29,310,158

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

SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three months ended Three months ended

Cumulative

March 31, 2013

March 31, 2012

Amounts*

(unaudited)

(unaudited & restated)

(unaudited)

Revenues

Revenues, net

Cost of revenues

Gross profit

Operating income / - expenses

General and administrative expenses

(1,304,957)

(971,627)

(22,514,214)

Sales and marketing

(480,872)

Impairment on property and equipment

(1,311,000)

Release of accrual for penalty to Mélia

Hotels & Resorts

1,000,000

Total operating income / - expenses

(304,957)

(971,627)

(23,306,086)

Loss from operations

(304,957)

(971,627)

(23,306,086)

Other income / - expenses

Loss on disposals of assets

(3,258)

Loss on sale of investments

(1,137,158)

Loss on extinguishment of debt

(1,806,758)

Interest income

174

3,060

168,141

Interest expense

(426,656)

(280,995)

(2,901,639)

Amortization of debt issuance costs

and commissions

(82,815)

712

(887,053)

Exchange differences

143,872

130,272

519,929

Change in fair value of conversion

feature

(50,181)

Other income / - expenses

(27,032)

14,053

10,067

Total other income / - expenses

(442,638)

(132,898)

(6,087,910)

Loss before income taxes

(747,595)

(1,104,525)

(29,393,996)

Income Taxes

(140,136)

Net loss

(747,595)

(1,104,525)

(29,534,132)

Comprehensive income / (loss)

Foreign currency translation

1,281,405

(802,775)

199,997

Comprehensive income / (loss)

533,810

(1,907,300)

(29,334,135)

Loss per common share

Basic and diluted

(0.01)

(0.02)

Weighted average common shares

Basic and diluted

71,251,720

54,092,186

* Cumulative amounts: January 1, 2005 (date of inception) to March 31, 2013

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

SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

January 1, 2005 (Date of Inception) to March 31, 2013

Common

Additional Paid

Accumulated Other

Prior Earnings

Deficit Accumulated

Treasury Stock

Total

Stock

in Capital

Comprehensive

During Development

Stockholders’

Income (Loss)

Stage

Equity (Deficit)

January 1, 2005

210,000 $

281,521 $

128 $

1,602 $

- $

493,251

Net loss

(807,118)

Translation adjustments

23,149

December 31, 2005

210,000

281,521

23,277

1,602

(807,118)

(290,718)

Net loss

(3,575,713)

Translation adjustments

(163,151)

December 31, 2006

210,000

281,521

(139,874)

1,602

(4,382,831)

(4,029,582)

Net loss

(2,912,578)

Translation adjustments

35,580

Acquisition of OpenLimit, Inc.

14,000

(63,080)

(49,080)

Issuance of stock for debt

64,312

10,742,025

10,806,337

December 31, 2007

288,312

10,960,466

(104,294)

1,602

(7,295,409)

3,850,677

Net loss

(1,188,377)

(1,188,377

Translation adjustments

(367,601)

Issuance of stock for compensation

417

61,852

62,269

Issuance of stock for debt

18,182

2,709,091

2,727,273

December 31, 2008

306,911

13,731,409

(471,895)

1,602

(8,483,786)

5,084,241

Net loss

(2,471,845)

Translation adjustments

401,460

Issuance of stock for compensation

600

44,400

45,000

Issuance of stock for cash

10,000

290,000

300,000

Issuance of stock for debt

77,259

3,785,668

3,862,927

Purchase of treasury stock

(12,200)

December 31, 2009

394,770

17,851,477

(70,435))

1,602

(10,955,631)

(12,200)

7,209,583

Net loss

(1,173,292)

Translation adjustments

10,983

Issuance of stock for debt

146,152

876,914

1,023,066

Purchase of treasury stock

(11,555)

December 31, 2010

540,922

18,728,391

(59,452)

1,602

(12,128,923)

(23,755)

7,058,785

Net loss

(10,382,930)

Translation adjustments

21,575

December 31, 2011

540,922

18,728,391

(37,877)

1,602

(22,511,853)

(23,755)

(3,302,570)

Net loss

(6,274,684)

Translation adjustments

(1,064,531)

Issuance of stock for debt

717,976

December 31, 2012

540,922

19,466,367

(1,102,408)

1,602

(28,786,537)

(23,755)

(9,923,809)

Net loss

(747,595)

Translation adjustments

1,281,405

Issuance of stock for compensation

35,000

335,000

370,000

Issuance of stock for debt

179,494

538,483

717,977

March 31, 2013

755,416 $

20,319,850 $

178,997 $

1,602 $

(29,534,132) $

(23,755)

(8,302,022)

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

SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

January 1 to

Cumulative

31 March 2013

31 March 2012

Amounts*

Unaudited

Unaudited & restated

Unaudited

Cash flows from operating activities

Net loss

(747,595)

(1,104,525)

(29,534,132)

Adjustments to reconcile net loss to net cash

Depreciation and amortization

10,198

22,443

330,283

Other income / expenses

(60,700)

Release of accrual for penalty to Mélia Hotels & Resorts

(1,000,000)

311,000

Amortization of debt issuance cost and commissions

82,815

(712)

894,751

Stock compensation expense

370,000

1,195,245

Unrealized exchange differences

(143,872)

(130,272)

(519,929)

Loss on securities acquired as deposit on stock

1,008,324

Loss on disposal of assets

3,258

Loss on extinguishment of debt

1,806,758

Change in fair value of conversion feature

50,181

Increase in pension fund commitments

(3,318)

12,774

70,757

Increase / decrease in:

Other current assets

(16,639)

(14,126)

(66,516)

Accounts payable

811,469

39,106

2,174,388

Accrued expenses

(693,751)

64,462

3,437,893

Net cash used in operating activities

(1,280,513)

(1,171,550)

(18,898,440)

Cash flows from investing activities

Proceeds from securities available-for-sale

1,740,381

Short term investments

75,000

Other receivables from related parties

(290,970)

(673,293)

(2,463,304)

Purchase of property and equipment

(753,024)

(1,002,487)

(18,520,832)

Down payments for property and equipment

(2,250,040)

(1,300,082)

(12,320,183)

Restricted cash

(739,327)

(980,827)

Net cash used in investing activities

(4,033,361)

(2,900,862)

(32,544,765)

Cash flows from financing activities

Net proceeds from deposit on stock

3,664,417

Proceeds from stock issuance

300,000

Proceeds from notes payable related parties

7,256,757

2,178,258

34,476,478

Repayment of notes payable related parties

(778,243)

Advances from third parties

700,000

Note payable

(714,819)

Proceeds from bond issuance, net of commissions

900,853

1,871,681

22,323,654

Repayments of bonds

(2,649,073)

(4,123,896)

Payment for debt issuance costs

(269,516)

(316,189)

(3,537,127)

Purchase of treasury stock

(23,755)

Net cash provided by financing activities

5,239,021

3,733,750

52,286,709

Effect of exchange rate changes

(6,677)

(17,775)

(665,069)

Net decrease in cash

(81,530)

(320,887)

178,435

Cash, beginning of period

260,520

505,500

555

Cash, end of period

178,990

184,613

178,990

Additional information

Interest paid

Income taxes paid

Conversion of note payable to Mr. Rigendinger to

stockholders' equity (non-cash)

717,977

Purchase of property and equipment through a note payable

(non-cash)

2,000,000

Reclassification of down payment for property and

equipment to property and equipment

10,200,000

Capitalized interest and debt issuance costs for construction

(non-cash)

368,000

314,000

* Cumulative amounts: January 1, 2005 (date of inception) to March 31, 2013

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

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

CORPORATE INFORMATION AND BASIS OF PREPARATION

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

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

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

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

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

focus to the development of holiday resorts and investments in the hospitality and related

industry. The Company has not materialized any revenues yet and is therefore a “development

stage company”.

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

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

The accompanying unaudited consolidated financial statements have been prepared by

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

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

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

31, 2012, filed with the Securities and Exchange Commission. These statements do include all

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

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

expected for the full year ended December 31, 2013.

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

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

10-K for the year ended December 31, 2012, filed with the Securities and Exchange

Commission.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

SIGNIFICANT ACCOUNTING POLICIES

New accounting standards – adopted

In February 2013, the FASB released ASU 2013-02 — Other comprehensive Income (Topic

220). The amendments in this Update supersede and replace the presentation requirements for

reclassifications out of accumulated other comprehensive income in AUSs 2011-05 (issued in

June 2011) and 2011-12 (issued in December 2011) for all public and private organizations. The

amendments would require an entity to provide additional information about reclassifications out

of accumulated other comprehensive income (loss). This Accounting Standard Update is the final

version of Proposed Accounting Standards Update 2012-240 — Comprehensive Income (Topic

220) which has been deleted. The amendments do not change the current requirements for

reporting net income or other comprehensive income (loss) in financial statements. However, the

amendments require an entity to provide information about the amounts reclassified out of

accumulated other comprehensive income (loss) by component. In addition, an entity is required

to present, either on the face of the statement where net income (loss) is presented or in the notes,

significant amounts reclassified out of accumulated other comprehensive income (loss) by the

respective line items of net income but only if the amounts reclassified is required under U.S.

