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)

þ

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

For the quarterly period ended March 31, 2013.

o

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

For the transition period from

to

.

Commission file number: 000-28731

SUNVESTA, INC.

(Exact name of registrant as specified in its charter)

Florida

98-0211356

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

Seestrasse 97, Oberrieden, Switzerland CH-8942

(Address of principal executive offices)    (Zip Code)

011 41 43 388 40 60

(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.

1



TABLE OF CONTENTS

PART 1- FINANCIAL INFORMATION

Item1.

Financial Statements:

3

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

4

2012

Unaudited  Consolidated Statements of Comprehensive Loss for the

5

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

Unaudited  Consolidated Statements of  Stockholders’ Equity (Deficit)

6

Unaudited  Consolidated Statements of Cash Flows for the three months ended

7

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

Notes to Unaudited  Consolidated Financial Statements

8

Item 2.

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

35

Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

45

Item 4.

Controls and Procedures

46

PART II-OTHER INFORMATION

Item 1.

Legal Proceedings

47

Item 1A.

Risk Factors

47

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

47

Item 3.

Defaults Upon Senior Securities

48

Item 4.

Mine Safety Disclosures

48

Item 5.

Other Information

48

Item 6.

Exhibits

48

Signatures

49

Index to Exhibits

50

2



PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

As used herein, the terms “Company,” “we,” “our,” and “us” refer to SunVesta, Inc., a Florida

corporation, and its predecessors and subsidiaries, unless otherwise indicated. In the opinion of

management, the accompanying unaudited, consolidated financial statements included in this Form 10-Q

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

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

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

3



SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

March 31, 2013

December 31, 2012

(Unaudited)

Assets

Current assets

Cash and cash equivalents

$

178,990     $

260,520

Other assets

55,876

39,238

Receivable from related parties

290,971

-

Total current assets

525,837

299,758

Non-current assets

Property and equipment - net

30,610,366

16,799,540

Debt issuance costs - net

1,464,576

1,649,216

Down payment for property and equipment

1,869,836

10,320,144

Restricted cash

980,327

241,500

Total non-current assets

34,925,105

29,010,400

Total assets

$

35,450,942

29,310,158

Liabilities and stockholders' equity (deficit)

Current liabilities

Accounts payable

1,638,571

827,102

Accrued expenses

2,175,163

3,868,914

Note payable

2,000,000

-

Notes payable to related parties

3,247,740

3,432,064

EUR-Bond

12,056,458

14,216,707

Total current liabilities

21,117,932

22,344,787

Non-current liabilities

CHF-Bond

5,566,811

5,689,364

Notes payable to related parties

16,947,284

11,125,741

Fair value of conversion feature

50,181

-

Pension liabilities

70,756

74,075

Total non-current liabilities

22,635,032

16,889,180

Total liabilities

43,752,964

39,233,967

Stockholders' equity (deficit)

Preferred stock, $0.01 par value;

50,000,000 share authorized no shares issued

and outstanding

-

-

Common stock, $0.01 par value;

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

54,092,186 shares issued and outstanding

755,416

540,922

Additional paid-in capital

20,319,850

19,446,367

Accumulated other comprehensive gain/loss

178,997

(1,102,408)

Retained earnings prior to development stage

1,602

1,602

Deficit accumulated during the development stage

(29,534,132)

(28,786,537)

Treasury stock, 157,220 and 157,220 shares

(23,755)

(23,755)

Total stockholders' equity (deficit)

(8,302,022)

(9,923,809)

Total liabilities and stockholders' equity (deficit)     $

35,450,942

29,310,158

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

4



SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three months ended      Three months ended

Cumulative

March 31, 2013

March 31, 2012

Amounts*

(unaudited)

(unaudited & restated)

(unaudited)

Revenues

Revenues, net

$

-

-

-

Cost of revenues

-

-

-

Gross profit

-

-

-

Operating income / - expenses

General and administrative expenses

$

(1,304,957)

(971,627)

(22,514,214)

Sales and marketing

-

-

(480,872)

Impairment on property and equipment

-

-

(1,311,000)

Release of accrual for penalty to Mélia

Hotels & Resorts

1,000,000

-

1,000,000

Total operating income / - expenses

$

(304,957)

(971,627)

(23,306,086)

Loss from operations

$

(304,957)

(971,627)

(23,306,086)

Other income / - expenses

Loss on disposals of assets

$

-

-

(3,258)

Loss on sale of investments

-

-

(1,137,158)

Loss on extinguishment of debt

-

-

(1,806,758)

Interest income

174

3,060

168,141

Interest expense

(426,656)

(280,995)

(2,901,639)

Amortization of debt issuance costs

and commissions

(82,815)

712

(887,053)

