ITEM 1.
BUSINESS
As used herein the terms “Company,” “we,” “our,” and “us” refer to SunVesta, Inc., its predecessors,
and its subsidiaries, unless context indicates otherwise.
Corporate History
The Company was incorporated under the laws of the State of Florida on September 12, 1989 as “Thor
Ventures Corp.” On November 26, 2002 the Company’s name was changed to “Jure Holdings, Inc.” as part
of a process to restructure the corporation. On April 25, 2003 we acquired OPENLiMiT Holding AG, a
Swiss developer of digital signature software and subsequently changed our name to “OPENLiMiT, Inc.”
We spun-off OPENLiMiT Holding AG to our stockholders on September 1, 2005. On August 24, 2007 we
changed the Company’s name to “SunVesta, Inc.” and on August 27, 2007 acquired SunVesta Holding AG
(“SunVesta AG”) as a wholly-owned subsidiary.
SunVesta AG was incorporated under the laws of Switzerland on December 18, 2001 and is domiciled in
the Canton of Zurich, Switzerland. SunVesta AG operates through its subsidiaries:
- SunVesta Projects & Management AG (Switzerland) (100% owned)
- SunVesta Costa Rica Limitada (Costa Rica) (100% owned)
- Rich Land Investments Limitada (Costa Rica) (100% owned)
The Company’s principal place of business is located at Seestrasse 97, Oberrieden, Switzerland CH-8942.
Our telephone number is 011 41 43 388 40 60. Our registered agent is Hubco Registered Agents Services,
Inc., located at 155 Office Plaza Drive, 1st Floor, Tallahassee, Florida, 32301 and their telephone number is
(800) 443-8177.
SunVesta
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 November 2014 subject to requisite financing.
Specifications
Paradisus Papagayo Bay Resort & Luxury Villas’ initial specifications are to be as follows:
- eco-luxury all-inclusive resort
- 381-keys
- direct beach access
- five restaurants and five bars
- Yhi Spa and Health Club
- Paradisus’ adults-only “Royal Service” level of accommodations
- Paradisus’ “Family Concierge” program
- 19,000 square feet of meeting facilities with the business traveler in mind
Royal Service
Our Royal Service will include an extensive range of services such as butler service, private pools for each
Garden Villa and/or a Jacuzzi in every suite.
The Royal Service area will include:
- 112 Junior Suites Grand Deluxe
(53-60* square meters)
- 3 Junior Suites Grand Deluxe for Handicapped Guests
(53* square meters)
- 6 Grand Master Suites
(82* square meters)
- 1 Grand Presidential Suite (4 bedrooms)
(145* square meters)
- 20 one or two bedroom Garden Villas
(91 - 117* square meters)
* Room size does not include balconies and terraces.
All ground floor suites will have direct access to swim-up pools. Each of the suites and villas will have a full
view of the sea. Royal Service guests will furthermore have access to restaurants, bars, lounges, fitness
equipment, spas and outside massage areas.
Family Concierge
The Family Concierge will be the family orientated part of the Paradisus Papagayo Bay Resort & Luxury
Villas. The accommodations will be designed to satisfy the needs of the modern family.
- 166 Junior Suites Deluxe
(47* square meters)
- 34 Suites Deluxe
(87* square meters)
- 34 Suites Premium
(93* square meters)
- 6 Handicapped Junior Suites Deluxe
(47* square meters)
- 1 Presidential Suite
(189* square meters)
* Room size does not include balconies and terraces.
All ground floor suites will have direct access to swim-up pools. Each of the suites will have a full view of
the sea. Family Concierge guests will furthermore have access to restaurants, bars, and lounges. The
intended Onyx Night Club and the Gabi Club will be located near the beach.
The Paradisus Papagayo Bay Resort & Luxury Villa’s will feature other highlights including:
- over 65 private, swim up and resort pools including the world’s second largest Infinity Pool all
within idyllic landscaped grounds
- a wedding chapel with a stunning ocean view
- rain forest walkways that permit guests to experience the flora and fauna of the rain forest
- a multipurpose convention hall with over 2,000 square meters of space that can be utilized as a
whole or divided to create smaller meeting rooms
- a full service spa committed to providing for the wellbeing of our guests. The spa will be located
with a 180 degree sea view within approximately 1,000 square meters that will include 12 large
treatment rooms, a hairdresser, relaxation areas, pools, saunas and steam rooms
- the 20 private villas will be located within the Royal Service area of the resort. The present
intention being that these villas will be sold to individuals who will then let them back to the resort
when not occupied by the owners.