GAAP to be reclassified to net income in its entirety in the same reporting period. For other

amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income,

an entity is required to cross-reference to other disclosures required under U.S. GAAP that

provide additional detail about those amounts. For public entities, the amendments are effective

prospectively for reporting periods beginning after December 15, 2012. The Company adopted

this ASU as of January 1, 2013 and its adoption did not impact the Company’s consolidated

financial statements.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

GOING CONCERN

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

of Guanacaste, Costa Rica.

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

the following expenditures are estimated to be incurred:

Expenditures

USD

a. Gross project cost

195,000,000

b. Less: Proceeds from sale of villas

(24,000,000)

c. Net project cost

171,000,000

d. Overhead expenses

21,000,000

e. Less: Recuperated in gross project cost

(12,000,000)

Total, excluding other potential projects

180,000,000

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

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

project cost”), as well as “non-recuperated overhead expenses” are going to be financed by the

main shareholders or lenders of the project, i.e. Zypam Ltd., shareholder, Mr. Hans Rigendinger,

shareholder and board member of SunVesta AG, Mr Max Rössler, majority shareholder of Aires

International Investment, Inc., Mr Josef Mettler, shareholder, director and chief executive officer.

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

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

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

guarantor to creditors to the extent of the project’s ongoing capital requirements. The guaranty

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

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

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

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

Based on this guaranty agreement, management believes that available funds are sufficient to

finance cash flows for the twelve months subsequent to March 31, 2013 and the filing date

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

availability of financing and can be adjusted as necessary.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

RESTRICTED CASH

As per March 31, 2013 the company has the following restricted cash positions:

Restricted Cash

March 31, 2013

December 31, 2012

Credit Suisse in favor of

BVK Personalvorsorge des Kantons Zürich

133,574

HSBC in favor of

Costa Rican Tourism Board

243,000

241,500

Banco Nacional de Costa Rica in favor of

Costa Rican Environmental Agency – SETENA

603,753

Gross

980,327

241,500

Restricted cash positions in favor of Costa Rican Tourism Board and Costa Rican Environmental

Agency – SETANA are related to the hotel project in Costa Rica and therefore their release is not

expected before finalization of the corresponding project. Due to this fact these restricted cash

positions has been classified as long term.

The restricted cash position in favor of BVK Personalvorsorge des Kantons Zürich is a rental

deposit related to a long term lease contract for office space. Due to this fact this restricted cash

position is also classified as long term.

The balances as of December 31, 2012 were reclassified to conform to the current presentation.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

PROPERTY & EQUIPMENT

Property & equipment

March 31, 2013

December 31, 2012

Land

19,700,000

7,000,000

IT Equipment

185,846

Other equipment and furniture

284,901

Leasehold improvements

66,617

Construction in-process

10,712,982

9,591,958

Gross

31,203,346

17,129,322

Less accumulated depreciation

(339,980)

(329,782)

Net

30,610,366

16,799,540

Depreciation expenses for the period ended

March 31, 2013

10,198

22,443

Property & equipment is comprised primarily of land held in Costa Rica that is currently being

developed for hotels and capitalized project costs in connection with the Papagayo Gulf Tourism

project. The land amounts to $19.7 million whereas $7 million relates to the concession held by

Richland (~84,000 m2) and $12.7 million held by Altos del Risco (~120,000 m2). The latter was

acquired through the acquisition of the shares of Altos del Risco SA whose only asset is the

concession, which does not qualify as a business. Control over Altos del Risco SA was obtained

on March 8, 2013. The previous down payments were reclassified to property and equipment.

The Richland concession is a right to use the property for a specific period of time of 20 years,

which thereafter will be renewed at no further cost, if the landholder is up to date with its

obligations and if there is no significant change in government policies. The current concession

expires in June 2022.

The Altos del Risco concession is also a right to use the property for a specific period of time of

30 years, which thereafter will be renewed at no further cost, if the landholder is up to date with

its obligations and if there is no significant change in government policies. The current

concession, which was issued in 2006, expires in November 2036. For further information

regarding acquisition of this piece of land see note 13.

The construction in process amount that was spent up to March 31, 2013 is represented primarily

by architectural work related to the hotel and apartments but also to some construction work.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

PLEDGES

March 31, 2013

December 31, 2012

Pledge of shares of Rich Land Investments Ltda.

10%

in favor of Zypam Ltd. for Zypam Ltd's liabilities

(0 shares)

(1 share)

Pledge of shares of Rich Land Investments Ltda.

in favor of Meliá Hotels International for bonds

20%

of EUR 2 million

(0 shares)

(2 shares)

The Company pledged the above shares as part of the bond agreement with Meliá and

corresponding contracts in Zypam Ltd. During the period ended March 31, 2013 the share

pledges were released back to the Company due to the repayment of the bond due to Meliá and

the amendment of the corresponding contracts in Zypam Ltd.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

FAIR VALUE MEASUREMENT

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

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

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

participants. This guidance also specifies a fair value hierarchy based upon the observability of

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

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

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

under the following hierarchy:

— Level 1 Quoted prices for identical instruments in active markets.

— Level 2 Quoted prices for similar instruments in active markets, quoted prices for identical

or similar instruments in markets that are not active; and model-derived valuations

in which all significant inputs or significant value drivers are observable in active

markets.

— Level 3 Model- deroved valuations in which one or more significant inputs or significant

value-drivers are unobservable.

When available, we use quoted market prices to determine fair value, and we classify such

measurements within Level 1. In some cases where market prices are not available, we make use

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

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

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

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

classified within Level 3.

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

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

though there may be significant inputs that are readily observable.

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

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

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

market price. For certain other financial assets and liabilities (Level 2 and 3), our fair value

calculations have been adjusted accordingly.

As of March 31, 2013 and December 31, 2012, respectively, there are no financial assets or

liabilities measured on a recurring basis at fair value with the exception of “fair value of

conversion option”.

In addition to the methods and assumptions we use to record the fair value of financial

instruments as discussed above, we used the following methods and assumptions to estimate the

fair value of our financial instruments.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

FAIR VALUE MEASUREMENT - continued

—

Cash and cash equivalents – carrying amount approximated fair value.

—

Restricted cash – carrying amount approximated fair value.

—

Receivables from related parties (current) - carrying amount approximated fair value due to

the short term nature of the receivables.

—

Accounts Payable – carrying amount approximated fair value.

—

Note payable - carrying amount approximated fair value due to the short nature of the note

payable.

—

EUR-Bond – The fair values of the bonds payable are classified as level 3 fair values. The

fair values of the bonds have been determined by discounting cash flow projections

discounted at the respective interest rates of 8.25% for EUR bonds, which represents the

current market rate based on the creditworthiness of the Company. Hence, the carrying

values approximate fair value.

— CHF-Bond – The fair values of the bonds payable are classified as level 3 fair values. The

fair values of the bonds have been determined by discounting cash flow projections

discounted at the respective interest rates of 7.25% for CHF bonds, which represents the

current market rate based on the creditworthiness of the Company. Hence, the carrying

values approximate fair value.

— Notes payable to related parties (current) – Rigendinger – carrying amount approximated fair

value due to the short term nature of the note payable.

— Notes payable to related parties (current) – other – carrying amount approximated fair value

due to the short term nature of the note payable.

— Notes payable to related parties – Dr. M. Roessler (current) - carrying amount approximated

fair value due to the short term nature of the notes payable and the fair value of the

underlying publicly trades shares

— Notes payable to related parties – Aires – The fair values of the notes payable to Aires

International Investments Inc. is classified as level 3 fair values. The fair values of the notes

were determined by discounting cash flow projections discounted at the respective interest

rates of 7.25%, which represents the current market rate based on the creditworthiness of the

Company. Hence, the carrying value approximates fair value.

— Fair value of conversion feature – The fair value of the conversion option is classified as

level 3 fair value. The fair value of the option was determined by using Black-Scholes with

the following input data:

- Stock price $0.10

- Exercise price: $1.01

- Expected term in years: 2.5 years

- Volatility 80%

- Annual Rate of quarterly dividends: 0%

- Discount Rate: 0.305%

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

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

FAIR VALUE MEASUREMENT – continued

March 31, 2013

December 31, 2012

Fair

Carrying

Fair Value

Carrying

Fair Value

Value

Amount

Reference

Levels

Cash and cash

equivalents

178,990

260,520

None

Restricted cash

980,327

241,500

Note 4

Receivable from

related parties

290,971

Note 8

Accounts Payable

1,638,571

827,102

None

Notes payable

2,000,000

Note 13

Notes payable to

related parties –

other (current)

35,706

149,328

Note 8

Notes payable to

related parties – Dr.