Exchange differences

143,872

130,272

519,929

Change in fair value of conversion

feature

(50,181)

-

(50,181)

Other income / - expenses

(27,032)

14,053

10,067

Total other income / - expenses

$

(442,638)

(132,898)

(6,087,910)

Loss before income taxes

$

(747,595)

(1,104,525)

(29,393,996)

Income Taxes

-

-

(140,136)

Net loss

$

(747,595)

(1,104,525)

(29,534,132)

Comprehensive income / (loss)

Foreign currency translation

1,281,405

(802,775)

199,997

Comprehensive income / (loss)

$

533,810

(1,907,300)

(29,334,135)

Loss per common share

Basic and diluted

$

(0.01)

(0.02)

Weighted average common shares

Basic and diluted

71,251,720

54,092,186

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

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

5



SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

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

Common

Additional Paid

Accumulated Other

Prior Earnings

Deficit Accumulated

Treasury Stock

Total

Stock

in Capital

Comprehensive

During Development

Stockholders’

Income (Loss)

Stage

Equity (Deficit)

January 1, 2005

$

210,000      $

281,521      $

128      $

1,602      $

-      $

-

$

493,251

Net loss

-

-

-

-

(807,118)

-

(807,118)

Translation adjustments

-

-

23,149

-

-

-

23,149

December 31, 2005

210,000

281,521

23,277

1,602

(807,118)

-

(290,718)

Net loss

-

-

-

-

(3,575,713)

-

(3,575,713)

Translation adjustments

-

-

(163,151)

-

-

-

(163,151)

December 31, 2006

210,000

281,521

(139,874)

1,602

(4,382,831)

-

(4,029,582)

Net loss

-

-

-

-

(2,912,578)

-

(2,912,578)

Translation adjustments

-

-

35,580

-

-

-

35,580

Acquisition of OpenLimit, Inc.

14,000

(63,080)

-

-

-

-

(49,080)

Issuance of stock for debt

64,312

10,742,025

-

-

-

-

10,806,337

December 31, 2007

288,312

10,960,466

(104,294)

1,602

(7,295,409)

-

3,850,677

Net loss

-

-

-

-

(1,188,377)

-

(1,188,377

Translation adjustments

-

-

(367,601)

-

-

-

(367,601)

Issuance of stock for compensation

417

61,852

-

-

-

-

62,269

Issuance of stock for debt

18,182

2,709,091

-

-

-

-

2,727,273

December 31, 2008

306,911

13,731,409

(471,895)

1,602

(8,483,786)

-

5,084,241

Net loss

-

-

-

-

(2,471,845)

-

(2,471,845)

Translation adjustments

-

-

401,460

-

-

-

401,460

Issuance of stock for compensation

600

44,400

-

-

-

-

45,000

Issuance of stock for cash

10,000

290,000

-

-

-

-

300,000

Issuance of stock for debt

77,259

3,785,668

-

-

-

-

3,862,927

Purchase of treasury stock

-

-

-

-

-

(12,200)

(12,200)

December 31, 2009

394,770

17,851,477

(70,435))

1,602

(10,955,631)

(12,200)

7,209,583

Net loss

-

-

-

-

(1,173,292)

-

(1,173,292)

Translation adjustments

-

-

10,983

-

-

-

10,983

Issuance of stock for debt

146,152

876,914

-

-

-

-

1,023,066

Purchase of treasury stock

-

-

-

-

-

(11,555)

(11,555)

December 31, 2010

540,922

18,728,391

(59,452)

1,602

(12,128,923)

(23,755)

7,058,785

Net loss

-

-

-

-

(10,382,930)

-

(10,382,930)

Translation adjustments

-

-

21,575

-

-

-

21,575

December 31, 2011

540,922

18,728,391

(37,877)

1,602

(22,511,853)

(23,755)

(3,302,570)

Net loss

-

-

-

-

(6,274,684)

-

(6,274,684)

Translation adjustments

-

-

(1,064,531)

-

-

-

(1,064,531)

Issuance of stock for debt

-

717,976

-

-

-

-

717,976

December 31, 2012

540,922

19,466,367

(1,102,408)

1,602

(28,786,537)

(23,755)

(9,923,809)

Net loss

-

-

-

-

(747,595)

-

(747,595)

Translation adjustments

-

-

1,281,405

-

-

1,281,405

Issuance of stock for compensation

35,000

335,000

-

-

-

-

370,000

Issuance of stock for debt

179,494

538,483

-

-

-

-

717,977

March 31, 2013

$

755,416      $

20,319,850      $

178,997      $

1,602      $

(29,534,132)      $

(23,755)

$

(8,302,022)

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

6



SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

January 1 to

January 1 to

Cumulative

31 March 2013

31 March 2012

Amounts*

Unaudited

Unaudited & restated

Unaudited

Cash flows from operating activities

Net loss

$

(747,595)