Management
Overall project development is lead by Josef Mettler, our chief executive officer, Charles Fessel, project
director Paradisus Papagayo Bay Resort & Luxury Villas, Hans Rigendinger, chairman of the board
SunVesta AG and Ernst Rosenberger, the Company’s corporate controller. The lead architect is Ossenbach,
Pendones & Bonilla, one of Costa Rica’s largest architectural offices with over 45 architects and designers.
Civil engineering services are provided by DEHC Engineers and structural engineering services by IEAC.
Landscape architects are TPA and interior designers are lead by Concreta Srl.
Resort management is to be provided by Meliá Hotel International, S.A. (“Sol Meliá”). “Paradisus” is
Meliá’s five star all-inclusive luxury hotel brand that is well recognized in the hospitality industry around
the world. Sol Meliá was founded in 1956 in Palma de Mallorca, Spain and is today one of the world’s
largest resort hotel chains, as well as Spain’s leading hotel chain for business or leisure. The company
currently offers more than 300 hotels in 26 countries over four continents under its Gran Sol Meliá, Sol
Meliá, ME by Sol Meliá, Innside by Sol Meliá, Tryp, Sol Meliá, Sol Meliá Vacation Club, and Paradisus
brands. The Paradisus brand represents all-inclusive luxury resorts with hotels in Mexico and the
Dominican Republic, including:
Paradisus Palma Real (Dominican Republic):
- 496 oversized suites
- numerous pools and whirlpools, five tennis courts, casino, beach, golf, meeting space, five
restaurants, two buffets, nine bars, etc.
The Reserve at Palma Real (Dominican Republic):
- 184 rooms “Residential Concierge Suites”
- private beach, swimming pools, 7800 sq ft “Kids Zone”, 24,000 sq. ft. Yhi Spa, three
restaurants, two buffets, two bars, etc.
Paradisus Punta Cana (Dominican Republic):
- 884 oversized suites (500 - 1000+ sq ft)
- seven pools, four tennis courts, casino, beach, “Kids Zone”, Yhi Spa and fitness, meeting
rooms, 12 restaurants, eight bars, etc.
The Reserve at Punta Cana (Dominican Republic):
- 132 residential suites
- pools (with partially underwater pool beds, water features, etc), private beach, spa, cabanas,
etc.
La Esmeralda at Playa del Carmen
- 512 suites including 56 swim-up suites
- spas, meeting spaces, 11 restaurants, 10 bars, etc. (partially shared with La Perla at Playa del
Carmen).
La Perla at Playa del Carmen
- 394 suites including 60 swim-up suites
- Paradisus’ adults-only “Royal Service” level of accommodations
- spas, meeting spaces, 11 restaurants, 10 bars, etc. (partially shared with La Esmeralda at
Playa del Carmen)
Our Paradisus Papagayo Bay Resort & Luxury Villas development is intended to replace Paradisus Resorts’
former Paradisus Playa Conchal in Guanacaste, Costa Rica which property was operated by Sol Meliá until
April 30, 2011. Our project is part of Sol Meliá’s master expansion plan, which includes the opening of two
resorts in Playa del Carmen, Mexico in November of 2011. Sol Meliá aims to solidify Paradisus Resorts as
a leader in the luxury all-inclusive market segment with the new properties in Playa del Carman and our
own Paradisus Papagayo Bay Resort & Luxury Villas project.
Additional Concession Properties
On April 20, 2012, SunVesta AG entered into an agreement with Meridian IBG (“Meridian”) to purchase
two additional concession properties in Polo Papagayo, Gunacaste. The additional concession properties
have a total surface of approximately 230,000 square metres, purchased for a total of $22,895,806, on terms
whereby fifty percent was to be paid in cash and the other fifty percent with the transfer of a ten percent
equity interest in La Punta (the concession properties in Polo Papagayo on which the project will be
located) and a five percent equity interest in Paradisus Papagayo Bay Resort & Luxury Villas. The payment
schedule was as follows:
- $0.5 million is required as a cash payment by May 16, 2012
- $5.0 million is required as a cash payment by August 31, 2012
- $5.698 million is required as a cash payment by January 31, 2013
- Equity is required to be transferred upon final payment
On November 13, 2012 the agreement with Meridian 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 to be defined.