M. Roessler

(current)

2,612,034

2,682,736

2,594,284

Note 8

Notes payable to

related parties –

Rigendinger

(current)

600,000

Note 8

EUR-bond

12,056,458

14,216,707

Note 10

CHF-bond

5,566,811

5,689,364

Note 10

Notes payable to

related parties –

Aires (non-current)

16,947,284

10,407,764

Note 8

Notes payable to

related parties –

Rigendinger Aires

(non-current)

717,977

Note 9

Fair value of

conversion option

50,181

Note 8

RECEIVABLES FROM AND PAYABLES TO RELATED PARTIES

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

Advances from (to) related parties are composed as follows:

Receivables

Payables

Receivables from and notes

March 31,

December 31,

March 31,

December 31,

to related parties

2013

2012

2013

2012

Hans Rigendinger

600,000

Josef Mettler

36,000

L03

Adrian Oehler

35,706

37,380

o04

Sportiva

46,976

31,948

n05

Aires International

16,974,284

10,407,764

Dr. Max Roessler

2,612,034

2,682,736

a07

Hans Rigendinger

717,977

g08

Akyinyi Interiors

80,000

e09

4f capital ag

207,995

Total excluding

interest

290,971

20,222,024

14,577,805

Accrued interest

768,245

566,093

Total

290,971

20,990,269

15,123,898

of which non-current

16,974,284

11,125,741

Related party

Capacity

Interest

Repayment

Rate

Terms

Security

Hans Rigendinger

Shareholder, director, chief operating

officer (COO)

0.00%

none

Shareholder, chairman of the board of

Josef Mettler

directors, chief executive officer

(CEO), chief financial officer (CFO)

3.00%

none

and principal accounting officer (PAO)

Adrian Oehler

Shareholder and SunVesta AG board

member

0.00%

none

Sportiva

Entity owned by the Company’s

director, CEO, CFO and PAO

3.00%

none

Aires International

*** see hereinafter***

Dr. Max Roessler

Shareholder and director

*** see hereinafter ***

Hans Rigendinger

Shareholder, director and COO

*** see hereinafter ***

Akyinyi Interiors

Entity owned by a director’s wife

0.00%

01/31/13

none

4f Capital Ag

Entity owned by the Company’s

director, CEO, CFO and PAO

0.00%

none

RECIEVABLES FROM AND PAYABLE TO RELATED PARTIES - Continued

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

Loan agreement Aires International Investment Inc.

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

(“Aires”), a company owned by a board member of the Company, which has been amended and

superseded by an amendment on May 11, 2012 respectively June 21, 2012 and which includes the

following major conditions:

—

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

maximum amount of CHF 10,000,000.

—

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

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

—

Once the entire amount of CHF 10,000,000 has been drawn down, Aires now has the right to

convert its entire loan of CHF 10,000,000 into 20% shares of SunVesta Inc. (instead of

Richland) whereas 20% shares reflect the number of shares at the time when the entire

amount of CHF 10,000,000 has been drawn down.

—

In principle, the loan will become due in September 30, 2015, being the latest date on which

Aires can exercise its conversion option

—

CHF 10,000,000 of this line of credit is subordinated in favour of other creditors.

—

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

The conditions of the above mentioned conversion option was met during 2012. The Company

has analyzed the accounting treatment of this financial instrument. Based on this analysis the

Company concluded that the conversion option needs to be bifurcated and is to be accounted for

as a derivative under ASC 815. Main factors for this accounting treatment are: the debt is

denominated in CHF while the shares are convertible into shares of the Company, whose

functional currency is USD and whose shares are traded in USD. Based on that, the Company

determined that the conversion feature is not indexed to the Company’s shares and it should be

bifurcated and accounted for as a derivative. As of November 13, 2012 (the date when the loan

became convertible) and December 31, 2012 the fair value of the conversion feature was

immaterial. As of March 31, 2013 the fair value of the conversion feature was $50,181 which is

recorded in fair value of conversion option.

The fair value of the call option value has been calculated by using Black-Scholes with the

following assumptions:

- Stock price $0.10

- Exercise price $1.01

- Expected term in years 2.50

- Volatility of 80%

- Annual Rate of quarterly Dividends 0%

- Discount Rate 0.305%

Based on this calculation one call option has a fair value of $0.005 as per March 31, 2013.

Multiplied with number of option granted of 10,818,437 this result in fair value of the conversion

feature of $50,181.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

RECIEVABLES FROM AND PAYABLE TO RELATED PARTIES – Continued

Loans Dr. Max Roessler

On June 7, 2012, Dr. Max Roessler (board member of SunVesta AG) gave a short term loan of

$1.81 million that is repayable on May 30, 2013, or on demand within five working days. On this

short term loan the Company is not required to pay any interest and can repay the loan either in

cash or with the delivery of 10,000 shares of Intershop Holding AG, a publically traded entity,

regardless of actual trading value on the date of delivery. The Company therefore might

recognize a gain if the loan is repaid in Intersthop Holding AG shares and the trading price of the

shares is less than the amount due. Based on the trading price for Intershop Holding AG shares on

March 31, 2013 the Company would not have recognized a gain. Therefore the fair value of the

loan approximates the carrying value of the loan.

On July 24, 2012, Dr. Max Roessler (board member of SunVesta AG) gave an additional short

term loan of $0.47 million that is repayable on May 30, 2013, or on demand within five working

days. On this short term loan the Company is not required to pay any interest and can repay the

loan either in cash or with the delivery of 10,000 shares of Schindler Holding AG, a publically

traded entity, regardless of actual trading value on the date of delivery. The Company therefore

might recognize a gain if the loan is repaid in Schindler Holding AG shares and the trading price

of the shares is less than the amount due. Based on the trading price for Schindler Holding AG

shares on March 31, 2013 the Company would not have recognized a gain. Therefore the fair

value of the loan approximates the carrying value of the loan.

On August 8, 2012, Dr. Max Roessler (board member of SunVesta AG) gave a further short term

loan of $0.4 million that is repayable also on May 30, 2013, or on demand within five working

days. On this short term loan the Company is not required to pay any interest and can repay the

loan either in cash or with the delivery of 700 shares of Zug Estates Holding AG, a publically

traded entity, regardless of actual trading value on the date of delivery. The Company therefore

might recognize a gain if the loan is repaid in Zug Estates Holding AG shares and the trading

price of the shares is less than the amount due. Based on the trading price for Zug Estates AG

shares on March 31, 2013, the Company would have recognized a gain, which gain is immaterial.

The Company has not recorded such gain and the fair value of the loan approximates the carrying

value of the loan.

On March 1, 2013, Dr. Max Roessler (board member of SunVesta AG) gave a further short term

loan of $0.05 million that is repayable on July 31, 2013, or on demand within five working days.

On this short term loan the Company is not required to pay any interest and can repay the loan

either in cash or with the delivery of 52,500 shares of Daetwyler Holding AG, a publically traded

entity, regardless of actual trading value on the date of delivery. The Company therefore might

recognize a gain if the loan is repaid in Datewyler Holding AG shares and the trading price of the

shares is less than the amount due. Based on the trading price for Daetwyler Holding AG shares

on March 31, 2013, the Company would not have recognized a gain. Therefore the fair value of

the loan approximates the carrying value of the loan.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

RELATED PARTY TRANSACTIONS

Debt Settlement Agreements

On December 31, 2012 the Company concluded a debt settlement agreement with Hans

Rigendinger. This debt settlement agreement, settled the outstanding balance of $717,977 as of

December 31, 2012 as described hereinafter:

—

The Company issued 17,949,417 shares of its common stock ($0.01 par value) at a

conversion price of $0.04 to Hans Rigendinger for the purposes of this debt settlement.

—

The difference between the carrying value of this debt and the fair value of the common

stock issued amounted to $717,976. The difference has been recorded as stock compensation

expense in general and administrative expenses in the year ended December 31, 2012.

—

To determine the fair value of the common stock issued the quoted market price as of

December 31, 2012 was used.

—

The shares were not formally issued as of December 31, 2012, and therefore, the note

payable was not eliminated as of December 31, 2012. The satisfaction of the note payable

was recorded on the issuance of the shares as of January 8, 2013.

Comissions paid to related parties

During Quarter ended March 31, 2013 and March 31, 2012 the Company paid commissions to

4f Capital AG in the amount of approximately $108,000 and $0, respectively related to financing

of the Company.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

10.

BONDS

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

Description

EUR (€) bond

CHF bond

Issuer:

SunVesta Holding AG

Type of securities:

Bond in accordance with

Swiss law

Approval by SunVesta

May 12, 2010

June 3, 2011

Holding AG Board of Directors

Volume:

Up to € 25,000,000

Up to CHF 15,000,000

Units:

€1,000

CHF 50,000

Offering period:

11/10/2010 – 04/30/2011

09/01/2011 – 02/28/2012

Due date:

November 30, 2013

August 31, 2015

Issuance price:

100 %

100%

Issuance day:

December 1, 2010

September 1, 2011

Interest rate:

8.25% p.a.

7.25% p.a.

Interest due dates:

November 30 of each year,

August 31 of each year,

the first time November 30, 2011

the first time August 31, 2012

Applicable law:

Swiss

The nominal amounts have changed as follows:

EUR-Bond

CHF Bond

EUR-Bond

CHF Bond

2013

2012

USD

Balances January 1

14,216,707

5,689,364

9,598,537

3,818,898

Cash inflows

792,740

108,113

4,015,549

3,191,888

Cash outflows

(2,649,073)

1,474,823

Foreign currency adjustments

(239,193)

59,736

692,295

463,849

Sub-total (Fair value)

12,121,181

5,857,113

14,306,380

5,999,813

Commissions paid to bondholders

(248,195)

(417,709)

(248,195)

(417,709)

Amortization of such commissions

183,472

127,307

158,522

107,260

Balance March 31, 2013

December 31, 2012 (Carrying value)

12,056,458

5,566,811

14,216,707

5,689,364

Should the refinancing of the EUR bonds not be completed by November 30, 2013, certain

principal shareholders of the Company or principal lenders to the project would provide bridge

financing according to the guaranty agreement (see Note 3).

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

11.

PENSION PLAN

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

defined benefit plan and accounted for in accordance with ASC 715 (“compensation – retirement

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

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

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

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

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

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

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

liability.

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

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

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

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

assets are determined based on prevailing market prices.