(1,104,525)

(29,534,132)

Adjustments to reconcile net loss to net cash

Depreciation and amortization

10,198

22,443

330,283

Other income / expenses

-

(60,700)

(60,700)

Release of accrual for penalty to Mélia Hotels & Resorts

(1,000,000)

-

311,000

Amortization of debt issuance cost and commissions

82,815

(712)

894,751

Stock compensation expense

370,000

-

1,195,245

Unrealized exchange differences

(143,872)

(130,272)

(519,929)

Loss on securities acquired as deposit on stock

-

-

1,008,324

Loss on disposal of assets

-

-

3,258

Loss on extinguishment of debt

-

-

1,806,758

Change in fair value of conversion feature

50,181

-

50,181

Increase in pension fund commitments

(3,318)

12,774

70,757

Increase / decrease in:

Other current assets

(16,639)

(14,126)

(66,516)

Accounts payable

811,469

39,106

2,174,388

Accrued  expenses

(693,751)

64,462

3,437,893

Net cash used in operating activities

(1,280,513)

(1,171,550)

(18,898,440)

Cash flows from investing activities

Proceeds from securities available-for-sale

-

-

1,740,381

Short term investments

-

75,000

-

Other receivables from related parties

(290,970)

(673,293)

(2,463,304)

Purchase of property and equipment

(753,024)

(1,002,487)

(18,520,832)

Down payments for property and equipment

(2,250,040)

(1,300,082)

(12,320,183)

Restricted cash

(739,327)

-

(980,827)

Net cash used in investing activities

(4,033,361)

(2,900,862)

(32,544,765)

Cash flows from financing activities

Net proceeds from deposit on stock

-

-

3,664,417

Proceeds from stock issuance

-

-

300,000

Proceeds from notes payable related parties

7,256,757

2,178,258

34,476,478

Repayment of notes payable related parties

-

-

(778,243)

Advances from third parties

-

-

700,000

Note payable

-

-

(714,819)

Proceeds from bond issuance, net of commissions

900,853

1,871,681

22,323,654

Repayments of bonds

(2,649,073)

-

(4,123,896)

Payment for debt issuance costs

(269,516)

(316,189)

(3,537,127)

Purchase of treasury stock

-

-

(23,755)

Net cash provided by financing activities

5,239,021

3,733,750

52,286,709

Effect of exchange rate changes

(6,677)

(17,775)

(665,069)

Net decrease in cash

(81,530)

(320,887)

178,435

Cash, beginning of period

260,520

505,500

555

Cash, end of period

$

178,990

184,613

178,990

Additional information

Interest paid

-

-

Income taxes paid

-

-

Conversion of note payable to Mr. Rigendinger to

stockholders' equity (non-cash)

717,977

-

Purchase of property and equipment through a note payable

(non-cash)

2,000,000

-

Reclassification of down payment for property and

equipment to property and equipment

10,200,000

-

Capitalized interest and debt issuance costs for construction

(non-cash)

368,000

314,000

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

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

7



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

1.

CORPORATE INFORMATION AND BASIS OF PREPARATION

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

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

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

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

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

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

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

stage company”.

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

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

The   accompanying   unaudited   consolidated   financial   statements   have   been   prepared   by

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

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

therefore,  be  read  in  conjunction  with  the  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.

8



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

2.

SIGNIFICANT ACCOUNTING POLICIES

New accounting standards – adopted

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

financial statements.

9



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

3.

GOING CONCERN

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

of Guanacaste, Costa Rica.

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

the following expenditures are estimated to be incurred:

Expenditures

USD

a.     Gross project cost

195,000,000

b.     Less: Proceeds from sale of villas

(24,000,000)

c.     Net project cost

171,000,000

d.     Overhead expenses

21,000,000

e.     Less: Recuperated in gross project cost

(12,000,000)

f

Total, excluding other potential projects

180,000,000

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

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

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

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

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

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

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

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

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

guarantor  to  creditors  to  the  extent  of  the  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.

10



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

4.

RESTRICTED CASH

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

Restricted Cash

March 31, 2013

December 31, 2012

$

$

Credit Suisse in favor of

BVK Personalvorsorge des Kantons Zürich

133,574

-

HSBC in favor of

Costa Rican Tourism Board

243,000

241,500

Banco Nacional de Costa Rica in favor of

Costa Rican Environmental Agency – SETENA

603,753

-

Gross

980,327

241,500

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

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

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

positions has been classified as long term.

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

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

position is also classified as long term.

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

11



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

5.