Furthermore, all payments by the Company to date and in the future are refundable. Since signing the
agreement, the Company had paid down-payments on the purchase of the additional concession properties
of approximately $1,400,000 as of December 31, 2012.
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
- $1,000,000 on July 31, 2013, which is refundable
- $1,000,000 on August 31, 2013, which is refundable
- $1,500,000 on September 30, 2013, which is refundable
- $1,500,000 on October 31, 2013, which is refundable
- $1,700,000 on November 30, 2013, which is refundable
$8,000,000 in total to Third Party
Original Seller
- $1,000,000 on January 31, 2014
- $1,000,000 on February 28, 2014
- $1,000,000 on March 31, 2014
- $1,000,000 on April 30, 2014
- $1,000,000 on May 31, 2014
- $1,000,000 on June 30, 2014
- $1,000,000 on July 31, 2014
- $1,130,000 on August 31, 2014
$8,130,000 in total to Original Seller
Should SunVesta AG be able to meet the payments due to the third party in advance of the required
payment dates, the new agreement provides for certain discounts against that amount to be paid to Meridian
based on a sliding scale determined as of the full satisfaction date.
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. Subsequent to period end,
February 6, 2013, the $250,000 escrow deposit was released 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. A third amendment and reinstatement agreement was entered into on May 17,
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 July 10, 2013. Should SunVesta AG
close the transaction with Fundus on or before July 10, 2013, those amounts paid on deposit and as
extension fees are to be credited against the purchase price for the hotel and entertainment complex.
Otherwise, said amounts are to be considered earned by Fundus and non-refundable to SunVesta AG.
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 $25 million has been
expended as of December 31, 2012. 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 $75 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, shareholder loans and the
guaranty agreement in place as described herein.
SunVesta AG, our wholly owned subsidiary, is in the process of issuing fixed-income Euro denominated
bonds up to an aggregate amount of € 25,000,000 and fixed income CHF denominated bonds up to an
aggregate amount of CHF 15,000,000 to fund the initial development of the Paradisus Papagayo Bay Resort
& Luxury Villas project.
The Euro bonds are unsecured, have a three year term, bear interest at 8.25% per annum payable each
November 30 over the term due November 30, 2013. SunVesta AG raised $4,618,170 for the year ended
December 31, 2012 and $9,598,537 for the year ended December 31, 2011, for a total of $14,216,707 as of
December 31, 2012, in connection with the Euro bond offering.
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 raised $1,870,466 for the year ended
December 31, 2012 and $3,818,898 for the year ended December 31, 2011, for a total of $5,689,364 as of
December 31, 2012, 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 has the right to
convert its entire loan of CHF 10,000,000 into a 20% holding of the capital of the Company
(instead of Rich Land).
- 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 $7,214,916 against the line of credit for the year ended December 31, 2012 and
$3,192,848 against the line of credit for the year ended December 31, 2011, for a total of $10,407,764 as of
December 31, 2012. SunVesta AG had loaned approximately $24,150,000 against the Aires line of credit as
of the filing date of this report.
Despite surpassing the maximum amount permitted under the line of credit, SunVesta AG and Aires are 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, SunVesta AG entered into a series of interest free short term loans with Dr.
Max Roessler, a board member of SunVesta AG and a principal of Aires. The loans were to be repaid in full
by December 17, 2012, either in cash or in a fixed number of shares in certain publicly traded entities as
follows:
Date
Amount
Shares
Public Entity
June 7, 2012
$1,810,000
10,000
Intershop Holding AG
July 24, 2012
$470,000
10,000
Schindler Holding AG
August 8, 2012
$400,000
Zug Estates Holding AG
The short terms loan were not repaid as December 31, 2012.
Subsequent to the period, on February 5, 2013, SunVesta AG reached an agreement with Dr. Roessler
pursuant to which agreement said short term loans were to be repaid on or before May 30, 2013. The short
term loans were not repaid as of the extended due date and have been since extended by verbal agreement
on undetermined terms. Subsequent to period end, SunVesta AG entered into an additional short term loan
with Dr. Roessler in the amount of $50,000 due on or before July 31, 2013.
Subsequent to period end, 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.
The Company expects that the remaining amounts required to complete the Paradisus Papagayo Bay Resort
& Luxury Villas will be realized from SunVesta AG’s bond offerings, equity placements, related party
loans and, as necessary, the guaranty agreement.