Actuarial valuation

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

Three months ended

Pension expense

March 31, 2013

March 31, 2012

Current service cost

13,632

25,383

Past service cost

Net actuarial (gain) loss recognized

(268)

Interest cost

1,181

772

Expected return on assets

(1,208)

(692)

Employee contributions

(5,448)

(10,164)

Net periodic pension cost

7,890

15,299

During the three months periods ended March 31, 2013 and March 31, 2012 the Company made

cash contributions of $5,500 and $10,000, respectively, to its defined benefit pension plan.

All of the assets are held under the collective contract by the plan’s re-insurer Company and are

invested in a mix of Swiss and international bond and equity securities within the limits

prescribed by the Swiss Pension Law.

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

to the pension plan for the year ended December 31, 2013 are $16,500.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

12.

STOCK COMPENSATION

The Company has included share based remuneration based on “SunVesta Inc. Stock Option Plan

2013” as part of the total remuneration in some new employment contracts. Based on this stock

option plan the Company has the possibility since January 1, 2013 to issue up to 50,000,000

common stock shares under the plan.

The purpose of these share based remuneration is to advance the interests of the Company by

encouraging its employees to remain associated with the Company and assist the Company in

building value. Such share based remuneration includes either shares or options to acquire shares

of the Company’s common stock.

The Company grants equity awards to its employees and directors. Certain employee and director

awards vest over stated vesting periods and others also require achievement of specific

performance. The grant-date fair value of awards to employees and directors will be expensed

over their respective vesting periods. To the extent that employee and director awards vest only

upon the achievement of a specific performance condition, expense is recognized over the period

from the date management determines that the performance condition is probable of achievement

through the date they are expected to be met. The fair value of stock options is estimated using

the Black-Scholes option-pricing model. Option pricing methods require the input of highly

subjective assumptions, including the expected stock price volatility.

Share Grants

On January 1, 2013 the Company issued 3,500,000 common shares, valued at $0.08 which has

been the share price and therefore the fair value on grant date, to Hans Riegendinger in

connection with his employment agreement of even date as so-called signing bonus.

Additionally the Company granted 2,500,000 common shares as so-called retention award for

each completed year of employment (e.g. first time as per January 1, 2014). The employment

contract has been concluded for three years with an additional bilateral option for another two

years. Therefore in total the Company could be requested to issue maximal 12,500,000 common

shares up to January 1, 2018 to Hans Rigendinger related to this retention bonus.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

12.

STOCK COMPENSATION - Continued

Based on this contract the Company has included the following stock-based compensation in the

Company’s results:

Three months

Stock-based compensation (shares)

ended March 31,

2013

2012

Shares granted

16,000,000 shares

---

Fair Value respectively market price on grant date

$ 0.08

---

Total maximal expenses (2013-2017)

$ 1,280,000

---

Shares vested (signing bonus)

3,500,000 shares

---

Unvested shares (retention award)

12,500,000 shares

---

Expenses recorded under general & administrative

---

expenses

$ 330,000

Unrecorded costs related to unvested share grants

---

(retention bonus)

$ 950,000

Tax benefit associated with compensation expense

$ 0

---

As of March 31, 2013 the Company expects to record compensation expense in the future as

follows:

Through

Year ending December 31,

Stock-based

December 31,

compensation (shares)

2013

2014

2015

2016

2017

Unrecognized

compensation expense

150,000

200,000

Stock options

The Company granted to Hans Rigendinger in connection with his employment contract

10,000,000 options on January 1, 2013. Each option entitles to buy one Company’s share at a

strike price of $0.05. These options will vest in two identical installments (installment A and B)

of 5,000,000 options.

For installment A it is required that the Company complete a financing arrangement with a

specific counterparty. As of grant date the fair value was $300,000. As of March 31, 2013, the

Company assessed that this financing arrangement will not be completed. Therefore, the

Company assessed the probability of completion to be zero and therefore no expense has been

recognized for the stock options associated with installment A as per March 31, 2013.

For installment B it is required that the Company completes the Paradisius Papagayo Bay Resort

& Luxury Villas (see Note 16) by the thereinafter mentioned date of November 1, 2014. The

grant date fair value was $300,000. As of March 31, 2013 the Company assessed that the

probability that this performance condition will be met at 100%.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

12.

STOCK COMPENSATION - Continued

A summary of stock options outstanding as per March 31, 2013, is as follows (during three-

month period ended March 31, 2012, no options were granted):

Options outstanding

Number of Options

Weighted average

exercise price

remaining

contractual life

Outstanding January 1, 2013

None

Granted

10,000,000

$ 0.05

9.75 years

Exercised

Forfeited or expired

Outstanding March 31, 2013

10,000,000

$ 0.05

9.75 years

Exercisable March 31, 2013

The following table depicts the Company’s non-vested options as of March 31, 2013 and changes

during the period:

Non-vested options

Shares under Options

Weighted average grant

date fair value

Non-vested at December 31, 2012

$ 0.00

Non-vested-granted

10,000,000

$ 0.06

Vested

$ 0.00

Non-vested, forfeited or canceled

$ 0.00

Non-vested at March 31, 2013

10,000,000

$ 0.06

Under the provisions of FASB ASC Topic 718, the Company is required to measure and

recognize compensation expense related to any outstanding and unvested stock options

previously granted, and thereafter recognize, in its consolidated financial statements,

compensation expense related to any new stock options granted after implementation using a

calculated fair value based option-pricing model. The Company uses the Black-Scholes option-

pricing model to calculate the fair value of all of its stock options and its assumption are based on

historical and or if available market information. The following assumptions were used to

calculate the compensation expense and the calculated fair value of stock options granted:

Assumption

March 31, 2013

March 31, 2012

Dividend yield

None

---

Risk-free interest rate

1.00%

---

Expected market price volatility

80.00%

---

Average expected life of stock options

6.0 years

---

The computation of the expected volatility assumption used in the Black-Scholes calculation for

new grants is based on historical volatilities of a peer group of similar companies in the same

industry. The expected life assumptions are based on underlying contracts.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

12.

STOCK COMPENSATION - Continued

The Company recorded the following amounts related to the expense of the fair values of options

during the quarter ended March 31, 2013:

Stock based compensation (options)

March 31, 2013

Expenses recorded under general &

40,000

---

administrative expenses

Benefit for income taxes

---

Effect on net loss

40,000

---

As of March 31, 2013 the Company had unrecognized compensation expenses related to stock

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

Through December 31,

Year ending December 31,

Stock-based compensation (options)

2013

2014

Unrecognized compensation expense

120,000

140,000

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

13.

AGREEMENT TO PURCHASE NEIGHBORING PIECE OF LAND

In 2010 SunVesta AG entered into a sale and purchase agreement with a company called DIA

S.A. (“DIA”), domiciled in San José, Costa Rica to acquire a piece of land, neighboring the

Paradisus Papagayo Bay Resort & Luxury Villas development, of approximately 120,000 m2

having direct beach access by purchasing 100% of the shares of Altos del Risco S.A. from DIA.

The total purchase consideration was $12.7 million. On March 9, 2013 the Company concluded

the purchase of this piece of land and ownership has been officially transferred. Up to March 9,

2013 the Company paid $10.7 million in cash.

As part of the completion of the purchase, the parties agreed that a remaining part of the purchase

price of $2,000,000 has been converted into a non interest bearing and uncollateralized loan

payable which is due for payment on March 8, 2014.

14.

MANGEMENT AGREEMENT WITH MELIA HOTELS & RESORTS

In March 2011 the Company concluded a management agreement for the management of the

planned resort in Guanacaste, Costa Rica. This agreement includes a clause saying that if

SunVesta AG were not able to conclude the purchase of the property described in Note 12 by

November 30, 2011, then a penalty of $1 million would become due to Sol Meliá, S.A. Therefore

the Company recorded a liability in accrued expenses in the full amount as of December 31, 2011

with the corresponding expense recorded in general and administrative expense in the year ended

December 31, 2011.

On March 3, 2012, the deadline to pay the penalty of $1 million was extended by Sol Meliá, S.A.

to June 30, 2012. On June 30, 2012 neither the whole penalty nor a part of the penalty has been

paid. Therefore the deadline to pay the penalty of $1 million was extended on June 30, 2012 up to

August 31, 2012.

Neither on August 31, 2012, nor on December 31, 2012, was the whole penalty or a part of the

penalty paid although the deadline of August 31, 2012 to pay the penalty of $1 million has

expired. Hence, the penalty of $1 million remained in accrued expenses as of December 31, 2012.

On February 5, 2013, the Company extended the deadline to complete the purchase of the

property pursuant to the terms of the management agreement with Sol Meliá, S.A., to March 15,

2013 and agreed that the penalty of $1 million would be waived if the purchase was completed by

March 15, 2013. The purchase of the property was concluded on March 9, 2013.

Since the Company concluded the purchase of the property described within the extension period

the penalty otherwise payable to Sol Meliá, S.A. and the corresponding allowance has been

eliminated as of March 9, 2013. Therefore, the Company has released the accrual of $1 million

related to this transaction in the period ended March 31, 2013.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

15.

INTENTION TO PURCHASE TWO ADDITIONAL CONCESSION PROPERTIES AT

POLO PAPAGAYO, GUANACASTE

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

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

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

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

five percent in equity of Paradisus Papagayo Bay Resort & Luxury Villas (the hotel currently

under construction), both located in Costa Rica. The payment schedule is as follows:

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

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

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

— Equity is required to be transferred upon final payment

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

its funds on deposit.