PROPERTY & EQUIPMENT

Property & equipment

March 31, 2013

December 31, 2012

$

$

Land

19,700,000

7,000,000

IT Equipment

185,846

185,846

Other equipment and furniture

284,901

284,901

Leasehold improvements

66,617

66,617

Construction in-process

10,712,982

9,591,958

Gross

31,203,346

17,129,322

Less accumulated depreciation

(339,980)

(329,782)

Net

30,610,366

16,799,540

Depreciation expenses for the period ended

March 31, 2013

10,198

22,443

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

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

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

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

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

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

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

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

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

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

expires in June 2022.

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

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

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

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

regarding acquisition of this piece of land see note 13.

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

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

12



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

6.

PLEDGES

March 31, 2013

December 31, 2012

Pledge of shares of Rich Land Investments Ltda.

0%

10%

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

(0 shares)

(1 share)

Pledge of shares of Rich Land Investments Ltda.

in favor of Meliá Hotels International for bonds

0%

20%

of EUR 2 million

(0 shares)

(2 shares)

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

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

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

the amendment of the corresponding contracts in Zypam Ltd.

13



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

7.

FAIR VALUE MEASUREMENT

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

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

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

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

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

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

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

under the following hierarchy:

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

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

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

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

markets.

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

value-drivers are unobservable.

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

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

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

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

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

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

classified within Level 3.

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

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

though there may be significant inputs that are readily observable.

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

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

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

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

calculations have been adjusted accordingly.

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

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

conversion option”.

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

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

fair value of our financial instruments.

14



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

7.

FAIR VALUE MEASUREMENT - continued

Cash and cash equivalents – carrying amount approximated fair value.

Restricted cash – carrying amount approximated fair value.

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

the short term nature of the receivables.

Accounts Payable – carrying amount approximated fair value.

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

payable.

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

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

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

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

values approximate fair value.

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

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

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

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

values approximate fair value.

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

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

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

due to the short term nature of the note payable.

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

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

underlying publicly trades shares

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

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

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

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

Company. Hence, the carrying value approximates fair value.

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

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

the following input data:

-      Stock price $0.10

-      Exercise price: $1.01

-      Expected term in years: 2.5 years

-      Volatility 80%

-      Annual Rate of quarterly dividends: 0%

-      Discount Rate: 0.305%

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

15



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

7.

FAIR VALUE MEASUREMENT – continued

March 31, 2013

December 31, 2012

Fair

Carrying

Fair Value

Carrying

Fair Value

Value

Amount

Amount

Reference

$

$

$

$

Levels

Cash and cash

equivalents

178,990

178,990

260,520

260,520

1

None

Restricted cash

980,327

980,327

241,500

241,500

1

Note 4

Receivable from

related parties

290,971

290,971

-

-

1

Note 8

Accounts Payable

1,638,571

1,638,571

827,102

827,102

1

None

Notes payable

2,000,000

2,000,000

-

-

1

Note 13

Notes payable to

related parties –

other (current)

35,706

35,706

149,328

149,328

3

Note 8

Notes payable to

related parties – Dr.

M. Roessler

(current)

2,612,034

2,612,034

2,682,736

2,594,284

1

Note 8

Notes payable to

related parties –

Rigendinger

(current)

600,000

600,000

600,000

600,000

3

Note 8

EUR-bond

12,056,458

12,056,458

14,216,707

14,216,707

3

Note 10

CHF-bond

5,566,811

5,566,811

5,689,364

5,689,364

3

Note 10

Notes payable to

related parties –

Aires (non-current)

16,947,284

16,947,284

10,407,764

10,407,764

3

Note 8

Notes payable to

related parties –

Rigendinger Aires

(non-current)

-

-

717,977

717,977

3

Note 9

Fair value of

conversion option

50,181

50,181

-

-

3

Note 8

8.

RECEIVABLES FROM AND PAYABLES TO RELATED PARTIES

16



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

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

Receivables

Payables

Receivables from and notes

March 31,

December 31,

March 31,

December 31,

to related parties

2013

2012

2013

2012

$

$

$

$

01

Hans Rigendinger

-

-

600,000

600,000

02

Josef Mettler

36,000

-

-

-

L03

Adrian Oehler

-

-

35,706

37,380

o04

Sportiva

46,976

-

-

31,948

a

n05

Aires International

-

16,974,284

10,407,764

06

Dr. Max Roessler

-

2,612,034

2,682,736

a07

Hans Rigendinger

-

-

-

717,977

g08

Akyinyi Interiors

-

-

-

80,000

r

e09

4f capital ag

207,995

e

Total excluding

m

interest

290,971

-

20,222,024

14,577,805

e

Accrued interest

-

-

768,245

566,093

n

Total

290,971

-

20,990,269

15,123,898

t

of which non-current

-

-

16,974,284

11,125,741

No

Related party

Capacity

Interest

Repayment

Rate

Terms

Security

01

Hans Rigendinger

Shareholder, director, chief operating

officer (COO)