Timeline
Our expected timeline for developing the Paradisus Papagayo Bay Resort & Luxury Villas is as follows:
- complete revisions of architectural plans to incorporate Sol Meliá’s requirements in the 2nd
quarter of 2013
- procure traditional construction loan in the 3rd
quarter of 2013
- receive final building permits in 2nd quarter of 2013
- begin construction in the 2nd quarter 2013 (earth work is in process, foundation work is
planned for the 3rd quarter
- complete construction work in the 4th quarter of 2014
Competition
Three key factors have been taken into consideration when defining our hotel competitors in relation to the
Paradisus Papagayo Bay Resort & Luxury Villas:
- the proximity of competitors to our location in Guanacaste Province, Costa Rica
- the consumption habits of prospective clientele
- the ability to compete based on product similarity in relation to service standards, facilities,
the availability of equipment and the number or variety of services offered.
Based on our criteria we have determined that our prospective competitors are those characterized as 5 star
holiday resorts in geographic proximity to our planned location.
Luxury Hotel Resorts
Our primary competition in Guanacaste Province consists of nine 5-star establishments which include the
Four Seasons Peninsula Papagayo, The Chocolate Hotel & Five Star Hostel, Sol Papagayo Resort Culebra,
Hilton Papagayo Costa Rica Resort & Spa, Casa Conde del Mar Hotel Culebra, Hilton Garden Inn Liberia
Airport, the Westin Hotel, and the J.W. Marriott Guanacaste Resort & Spa. The closest direct competition
for our Guanacaste property will be the Four Seasons Hotel. All of our primary competitive establishments
have common characteristics with a standard vacation resort format with much more equipment and many
more facilities to offer than hotels based in a city such as:
- several modules/ lodging buildings around central services
- ample water areas with outdoor swimming pools, areas for hammocks and sun bathing
- children and entertainment activity areas
- restaurant pool areas with bars and service throughout the day
- large lounges for breakfast, lunch and dinner services
- alternative gastronomic or theme restaurants
- sports areas (basketball court, tennis courts, golf course, soccer field)
- Fitness Center, Wellness Centre and Spa Areas
Our competitors are managed by leading international chains or experienced domestic companies.
Despite what might be construed as obvious obstacles to entry, due to robust competition in the hospitality
sector in Guanacaste Province, we believe that our development of the Paradisus Papagayo Bay Resort &
Luxury Villas will be successful based principally on the following factors:
- the beach front location of the development
- environmental integrity in project development and operation
- the reputation of the Paradisus brand in the region and internationally
Further, we believe that we have certain distinctive competitive advantages over all or many of our
competitors including:
- location in one of the most appealing areas worldwide
- environmental integrity in project development and operation
- superior project development and management agreements that maximize resources and
broaden market penetration
We believe that all of the factors detailed above, in combination with the dedication of our personnel and
partners, will enable us to be competitive in developing the Paradisus Papagayo Bay Resort & Luxury
Villas.
Marketability
Costa Rican Tourism
Costa Rica has a long track record of political stability along with a well-established outward-looking
growth model. The government has adopted a proactive policy of fostering higher-end beach resort tourism,
mainly through fiscal incentives for investors. As such, Costa Rica is benefiting from a burgeoning hotel
development pipeline emerging as a regional hotel investment hot-spot, boasting a burgeoning upscale and
luxury hotel development pipeline which still provides much fertile ground for real estate investors and
developers to expand their search for profitable growth. Foreign tourism investment is projected to continue
this upward trend over the next several years as demand outpaces the existing lodging and tourism services
supply.
Costa Rica stands as the most visited nation in the Central American region. The Costa Rican Tourism
Institute (“TI”) is responsible for collecting information on the number and economic impact of tourists that
visit Costa Rica. TI also collects information related to hotel rooms and the country of origin for tourists
arriving in Costa Rica. Records produced by TI detail that the number of tourists visiting Costa Rica
surpassed 2 million in 2008, and that tourist-related income reached US$2.1 billion that year. Due to the
global economic crisis, TI recorded that international arrivals began to fall beginning in August 2008, as the
number of U.S. citizens visiting the country shrank, which market segment represented 54% of all foreign
tourists visiting Costa Rica. The combined effect of the economic crisis and the 2009 flu pandemic resulted
in reduction of tourist arrivals in 2009 to 1.9 million visitors, an 8 percent reduction as compared to 2008.