On November 13, 2012 the above agreement was amended to decrease the total purchase price to

$17.2 million with no equity payment. The terms and conditions of the cash payment were still to

be defined. Furthermore, all payments by the Company to date and in the future are refundable.

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

properties of approximately $1,400,000 up to March 31, 2013, which is included in down

payment for property and equipment.

Subsequent to the balance sheet date March 31, 2013 the Company entered into a new, revised

agreement regarding the purchase of the two additional concession properties (refer to Note 20).

16.

OPENING DATE “Paradisius Papagayo Bay Resort & Luxury Villas”

During the 3rd Quarter of 2012, the Company postponed the opening date for Papagayo Gulf

Tourism Project of Costa Rica, which is now scheduled for the winter of 2014. Due to the

postponement an addendum to the original management agreement with Sol Meliá, S.A. was

agreed as follows:

— The construction of the “Paradisius” will be completed by November 1, 2014

— Should the “Paradisius” not be completed by November 1, 2014, (subject to force majeure)

and should an extension date not be agreed, subsequent to November 1, 2014, the Company

will be obligated to pay Sol Meliá, S.A. a daily amount of $2,000 as liquidated damages

— Should the Company be unable to complete the construction of the “Paradisius” by February

28, 2015, Sol Meliá, S.A. can terminate the management agreement obligating the Company to

compensate Sol Meliá, S.A. in the amount of $5,000,000 unless the respective parties agree to

extend such date.

Regarding current situation, subsequent to March 31, 2013, refer to Note 20.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

17.

HOTEL PROJECT ATLANTA

On September 19, 2012, the Company entered into a purchase agreement for a hotel and

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

amount of $26 million for the assets has no firm financing commitment. Additionally, an

additional amount of approximately $18 million for renovations would need to be invested in the

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

a financing package for this project. Should the Company conclude the transaction on or before

July 10, 2013, those amounts paid on deposit extension will be credited to the purchase price.

Otherwise, the Company will lose non-refundable deposits of $750,000 of which $500,000 was

paid up to March 31, 2013 and $250,000 subsequent to March 31, 2013.

Regarding current situation, subsequent to March 31, 2013, refer to Note 20.

18.

EARNINGS PER SHARE

Basic earnings per share are the result of dividing the 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, basis loss per share equals diluted loss per share. The following

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

determined under the treasury stock method.

Earnings per share

Three-month period ended

March 31, 2013

March 31, 2012

Company posted

Net loss

Basic weighted average shares outstanding

71,251,720

54,092,186

Dilutive effect of common stock equivalents

none

Dilutive weighted average shares outstanding

71,251,720

54,092,186

The following table shows the number of stock equivalents that were excluded from the

computation of diluted earnings per share for the respective period because the effect would have

been anti-dilutive.

Three-month period

Earnings per share

ended

March 31, 2013

March 31, 2012

Conversion feature loan to Aires International

10,818,437

---

Investment Inc.

Shares to Hans Rigendinger (retention bonus)

12,500,000

---

Options

10,000,000

---

Total

33,318,437

---

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

19.

RESTATEMENT

During the year ended December 31, 2012 the Company determined that the interest capitalized

was understated in the quarter ended March 31, 2012. The Company capitalized interest costs on

the carrying value of the construction in progress during the contraction period based on the

contractual rate. However, interest cost as defined in ASC 835-20 includes stated interest,

imputed interest (ASC 835-30), and interest related to a capital lease in accordance with ASC

840-30, as well as amortization of discount, premium and issue costs on debt.

Management has concluded that the impact of the error is not material to the previously filed

quarterly report for the quarter ended March 31, 2012 and therefore has not filed any amendments

to this quarter. The table below summarizes the impact of the restatement, which has been

reflected in the quarterly report for the period ended March 31, 2013:

Quarter to date

Period ended March 31

2012

as reported

as restated

Property and equipment, net

$12,370,324

$12,600,324

Shareholders' equity (deficit)

$(5,439,870)

$(5,209,870)

Total assets

$20,145,618

$20,375,618

Amortization of debt issuance

$(229,288)

$712

costs and commissions

Net loss

$(1,334,525)

$(1,104,525)

Basic and diluted loss per share

$(0.02)

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

20.

SUBSEQUENT EVENTS

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

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

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

except for the below:

Hotel Project Atlanta

The Company has not been able to complete a financing package for this project up to July 10,

2013 and has concluded on July 30, 2013 a new agreement. The Company is requested to pay

another deposit of $250,000 up to August 16, 2013. Therefore, the Company was able to extend

the deadline to finalize a financing package up to September 30, 2013. Additionally the Company

bears taxes of the counterparty for the tax year 2013 of approximately $573,932. Therefore the

Company is requested to pay directly to the counterparty on or before August 30, 2013 $579,932.

The Company has neither remitted the additional deposit of $250,000 nor paid the counterparty

the taxes on the property for the tax year 2013.

Since the Company has not been able to conclude a financing package as of date of this report the

Company is in default and will lose all deposits (including taxes paid for the counterparty) of

$1,329,932 of which $500,000 was paid up to March 31, 2013 and another $250,000 on June 10,

2013, if the Company is not able to extend the deadline.

EUR Bond Offering

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

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

of the bonds due November 30, 2013.

A cumulative amount of EUR 9.45 million ($12.1 million) has been realized by the Company

from the initial date up to the date of this filing.

CHF Bond Offering

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

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

the bonds due August 31, 2015.

A cumulative amount of CHF 5.60 million ($5.85 million) has been realized by the Company

from the initial date up to the date of this filing.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

20.

SUBSEQUENT EVENTS – Continued

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

During the 2nd Quarter of 2013 the Company entered into a new, revised agreement regarding the

purchase of two additional concession properties at Polo Papagayo, Guanacaste. The original

contract (refer to Note 15) has been cancelled and replaced by a new contract which includes the

following clauses:

— The Company has paid approximately $1,669,000 as of the date of this report which is

refundable.

— The total purchase price is $17,500,000 and the remaining balance as of the date of this report is

$15,830,299.

— Since the original seller of these two additional concession properties at Polo Papagayo,

Guanacaste owes a third party $8,000,000 the Company will pay $7,700,000 ($ 300,000 already

paid) of the purchase price directly to this third party instead of the original seller. The remaining

$8,130,000 will be paid directly to the original seller of the concession properties.

— The payment schedule for these two additional concession properties at Polo Papagayo

Guanacaste is as hereinafter:

Third Party

— $300,000 on May 4, 2013 which was paid on May 3, 2013 and is non-refundable

— $1,000,000 on June 30, 2013, which is refundable and has not been paid as of the date of this

report

— $1,000,000 on July 31, 2013, which is refundable and has not been paid as of the date of this

report

— $1,000,000 on August 31, 2013 which is refundable and has not been paid as of the date of this

report

— $1,500,000 on September 30, 2013, which is refundable and has not been paid as the date of this report

— $1,500,000 on October 31, 2013, which is refundable

— $1,700,000 on November 30, 2013, which is refundable

$8,000,000 in total to Third Party

Original Seller

— $1,000,000 on January 31, 2014 and is non-refundable

— $1,000,000 on February 28, 2014 and is non-refundable

— $1,000,000 on March 31, 2014 and is non-refundable

— $1,000,000 on April 30, 2014 and is non-refundable

— $1,000,000 on May 31, 2014 and is non-refundable

— $1,000,000 on June 30, 2014 and is non-refundable

— $1,000,000 on July 31, 2014 and is non-refundable

— $1,130,000 on August 31, 2014 and is non-refundable

$8, 130,000 in total to Original Seller

Should the Company be able to pay the third party and the original seller all amounts - as above

mentioned - earlier than scheduled, the original seller will give a discount on his remaining

portion of the purchase price as following:

— Should the Company complete the remaining balance due to the third party on or before August

31, 2013, the discount will be $3,250,000

— Should the Company complete the remaining balance due to the third party on or before

September 30, 2013, the discount will be $2,750,000

— Should the Company complete the remaining balance due to the third party on or before October

31, 2013, the discount will be $2,250,000

— Should the Company complete the remaining balance due to the third party on or before

November 30, 2013, the discount will be $1,750,000

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

20.

SUBSEQUENT EVENTS – Continued

Loan Aires International Investment Inc.

As described in Note 8, the Company is still negotiating with Aires International Investment Inc.

a revised conversion option for their loan. Despite of this fact Aires International Investment Inc.

has paid additional amounts to the Company since March 31, 2013.

As of the date of this report the Company has borrowed CHF 23.82 million (approximately

$23.56 million) from Aires.

New Entity

The Company founded on June 26, 2013 a wholly owned new subsidiary in the United States.

— Name:

Profunda Capital Partners LLC

— Incorporated:

State of Nevada, United States

— Manager:

Josef Mettler / Hans Rigendinger

Issuances of securities

On July 4, 2013, the Company authorized the issuance of 5,000,000 shares of restricted common

shares to Josef Mettler valued at Fair Value at the corresponding date. Additionally the Company

granted 12,000,000 options of common stock of the Company as of July 4, 2013 to Josef

Mettler. These Options shall be exercisable in three portions at an exercise price of $0.05 as

following:

3,000,000 options

On the date that the Company or one of its subsidiaries

completes a bridge financing prior to completion of the

main financing anticipated for the development of the

Paradsius Papagayo Bay.