0.00%

none

none

Shareholder, chairman of the board of

02

Josef Mettler

directors, chief executive officer

(CEO), chief financial officer (CFO)

3.00%

none

none

and principal accounting officer (PAO)

03

Adrian Oehler

Shareholder and SunVesta AG board

member

0.00%

none

none

04

Sportiva

Entity owned by the Company’s

director, CEO, CFO and PAO

3.00%

none

none

05

Aires International

                                     *** see hereinafter***

06

Dr. Max Roessler

Shareholder and director

*** see hereinafter ***

07

Hans Rigendinger

Shareholder, director and COO

*** see hereinafter ***

08

Akyinyi Interiors

Entity owned by a director’s wife

0.00%

01/31/13

none

09

4f Capital Ag

Entity owned by the Company’s

director, CEO, CFO and PAO

0.00%

none

none

8.

RECIEVABLES FROM AND PAYABLE TO RELATED PARTIES - Continued

17



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

Loan agreement Aires International Investment Inc.

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

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

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

following major conditions:

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

maximum amount of CHF 10,000,000.

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

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

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

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

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

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

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

Aires can exercise its conversion option

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

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

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

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

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

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

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

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

determined  that  the  conversion  feature  is  not  indexed  to  the  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.

18



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

8.

RECIEVABLES FROM AND PAYABLE TO RELATED PARTIES – Continued

Loans Dr. Max Roessler

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

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

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

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

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

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

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

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

loan approximates the carrying value of the loan.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

value of the loan.

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

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

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

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

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

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

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

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

the loan approximates the carrying value of the loan.

19



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

9.

RELATED PARTY TRANSACTIONS

Debt Settlement Agreements

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

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

December 31, 2012 as described hereinafter:

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

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

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

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

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

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

December 31, 2012 was used.

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

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

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

Comissions paid to related parties

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

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

of the Company.

20



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

10.

BONDS

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

Description

EUR () bond

CHF bond

Issuer:

SunVesta Holding AG

SunVesta Holding AG

Type of securities:

Bond in accordance with

Bond in accordance with

Swiss law

Swiss law

Approval by SunVesta

May 12, 2010

June 3, 2011

Holding AG Board of Directors

Volume:

Up to 25,000,000

Up to CHF 15,000,000

Units:

1,000

CHF 50,000

Offering period:

11/10/2010 –  04/30/2011

09/01/2011 –  02/28/2012

Due date:

November 30, 2013

August 31, 2015

Issuance price:

100 %

100%

Issuance day:

December 1, 2010

September 1, 2011

Interest rate:

8.25% p.a.

7.25% p.a.

Interest due dates:

November 30 of each year,

August 31 of each year,

the first time November 30, 2011

the first time August 31, 2012

Applicable law:

Swiss

Swiss

The nominal amounts have changed as follows:

EUR-Bond

CHF Bond

EUR-Bond

CHF Bond

2013

2013

2012

2012

USD

USD

USD

USD

Balances January 1

14,216,707

5,689,364

9,598,537

3,818,898

Cash inflows

792,740

108,113

4,015,549

3,191,888

Cash outflows

(2,649,073)

-

-

1,474,823

Foreign currency adjustments

(239,193)

59,736

692,295

463,849

Sub-total (Fair value)

12,121,181

5,857,113

14,306,380

5,999,813

Commissions paid to bondholders

(248,195)

(417,709)

(248,195)

(417,709)

Amortization of such commissions

183,472

127,307

158,522

107,260

Balance March 31, 2013

December 31, 2012 (Carrying value)

12,056,458

5,566,811

14,216,707

5,689,364

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

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

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

21



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

11.

PENSION PLAN

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

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

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

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

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

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

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

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

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

liability.

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

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

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

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

assets are determined based on prevailing market prices.

Actuarial valuation

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

Three months ended

Three months ended

Pension expense

March 31, 2013

March 31, 2012

$

$

Current service cost

13,632

25,383

Past service cost

-

-

Net actuarial (gain) loss recognized

(268)

-

Interest cost

1,181

772

Expected return on assets

(1,208)

(692)

Employee contributions

(5,448)

(10,164)

Net periodic pension cost

7,890

15,299

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

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

All  of  the  assets  are  held  under  the  collective  contract  by  the  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.

22



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

12.

STOCK COMPENSATION

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

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

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

common stock shares under the plan.

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

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

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

of the 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.

23



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

12.

STOCK COMPENSATION - Continued

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

Company’s results:

Three months

Three months

Stock-based compensation (shares)

ended March 31,

ended March 31,

2013

2012

Shares granted

16,000,000 shares

---

Fair Value respectively market price on grant date

$ 0.08

---

Total maximal expenses (2013-2017)

$ 1,280,000

---

Shares vested (signing bonus)

3,500,000 shares

---

Unvested shares (retention award)

12,500,000 shares

---

Expenses recorded under general & administrative

---

expenses

$ 330,000

Unrecorded costs related to unvested share grants

---

(retention bonus)

$ 950,000

Tax benefit associated with compensation expense

$ 0

---

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

follows:

Through

Year ending December 31,

Stock-based

December 31,

compensation (shares)

2013

2014

2015

2016

2017

$

$

$

$

$

Unrecognized

compensation expense

150,000

200,000

200,000

200,000

200,000

Stock options

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

10,000,000  options  on  January  1,  2013.  Each  option  entitles  to  buy  one  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%.

24



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

12.

STOCK COMPENSATION - Continued

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

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

Options outstanding

Number of Options

Weighted average

Weighted average

exercise price

remaining

contractual life

Outstanding January 1, 2013

None

None

Granted

10,000,000

$ 0.05

9.75 years

Exercised

0

0

Forfeited or expired

0

0

Outstanding March 31, 2013

10,000,000

$ 0.05

9.75 years

Exercisable March 31, 2013

0

The following table depicts the 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

$ 0.00

Non-vested-granted

10,000,000

$ 0.06

Vested

0

$ 0.00

Non-vested, forfeited or canceled

0

$ 0.00

Non-vested at March 31, 2013

10,000,000

$ 0.06

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

recognize   compensation   expense   related   to   any   outstanding   and   unvested   stock   options

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

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

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

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

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

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

Assumption

March 31, 2013

March 31, 2012

Dividend yield

None

---

Risk-free interest rate

1.00%

---

Expected market price volatility

80.00%

---

Average expected life of stock options

6.0  years

---

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

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

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

25



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

12.

STOCK COMPENSATION - Continued

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

during the quarter ended March 31, 2013:

Stock based compensation (options)

March 31, 2013

March 31, 2013

$

$

Expenses recorded under general &

40,000

---

administrative expenses

Benefit for income taxes

0

---

Effect on net loss

40,000

---

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

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

Through December 31,

Year ending December 31,

Stock-based compensation (options)

2013

2014

$

$

Unrecognized compensation expense

120,000

140,000

26



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

13.

AGREEMENT TO PURCHASE NEIGHBORING PIECE OF LAND

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

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

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

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

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

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

2013 the Company paid $10.7 million in cash.

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

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

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

14.

MANGEMENT AGREEMENT WITH MELIA HOTELS & RESORTS

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

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

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

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

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

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

December 31, 2011.

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

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

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

August 31, 2012.

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

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

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

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

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

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

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

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

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

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

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

27



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

15.

INTENTION  TO  PURCHASE  TWO  ADDITIONAL  CONCESSION  PROPERTIES  AT

POLO PAPAGAYO, GUANACASTE

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

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

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

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

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

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

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

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

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

    Equity is required to be transferred upon final payment

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

its funds on deposit.

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

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

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

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

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

payment for property and equipment.

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

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

16.

OPENING DATE “Paradisius Papagayo Bay Resort & Luxury Villas”

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

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

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

agreed as follows:

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

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

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

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

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

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

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

extend such date.

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

28



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

17.

HOTEL PROJECT ATLANTA

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

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

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

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

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

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

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

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

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

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

18.

EARNINGS PER SHARE

Basic  earnings  per  share  are  the  result  of  dividing  the 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

Net loss

Basic weighted average shares outstanding

71,251,720

54,092,186

Dilutive effect of common stock equivalents

none

none

Dilutive weighted average shares outstanding

71,251,720

54,092,186

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

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

been anti-dilutive.

Three-month period

Three-month period

Earnings per share

ended

ended

March 31, 2013

March 31, 2012

Conversion feature loan to Aires International

10,818,437

---

Investment Inc.

Shares to Hans Rigendinger (retention bonus)

12,500,000

---

Options

10,000,000

---

Total

33,318,437

---

29



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

19.

RESTATEMENT

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

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

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

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

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

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

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

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

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

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

Quarter to date

Period ended March 31

2012

2012

as reported

as restated

Property and equipment, net

$12,370,324

$12,600,324

Shareholders' equity (deficit)

$(5,439,870)

$(5,209,870)

Total assets

$20,145,618

$20,375,618

Amortization of debt issuance

$(229,288)

$712

costs and commissions

Net loss

$(1,334,525)

$(1,104,525)

Basic and diluted loss per share

$(0.02)

$(0.02)

30



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

20.

SUBSEQUENT EVENTS

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

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

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

except for the below:

Hotel Project Atlanta

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

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

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

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

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

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

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

the taxes on the property for the tax year 2013.