4,000,000 options

On the date that the Company or one of its subsidiaries

completes a financing for the development of the

Paradsius Papagayo Bay.

5,000,000 options

On the date that Paradisus (Sol Meliá S.A.) assumes

management responsibilities for the Paradisus Papagayo

Bay.

These issuances of securities are in relation with a new employment contract concluded between

Josef Mettler and the Company on July 4, 2013. This employment contract includes a retention

award of 3,000,000 restricted common shares of the Company as of each annual anniversary of

the employment contract, as well as an annual base salary of $144,000.

On July 3, 2013, the Company authorized the issuance of 3,000,000 shares of restricted common

shares to Dr. Roessler, valued at Fair Value at the corresponding date, in relation with his election

as board member of the Company.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

20.

SUBSEQUENT EVENTS – Continued

OPENING DATE “Paradisius Papagayo Bay Resort & Luxury Villas”

The official opening of the “Paradisius Papagayo Bay Resort & Luxury Villas” will be delayed

by a few months due to geological difficulties during earthwork operations in August and

September 2013. Due to these geological difficulties some rock demolition became necessary. On

September 6, 2013 the Company has achieved an agreement in good understanding with Sol

Meliá, S.A. (“5^th addendum to the management agreement of March 8, 2011”) to postpone the

opening date as follows:

— The construction of the “Paradisius” will be completed by July 1, 2015

— Should the “Paradisius” not be completed by July 1, 2015, (subject to force majeure)

and should an extension date not be agreed, subsequent to July 1, 2015, the Company

will be obligated to pay Sol Meliá, S.A. a daily amount of $2,000 as liquidated

damages

— Should the Company be unable to complete the construction of the “Paradisius” by

October 1, 2015, Sol Meliá, S.A. can terminate the management agreement obligating

the Company to compensate Sol Meliá, S.A. in the amount of $5,000,000 unless the

respective parties agree to extend such date.

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, 2013 and March 31, 2012. Our fiscal year end is December 31.

Discussion and Analysis

Business Overview

We are in the process of developing high-end luxury hotels and resorts in emerging tourist destinations.

We are initially concentrating on offering luxury hotel products located in attractive, top-class coastal

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

popular tourist destinations. Country specific conditions are taken into account when properties are

considered for development. General considerations as to where to develop properties include the stability

of local political conditions, geologically useful cultivability, and the types of destinations that attract a

five-star clientele. Each potential investment is first compared against a validation checklist and then, if

warranted, subjected to a substantial due diligence process. Since location is the key to the success of any

tourist based luxury real estate project, each development will be carefully considered during the

eligibility process.

Initial Development

Our initial real estate development, to be constructed on 20.5 hectares of prime land located in

Guanacaste Province, Costa Rica, is the Paradisus Papagayo Bay Resort & Luxury Villas, a five star

luxury hotel scheduled to open in July 2015 subject to requisite financing.

Specifications

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

— eco-luxury all-inclusive resort

— 381-keys

— direct beach access

— five restaurants and five bars

— Yhi Spa and Health Club

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

— Paradisus’ “Family Concierge” program

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

Royal Service

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

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

The Royal Service area will include:

— 112 Junior Suites Grand Deluxe

(53-60* square meters)

— 3 Junior Suites Grand Deluxe for Handicapped Guests

(53* square meters)

— 6 Grand Master Suites

(82* square meters)

— 1 Grand Presidential Suite (4 bedrooms)

(145* square meters)

— 20 one or two bedroom Garden Villas

(91 – 117* square meters)

* Room size does not include balconies and terraces.

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

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

fitness equipment, spas and outside massage areas.

Family Concierge

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

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

— 166 Junior Suites Deluxe

(47* square meters)

— 34 Suites Deluxe

(87* square meters)

— 34 Suites Premium

(93* square meters)

— 6 Handicapped Junior Suites Deluxe

(47* square meters)

— 1 Presidential Suite

(189* square meters)

* Room size does not include balconies and terraces.

All ground floor suites will have direct access to swim-up pools. Each of the suites will have a full view

of the sea. Family Concierge guests will furthermore have access to restaurants, bars, and lounges. The

intended Onyx Night Club and the Gabi Club will be located near the beach.

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

— over 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 let them back to the

resort when not occupied by the owners.

Management

Overall project development is lead by Josef Mettler, our chief executive officer, Charles Fessel, project

director Paradisus Papagayo Bay Resort & Luxury Villas, Hans Rigendinger, our chief operating officer

and Ernst Rosenberger, the 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 lead by Concreta Srl.

Resort management is to be provided by Meliá Hotel International, S.A. (“Sol Meliá”). “Paradisus” is

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

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

largest resort hotel chains, as well as Spain’s leading hotel chain for business or leisure. The company

currently offers more than 300 hotels in 26 countries over four continents under its Gran Sol Meliá, Sol

Meliá, ME by Sol Meliá, Innside by Sol Meliá, Tryp, Sol Meliá, Sol Meliá Vacation Club, and Paradisus

brands. The Paradisus brand represents all-inclusive luxury resorts with hotels in Mexico and the

Dominican Republic, including:

Paradisus Palma Real (Dominican Republic):

— 496 oversized suites

— numerous pools and whirlpools, five tennis courts, casino, beach, golf, meeting space, five

restaurants, two buffets, nine bars, etc.

The Reserve at Palma Real (Dominican Republic):

— 184 rooms “Residential Concierge Suites”

— private beach, swimming pools, 7800 sq ft “Kids Zone”, 24,000 sq. ft. Yhi Spa, three

restaurants, two buffets, two bars, etc.

Paradisus Punta Cana (Dominican Republic):

— 884 oversized suites (500 - 1000+ sq ft)

— seven pools, four tennis courts, casino, beach, “Kids Zone”, Yhi Spa and fitness, meeting

rooms, 12 restaurants, eight bars, etc.

The Reserve at Punta Cana (Dominican Republic):

— 132 residential suites

— pools (with partially underwater pool beds, water features, etc), private beach, spa, cabanas,

etc.

La Esmeralda at Playa del Carmen

— 512 suites including 56 swim-up suites

— spas, meeting spaces, 11 restaurants, 10 bars, etc. (partially shared with La Perla at Playa

del Carmen).

La Perla at Playa del Carmen

— 394 suites including 60 swim-up suites

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

— spas, meeting spaces, 11 restaurants, 10 bars, etc. (partially shared with La Esmeralda at

Playa del Carmen)

Our Paradisus Papagayo Bay Resort & Luxury Villas development is intended to replace Paradisus

Resorts’ former Paradisus Playa Conchal in Guanacaste, Costa Rica which property was operated by Sol

Meliá until April 30, 2011. Our project is part of Sol Meliá’s master expansion plan, which includes the

opening of two resorts in Playa del Carmen, Mexico in November of 2011. Sol Meliá aims to solidify

Paradisus Resorts as a leader in the luxury all-inclusive market segment with the new properties in Playa

del Carman and our own Paradisus Papagayo Bay Resort & Luxury Villas project.

Additional Concession Properties

On April 20, 2012, SunVesta AG entered into an agreement with Meridian IBG (“Meridian”) to purchase

two additional concession properties in Polo Papagayo, Gunacaste with a total surface of approximately

230,000 square meters, on terms, for a total of $22,895,806. The agreement with Meridian was amended

on November 13, 2012 to do away with the agreed equity payment, decrease the total purchase price to

$17.2 million and to provide that all payments for the purchase of the property were refundable in the

event SunVesta AG determines not to complete the purchase. SunVesta AG had paid down-payments of

approximately $1,400,000 as of March 31, 2013.

Subsequent to period end, on May 7, 2013, SunVesta AG entered into a new agreement with Meridian

that replaced the original contract, with a new total purchase price of $17,500,000 and a remaining

amount due of $15,830,299. The new agreement includes a payment plan for the remainder due divided

amongst Meridian and a third party as follows:

Third Party

— $300,000 on May 4, 2013 which was paid on May 7, 2013 and is non-refundable

— $1,000,000 on June 30, 2013, which is refundable and has not been paid as of the date of

this report

— $1,000,000 on July 31, 2013, which is refundable and has not been paid as of the date of

this report

— $1,000,000 on August 31, 2013, which is refundable and has not been paid as of the date of

this report

— $1,500,000 on September 30, 2013, which is refundable

— $1,500,000 on October 31, 2013, which is refundable

— $1,700,000 on November 30, 2013, which is refundable

$8,000,000 in total to Third Party

Original Seller

— $1,000,000 on January 31, 2014

— $1,000,000 on February 28, 2014

— $1,000,000 on March 31, 2014

— $1,000,000 on April 30, 2014

— $1,000,000 on May 31, 2014

— $1,000,000 on June 30, 2014

— $1,000,000 on July 31, 2014

— $1,130,000 on August 31, 2014

$8,130,000 in total to Original Seller

Should SunVesta AG be able to meet the payments due to the third party in advance of the required

payment dates, the new agreement provides for certain discounts against the amount to be paid to

Meridian based on a sliding scale determined as of the full satisfaction date. SunVesta AG has not made

the required June and July payments to the third party as of the filing date of this report.