 

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

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

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

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

 

 

EUR Bond Offering

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

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

of the bonds due November 30, 2013.

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

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

CHF Bond Offering

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

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

the bonds due August 31, 2015.

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

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

31



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

20.

SUBSEQUENT EVENTS – Continued

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

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

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

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

following clauses:

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

refundable.

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

$15,830,299.

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

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

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

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

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

Guanacaste is as hereinafter:

Third Party

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

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

report

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

report

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

report

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

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

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

$8,000,000 in total to Third Party

Original Seller

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

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

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

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

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

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

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

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

$8, 130,000 in total to Original Seller

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

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

portion of the purchase price as following:

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

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

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

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

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

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

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

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

32



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

20.

SUBSEQUENT EVENTS – Continued

Loan Aires International Investment Inc.

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

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

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

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

$23.56 million) from Aires.

New Entity

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

—     Name:

Profunda Capital Partners LLC

—     Incorporated:

State of Nevada, United States

—     Manager:

Josef Mettler / Hans Rigendinger

Issuances of securities

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

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

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

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

following:

3,000,000 options

On the date that the Company or one of its subsidiaries

completes a bridge financing prior to completion of the

main financing anticipated for the development of the

Paradsius Papagayo Bay.

4,000,000 options

On the date that the Company or one of its subsidiaries

completes a financing for the development of the

Paradsius Papagayo Bay.

5,000,000 options

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

management responsibilities for the Paradisus Papagayo

Bay.

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

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

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

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

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

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

as board member of the Company.

33



SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

20.

SUBSEQUENT EVENTS – Continued

OPENING DATE “Paradisius Papagayo Bay Resort & Luxury Villas”

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

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

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

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

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

opening date as follows:

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

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

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

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

damages

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

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

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

respective parties agree to extend such date.

34



ITEM 2.

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

35



Royal Service

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

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

The Royal Service area will include:

—    112 Junior Suites Grand Deluxe

(53-60* square meters)

—    3 Junior Suites Grand Deluxe for Handicapped Guests

(53* square meters)

—    6 Grand Master Suites

(82* square meters)

—    1 Grand Presidential Suite (4 bedrooms)

(145* square meters)

—    20 one or two bedroom Garden Villas

(91 – 117* square meters)

*    Room size does not include balconies and terraces.

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

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

fitness equipment, spas and outside massage areas.

Family Concierge

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

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

—    166 Junior Suites Deluxe

(47* square meters)

—    34 Suites Deluxe

(87* square meters)

—    34 Suites Premium

(93* square meters)

—    6 Handicapped Junior Suites Deluxe

(47* square meters)

—    1 Presidential Suite

(189* square meters)

*    Room size does not include balconies and terraces.

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

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

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

The Paradisus Papagayo Bay Resort & Luxury 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

36



resort when not occupied by the owners.

Management

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

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

and Ernst Rosenberger, the 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).

37



La Perla at Playa del Carmen

    394 suites including 60 swim-up suites

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

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

Playa del Carmen)

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

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

Meliá until April 30, 2011. Our project is part of Sol 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

38



   $1,000,000 on May 31, 2014

   $1,000,000 on June 30, 2014

   $1,000,000 on July 31, 2014

   $1,130,000 on August 31, 2014

$8,130,000 in total to Original Seller

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

$26 million.

Finance

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

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

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

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

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

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

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

agreement as described herein.

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

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

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

Luxury Villas project.

39



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

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

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

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

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

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

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

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

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

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

maximum amount of CHF 10,000,000.

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

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

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

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

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

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

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

exercise its conversion option.

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

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

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

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

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

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

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

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

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

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

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

reached.

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

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

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

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

extended by verbal agreement on undetermined terms, as follows:

Loan Date

Amount

Shares

Public Entity

June 7, 2012

$

1,733,000

10,000    Intershop Holding AG

July 24, 2012

$

446,000

10,000    Schindler Holding AG

August 8, 2012

$

383,000

700    Zug Estates Holding AG

March 1, 2013

$

50,000

52,500    Datewyler Holding AG

40



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

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

closing of SunVesta 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 3th quarter of 2013

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

    obtain final building permits in the 3rd quarter of 2013

    secure construction loan in the 4th quarter of 2013

    commence onsite vertical construction in the 4th quarter of 2013

    complete construction in the 1st quarter of 2015

    Handover to Sol Meliá on July 1st of 2015

Results of Operations

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

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

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

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

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

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

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

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

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

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

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

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

Comprehensive Losses

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

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

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

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

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

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

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

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

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

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

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

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

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

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

41



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

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

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

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

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

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

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

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

ended December 31, 2013.

Income Tax Expense (Benefit)

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

startup costs that will offset future operating profits.