Hotel and Entertainment Complex (Atlanta, Georgia, U.S.A)

On September 19, 2012, SunVesta AG entered into an agreement with Fundus America (Atlanta) Limited

Partnership (“Fundus”) to purchase a hotel and entertainment complex in Atlanta, Georgia, U.S.A. for

$26 million. An additional $18 million for renovations would be required to remediate the hotel and

entertainment complex. The Company entered into a series of negotiations with various parties to finalize

a financing package for this project but was unable to procure such financing. On February 6, 2013

SunVesta paid $250,000 to Fundus. A second amendment and reinstatement agreement was entered into

on March 12, 2013, pursuant to which SunVesta AG remitted an additional non-refundable closing

extension fee in the amount of $250,000 to extend the closing date for the transaction to April 1, 2013.

Subsequent to period end, on May 17, 2013, SunVesta AG entered into a third amendment and

reinstatement agreement pursuant to which it remitted an additional non-refundable closing extension fee

in the amount of $250,000 in order to extend the closing date for the transaction to July 10, 2013. A

fourth amendment and reinstatement agreement was entered into on July 30, 2013, pursuant to which

SunVesta was required to remit another deposit of $250,000 on or before August 16, 2013 and to pay the

taxes on the property in the amount of $573,932 by August 30, 2013 in order to extend the closing date to

September 30, 2013. SunVesta AG did not remit the additional deposit of $250,000 nor did SunVesta pay

the taxes due on the property as required by the fourth amendment. Should SunVesta either determine not

to close the purchase or not be able to finance the transaction, said amounts remitted are to be considered

earned by Fundus and definitely non-refundable to SunVesta AG. Should SunVesta be able to finance all

above mentioned amounts, with exception of the taxes, would be offset against the total purchase price of

$26 million.

Finance

The anticipated completion of the Paradisus Papagayo Bay Resort & Luxury Villas in November of 2014

will require a total investment of approximately $180 million of which approximately $28 million has

been expended as of March 31, 2013. We expect to realize a minimum of $80 million in new funding

over the next twelve months, though our actual financing requirements may be adjusted to suit that

amount realized, and an additional $72 million in funding by the time the development is completed. New

funding over the next twelve months is expected to be raised from debt financing through bonds,

construction financing, or shareholder loans, equity placements and, if deemed necessary, the guaranty

agreement as described herein.

SunVesta AG, our wholly owned subsidiary recently completed the offering of fixed-income Euro

denominated bonds and continues to offer fixed income CHF denominated bonds up to an aggregate

amount of CHF 15,000,000 to fund the initial development of the Paradisus Papagayo Bay Resort &

Luxury Villas project.

The Euro bonds are unsecured, have a three year term, bear interest at 8.25% per annum payable each

November 30 over the term due November 30, 2013. SunVesta AG has raised $14,834,783 in connection

with the Euro bond offering of which $2,649,073 had been repaid as of March 31, 2013.

The CHF bonds are unsecured, have a three year term, bear interest at 7.25% per annum payable each

August 31 over the term due August 31, 2015. SunVesta AG has raised $ 7,488,871 of which $ 1,474,823

have been repaid as of March 31, 2013, in connection with the CHF bond offering.

On July 27, 2011, SunVesta AG entered into a line of credit agreement with Aires International

Investment, Inc. (“Aires”), a company owned by a board member of SunVesta AG, which was

subsequently amended on May 11, 2012 and June 21, 2012 to include the following provisions:

— the lender grants the Company a terminable, interest bearing and non-secured loan in the

maximum amount of CHF 10,000,000.

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

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

— Once the entire amount of CHF 10,000,000 has been drawn down, Aires now has the right to

convert its entire loan of CHF 10,000,000 into 20% shares of SunVesta Inc. (instead of

Richland) whereas 20% shares reflect the number of shares at the time when the entire

amount of CHF 10,000,000 has been drawn down.

— the repayment of the line of credit is due on September 30, 2015, until such time Aires can

exercise its conversion option.

— CHF 10,000,000 of this line of credit is subordinated in favour of other creditors.

— the interest rate is 7.25% and interest is due on September 30 of each year.

SunVesta AG loaned approximately $6,567,000 against the line of credit for the three month period ended

March 31, 2013, and approximately $10,407,000 as of December 31, 2012, for a total of approximately

$16,974,000 as of March 31, 2013. SunVesta AG had loaned approximately $23,560,000 against the

Aires line of credit as of the filing date of this report.

Since surpassing the maximum amount permitted under the line of credit, SunVesta AG and Aires have

been in discussions in connection with a revised conversion option for that amount due. A conversion

option to replace the one vested according to prior agreement contemplates the conversion of that amount

due to Aires into preferred Company shares with a fixed interest payment with the option to convert into

common Company shares at a discount to market within a limited time frame. No agreement has yet been

reached.

During the second half of 2012 up to the current three month period, SunVesta AG entered into a series of

interest free loans with Dr. Max Roessler, a director of the Company and a principal of Aires. The loans

were originally due either on predetermined dates or on demand, in cash or in a fixed number of shares of

certain publically traded entities. Since the predetermined due dates have now passed the loans have been

extended by verbal agreement on undetermined terms, as follows:

Loan Date

Amount

Public Entity

June 7, 2012

1,733,000

10,000 Intershop Holding AG

July 24, 2012

446,000

10,000 Schindler Holding AG

August 8, 2012

383,000

700 Zug Estates Holding AG

March 1, 2013

50,000

52,500 Datewyler Holding AG

On March 8, 2013, SunVesta AG entered into an interest free loan agreement with DIA S.A. in the

amount of $2,000,000 payable on March 8, 2014. The loan was made payable in connection with the

closing of SunVesta AG’s purchase of land adjacent to the Paradisus Papagayo Bay Resort & Luxury

Villas from Altos held in the name of Altos del Risco S.A.

Timeline

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

— complete architectural plans in the 3^th quarter of 2013

— commence onsite (Altos del Risco property) earthwork in the 2^nd quarter of 2013

— obtain final building permits in the 3^rd quarter of 2013

— secure construction loan in the 4^th quarter of 2013

— commence onsite vertical construction in the 4^th quarter of 2013

— complete construction in the 1st quarter of 2015

— Handover to Sol Meliá on July 1^st of 2015

Results of Operations

During the three month period ended March 31, 2013, our operations were focused on (i) completing the

purchase of an additional 12 hectares contiguous with our existing property in Guanacaste Province,

Costa Rica in connection with the development of the Paradisus Papagayo Bay Resort & Luxury Villas;

(ii) appointing Mr. Rigendinger to the board of directors and engaging him as chief operating officer; (iii)

obtaining building permits for the development of the Paradisus Papagayo Bay Resort & Luxury Villas

property; (iv) commencing earth work excavations on the Paradisus Papagayo Bay Resort & Luxury

Villas property; (v) discussions with prospective project development partners; (vi) pursuing additional

debt and equity financing arrangements including a bond offering through SunVesta AG in Europe and

loans from related parties; and (vii) repaying a portion of the Euro bonds outstanding.

The Company has been funded since inception from debt or equity placements and by shareholders or

partners in the form of loans. All of the capital raised to date has been allocated to the development of the

Costa Rican property including the purchase of the land and general and administrative costs.

Comprehensive Losses

For the period from the date of inception of development stage on January 1, 2005, until March 31, 2013,

the Company had incurred comprehensive losses of $29,334,135. Comprehensive income for the three

months ended March 31, 2013 were $533,810 as compared to a comprehensive loss of $1,907,300 for the

three months ended March 31, 2012. The decrease in comprehensive losses - which resulted in a

comprehensive income - over the comparative three month periods can be attributed to a gain of

$1,000,000 relating to a release of a prior period accrual to satisfy what was to be a penalty payable to Sol

Meliá, S.A. based on the delayed purchase of the Paradisus Papagayo Bay Resort & Luxury Villas

property, and the gain on foreign currency translation of $1,281,405 from a loss of $802,775, which is

due to volatility between Swiss Francs and US Dollars, and the related foreign currency translation

difference on intercompany loans which is classified as a permanent investment and the translation of the

balance sheet and results of operations of our foreign subsidiaries. These positive factors regarding

comprehensive income have been offset partially due to an increase in general and administrative

expenses to $1,304,957 from $971,627, of which a significant component was the additional payroll cost

as a result of hiring new personnel and stock based compensation as a result of granting options and

shares to our Chief Operating Officer and board member. Other contributing factors which partially offset

the comprehensive income over the comparative three month periods ended March 31, 2013 and March

31, 2012, respectively, were an increase in interest expense to $426,656 from $280,995 due to maturing

bond and credit line debt obligations, the amortization of debt issuance costs and commissions of $82,815

from a gain of $712, other losses of $27,032 from other gain of $14,053, the loss of $50,181 from zero,

due to an increase in the fair value of the conversion option associated with the Aires credit line and the

decrease in interest income to $174 from $3,060 due to declining cash balances,

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

ended December 31, 2013.

Income Tax Expense (Benefit)

The Company has a prospective income tax benefit resulting from a net operating loss carry-forward and

startup costs that will offset future operating profits.

Capital Expenditures

The Company expended a significant amount on capital expenditures for the period from January 1, 2005

to March 31, 2013, in connection with the purchase of land that includes a hotel concession in Costa Rica

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

Resources" and the "Going Concern" paragraphs below.

Liquidity and Capital Resources

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

in liquidity, capital resources, and stockholders’ equity.

As of March 31, 2013, we had a working capital deficit of $20,592,095. We had current assets of

$525,837 and total assets of $35,450,942. Our current assets consisted of $178,990 in cash, $55,876 in

other assets and $290,971 in receivables from related parties. Our total assets consisted of property and

equipment of $30,610,366 (mainly land and capitalized project costs for Paradisus Papagayo Bay Resort

& Luxury Villas, net debt issuance costs of $1,464,576, down payments for property and equipment of

$1,869,836 and restricted cash of $980,327. We had current liabilities of $21,117,932 and total liabilities

of $43,752,964. Our current liabilities consisted of $1,638,571 in accounts payable, $2,175,163 in accrued

expenses, $2,000,000 in a note payable, $3,247,740 in notes payable to related parties and $12,056,458 in

Euro bond debt. Our total non-current liabilities consisted of CHF bond debt of $5,566,811, notes payable

to related parties of $16,947,284, fair value conversion feature of $50,181 and pension liabilities of

$70,756. Total stockholders’ deficit in the Company was $8,302,022 at March 31, 2013.

For the period from January 1, 2005 to March 31, 2013, net cash used in operating activities was

$18,898,440.

Net cash used in operating activities for the three months ended March 31, 2013, was $1,280,513 as

compared to $1,171,550 for the three months ended March 31, 2012, which differences reflect the

increase in general and administrative expenses and changes in working capital. Net cash used in

operating activities in the current three month period is comprised of general and administrative expenses

that include but are not limited to, personnel costs, accounting fees, consulting expenses, finder’s fees and

professional fees, such as for auditing purposes and legal consultation, changes in other assets, accounts

payable and accrued expenses. Net cash used in operating activities in the prior three month period can

also be primarily attributed to general and administrative expenses and changes in other assets, accounts

payable and accrued expenses.

We expect to use net cash in operating activities until such time as net losses transition to net income

which transition is not anticipated until we complete the Paradisus Papagayo Bay Resort & Luxury Villas

project.

For the period from January 1, 2005 to March 31, 2013, net cash used in investing activities was

$32,544,765.

Net cash used in investing activities for the three months ended March 31, 2013, was $4,033,361 as

compared to $2,900,862 for the three months ended March 31, 2012. Net cash used in investing activities

in the current three month period can be attributed to receivables from related parties, the purchase of

property and equipment, down payments for property or equipment and restricted cash. Net cash used in

investing activities in the prior three month period ended March 31, 2012 can be attributed to receivables

from related parties, the purchase of property or equipment, down payments for property, offset by net

cash provided by investing activities that can be attributed to short term investments.

We expect negative net cash in investing activities while in the process of developing the Paradisus

Papagayo Bay Resort & Luxury Villas and looking to additional projects.

For the period January 1, 2005 to March 31, 2013, net cash provided by financing activities was

$52,286,709.

Net cash provided by financing activities for the three months ended March 31, 2013, was $5,239,021 as

compared to $3,733,750 for the three months ended March 31, 2012. Net cash provided by financing

activities in the current three month period can be attributed to proceeds from notes payable to related

parties and proceeds from SunVesta AG’s bond issuance, offset by the repayment of bonds and the

payment of debt issuance costs. Net cash provided by financing activities in the prior three month period

can be attributed to proceeds from notes payable to related parties, proceeds from SunVesta AG’s bond

issuance and notes payable to related parties, offset by the payment of debt issuance costs.

We expect net cash flow provided by financing activities in future periods from those debt and equity

infusions necessary to complete the development of the Paradisus Papagayo Bay Resort & Luxury Villas.

Management believes that our cash on hand in addition to short term related party loans and the guaranty

agreement in place as described in the going concern paragraph below are sufficient for us to conduct

operations over the next twelve months. Current debt financing efforts consist of a CHF bond offering in

progress, and short term related party loans that have permitted us to draw capital as necessary to meet

ongoing operational requirements. The Company has, as of the date of this filing, realized on a net basis

approximately $18,200,000 through its Euro and CHF bond offerings, drawn down approximately

$23,560,448 against the line of credit with Aires, a related party and borrowed on a short term basis

approximately $2,611,034 from Dr. Roessler, a related party.

We had no lines of credit or other bank financing arrangements as of March 31, 2013 other than that in

place with Aires. Since SunVesta AG has borrowed approximately $13 million in excess of that

anticipated by the line of credit agreement, the Company expects that this debt facility is exhausted.

We have commitments for executed purchase orders and agreements in the amount of $30 million as of

March 31, 2013, in connection with the development of the Paradisus Papagayo Bay Resort & Luxury

Villas, which commitments are included in the required financing of $180 million to complete the project.

Most material commitments were not contractually agreed as of the end of the period.

The firth addendum (dated September 6, 2013) to the management agreement with Sol Meliá stipulates

that should the completion of the construction not occur by July 1, 2015, and should an extension date not

be agreed, subsequent to July 1, 2015, Sol Meliá will be entitled to receive a daily amount of $2,000 as

liquidated damages. Should the completion of the construction not occur by October 1, 2015 Sol Meliá

will be entitled to terminate the management agreement and to receive a termination amount of $5 million

unless the parties agree in writing to extend such date.

We have cancellable commitments that are not included in the required financing for the development of

the Paradisus Papagayo Bay Resort & Luxury Villas of approximately $41.6 million including

approximately $15.8 million to third parties for the purchase of two additional concession properties in

Polo Papagayo, Guanacaste, Costa Rica and approximately $25.8 million to Fundus for the purchase of a

hotel and entertainment complex in Atlanta, Georgia, U.S.A and the payment of property taxes.

We maintain a defined benefit plan that covers all of our Swiss employees and have an employment

agreement with our chief executive officer and chief financial officer as of March 31, 2013.

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

with the planned construction of the Paradisus Papagayo Bay Resort & Luxury Villas and discussed

above.

We have no current plans to make any changes in the number of our employees as of March 31, 2013.

Future Financings

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

operations and may rely on a guaranty agreement to bridge traditional financing for the Paradisus

Papagayo Bay Resort & Luxury Villas.

Off-Balance Sheet Arrangements

As of March 31, 2013, we had no significant off-balance sheet arrangements that have or are reasonably

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

revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are

material to stockholders.

Going Concern

The Company intends to build a hotel in the Papagayo Gulf Tourism Project area of Guanacaste, Costa

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

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

following expenditures are estimated to be incurred:

a. Gross project cost

195,000,000

b. Less: Proceeds from sale of villas

(24,000,000)

c. Net project cost

171,000,000

d. Overhead expenses

21,000,000

e. Less: Recuperated in gross project cost

(12,000,000)

f Total, excluding other potential projects

180,000,000

Sixty percent (60%) of “Net Project Cost is expected to be financed by traditional mortgage loans, for

which negotiations have been initiated. The remaining forty percent (40%) of the “Net Project Cost”, as

well as non-recuperated overhead expenses are expected to be financed by the main shareholders of the

project, i.e. Zypam Ltd., shareholder, Mr. Hans Rigendinger, shareholder, director and officer, Mr. Max

Roessler, shareholder, director and majority shareholder of Aires, Mr. Josef Mettler, shareholder, director

and officer.

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

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

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

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

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

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

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

the completion of the project.

Based on this guaranty agreement, management therefore believes that available funds are sufficient to

finance cash flows for the twelve months subsequent to March 31, 2013 and the filing date though future

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

and can be adjusted as necessary.

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

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

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

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

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

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

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

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

limited to, statements concerning:

— our anticipated financial performance and business plan

— the sufficiency of existing capital resources

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

— uncertainties related to our future business prospects

— our ability to generate revenues to fund future operations

— the volatility of the stock market

— general economic conditions

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

could cause our actual results to differ materially from those discussed or anticipated. 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 quarterly report, an evaluation was carried out by the

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

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

under the Securities Exchange Act of 1934 (“Exchange Act”)). Disclosure controls and procedures are

designed to ensure that information required to be disclosed in reports filed or submitted under the

Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the

Commission’s rules and forms, and that such information is accumulated and communicated to

management, including the chief executive officer and chief financial officer, to allow timely decisions

regarding required disclosures.

Based on that evaluation, the Company’s management concluded that due to a lack of independent

oversight, failure to segregate duties, insufficient accounting resources and lack of US GAAP knowledge,

as of the end of the period covered by this report, that the Company’s disclosure controls and procedures

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

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

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

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

Changes in Internal Control over Financial Reporting

During the period ended March 31, 2013, there has been no change in internal control over financial

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

financial reporting.

PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

None.

ITEM 1A.

RISK FACTORS

Not required of smaller reporting companies.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On July 3, 2013, the Company authorized the issuance of 3,000,000 shares of restricted common shares,

valued at $0.05 a share to Max Roessler in connection his appointment to the board of directors on even

date in reliance upon the exemptions from registration provided by Section 4(2) and Regulation S of the

Securities Act of 1933, as amended (“Securities Act).

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

the following factors: (1) the issuance was an isolated private transaction by the Company which did not

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

disclose; and (3) the offeree was financially sophisticated.

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

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

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

authorized was a non-U.S. offeree with an address in a foreign country.

On July 4, 2013, the Company authorized the issuance of 5,000,000 shares of restricted common shares,

valued at $0.07 a share, and granted 12,000,000 stock options from the SunVesta, Inc. 2013 Stock Option

Plan, that vest in three parts on the satisfaction of certain criteria tied to the development of the Paradisus

Papagayo Bay Resort & Luxury Villas, to Josef Mettler in connection his employment agreement of even

date in reliance upon the exemptions from registration provided by Section 4(2) and Regulation S of the

Securities Act.