Capital Expenditures

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

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

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

Resources" and the "Going Concern" paragraphs below.

Liquidity and Capital Resources

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

in liquidity, capital resources, and stockholders’ equity.

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

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

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

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

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

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

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

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

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

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

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

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

$18,898,440.

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

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

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

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

that include but are not limited to, personnel costs, accounting fees, consulting expenses, 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

42



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

payable and accrued expenses.

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

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

project.

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

$32,544,765.

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

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

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

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

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

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

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

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

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

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

$52,286,709.

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

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

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

parties and proceeds from SunVesta 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

43



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

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

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

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

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

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

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

unless the parties agree in writing to extend such date.

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

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

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

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

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

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

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

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

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

above.

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

Future Financings

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

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

Papagayo Bay Resort & Luxury Villas.

Off-Balance Sheet Arrangements

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

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

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

material to stockholders.

Going Concern

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

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

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

following expenditures are estimated to be incurred:

a.     Gross project cost

$

195,000,000

b.    Less: Proceeds from sale of villas

(24,000,000)

c.     Net project cost

171,000,000

44



d.    Overhead expenses

21,000,000

e.     Less: Recuperated in gross project cost

(12,000,000)

f      Total, excluding other potential projects

$

180,000,000

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

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

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

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

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

and officer.

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

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

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

creditors to the extent of the 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.

45



Recent Accounting Pronouncements

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

pronouncements.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this quarterly report, an evaluation was carried out by the

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.

46



PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

None.

ITEM 1A.

RISK FACTORS

Not required of smaller reporting companies.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Securities Act.

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

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

47



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

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

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

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

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

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

On January 1, 2013, the Company authorized the issuance of 3,500,000 shares of restricted common

shares, valued at $0.08 a share, and granted 10,000,000 stock options from the SunVesta, Inc. 2013 Stock

Option Plan, that vest in two parts on the satisfaction of certain criteria tied to the development of the

Paradisus Papagayo Bay Resort & Luxury Villas, to Hans Rigendinger in connection his employment

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

Regulation S of the Securities Act.

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

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

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

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

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

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

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

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

ITEM 3.

DEFAULTS ON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURE

Not applicable.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS

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

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

48



SIGNATURES

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

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

SunVesta, Inc.

Date

/s/ Josef Mettler

October 10, 2013

Josef Mettler

Chief Executive Officer, Chief Financial Officer,

Principal Accounting Officer and Director

/s/ Hans Rigendinger

October 10, 2013

Hans Rigendinger

Chief Operating Officer and Director

49



INDEX TO EXHIBITS

Exhibit

Description

3.1.1*

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

Commission on December 31, 1999).

3.1.2*

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

the Commission on April 9, 2003).

3.1.3*

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

the Commission on November 17, 2003).

3.1.4*

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

Commission on September 27, 2007).

3.2.1*

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

31, 1999).

3.2.2*

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

on November 17, 2003).

10.1*

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

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

filed with the Commission on June 21, 2007).

10.2*

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

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

10.3*

Debt Settlement Agreement dated September 29, 2008 with Zypam Ltd. (incorporated by

reference from the Form 10-Q filed with the Commission on November 13, 2008).

10.4*

Debt Settlement Agreement dated April 21, 2009 between the Company and Zypam, Ltd.

(incorporated by reference from the Form 8-K filed with the Commission on April 30, 2009).

10.5*

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

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

10.6*

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

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

10.7*

Guaranty Agreement dated July 16, 2012 between SunVesta AG, Josef Mettler, Hans Rigendinger

and Max Rössler.

10.8*

Employment Agreement dated January 1, 2013 between the Company and Hans Rigendinger

(incorporated by reference to the Form 8-K filed with the Commission on February 4, 2013.

10.9

Employment Agreement dated July 4, 2013 between the Company and Josef Mettler.

14*

Code of Ethics adopted March 1, 2004 (incorporated by reference from the 10-KSB filed with the

Commission on April 14, 2004).

21*

Subsidiaries of the Company (incorporated by reference from the Form 10-K filed with the

Commission on June 20, 2013).

31

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14

of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of

the Sarbanes-Oxley Act of 2002.

32

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

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

99

SunVesta, Inc. 2013 Stock Option Plan

101. INS

XBRL Instance Document

101. PRE

XBRL Taxonomy Extension Presentation Linkbase

101. LAB

XBRL Taxonomy Extension Label Linkbase

101. DEF

XBRL Taxonomy Extension Label Linkbase

101. CAL

XBRL Taxonomy Extension Label Linkbase

101. SCH

XBRL Taxonomy Extension Schema

*

Incorporated by reference to previous filings of the Company.

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed “furnished” and

not “filed” or part of a registration statement or prospectus for purposes of Section 11 or 12 of the

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

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

50