However, in 2012 TI determined that the number of visitors rose to a historical record of 2.34 million,
which number represented a 6.9% increase over 2011. The continuing increase in visitors to Costa Rica
over the period indicates a mature demand market attractor with very positive worldwide destination
positioning.
The 2013 Travel and Tourism Competitiveness Index (TTCI), indicates that Costa Rica reached the 47th
place in the world ranking, classified as the second most competitive among Latin American countries after
Mexico, and ranking sixth in the Americas. Just considering the sub index measuring human, cultural, and
natural resources, Costa Rica ranks in the 38th place at a worldwide level, and 7th when considering just the
natural resources criteria. The TTCI report also notes Costa Rica's main weaknesses, limited number of
cultural sites (109th), time required to start a business (130th), poor condition of ground transport
infrastructure (100th), and poor quality of port infrastructure (136th).
TI has determined that the most relevant origin markets in terms of demand are the United States, Canada
and Mexico which generated approximately 48% of all tourists followed by Central American countries
including Guatemala, El Salvador, Panama and Nicaragua, which generated approximately 31% of the
tourists arriving in Costa Rica in 2011. Tourists from European countries represented approximately 14%
all tourists in 2011 led by Spain, Germany, France, Holland and the United Kingdom. Most visitors to Costa
Rica arrive through the airport in San Jose, Costa Rica during three peak seasons from December to
January, March to April and June through August.
Hotel records in Guanacaste, as detailed by TI statistics, evidence that the number of hotels in the 4 to 5 star
category has not increased since 2008 while the number of 4 or 5 star category rooms has increased from
2,728 rooms in 2008 to 3,415 rooms in 2011. The fact that the number of rooms on Guanacaste has
increased even though the number of hotels in our category has remained the same over the past three years
indicates a building demand for new facilities that fall within the 4 to 5 star category and the attendant
additional rooms that new resort construction will bring to the area.
Geography
Costa Rica’s Guanacaste Province is bound in the east by a group of vegetated volcanoes and the west by
beaches on the Pacific Ocean. The province contains heavily forested areas and seven national parks, and
includes the Area de Conservación Guanacaste World Heritage Site. Guanacaste is the northern-most
province of Costa Rica, with the Papagayo Bay a 40-minute flight and one-hour car transfer from the
capital’s airport. Tourism has emerged as the most lucrative revenue source in the province. Tourists to the
Guanacaste Province of Costa Rica are most often motivated by a desire for favorable weather and beach
conditions. Active tourism - those activities including canopying, trekking, visiting volcanoes and flora or
fauna watching - are secondary considerations.
We believe that the Paradisus Papagayo Bay Resort & Luxury Villas will be well positioned to fill that
demand for additional hospitality properties with a project that should be highly marketable.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements and Labor Contracts
The Company currently operates under and holds no patents, trademarks, licenses, franchises, or
concessions other than having registered its “SunVesta” trademark in various countries.
The Company is not subject to any labor contracts.
Governmental and Environmental Regulation
Our operations are subject to a variety of national, federal, provincial and local laws, rules and regulations
relating to, among other things, worker safety and the use, storage, discharge and disposal of
environmentally sensitive materials. We believe that we are in compliance in all material respects with all
laws, rules, regulations and requirements that affect our business. Further, we believe that compliance with
such laws, rules, regulations and requirements do not impose a material impediment on our ability to
conduct business.
Costa Rican National Environmental Office
The Costa Rican National Environmental Office (SETENA) created by the Organic Environmental Law is
tasked with administering the process of reviewing and evaluating environmental impact considerations.
Local municipal governments often require a ruling from SETENA before issuing building permits. Any
larger project in Costa Rica must apply for an Environmental Impact Statement from SETENA before
development is permitted. Delays associated with this process would have a negative impact on the
Company’s project in Guanacaste Province.
Costa Rican Sustainable Development
Costa Rica is considered as being in the forefront of implementing environmental policies. The country’s
national strategies for sustainable development are a broad matrix of policies requiring eco-friendly
practices, such as Agenda 21. The Agenda 21 process as developed by the 1992 and 2002 Earth Summits is
defined as a participative planning tool in which sectors in the government and civil society concertedly
determine the course to be taken by their communities, regions, or countries in pursuit of sustainable
development. This process and other Costa Rican sustainable development policies could delay or increase
the cost of the development of the property.
Climate Change Legislation and Greenhouse Gas Regulation
Many studies over the past couple decades have indicated that emissions of certain gases contribute to
warming of the Earth’s atmosphere. In response to these studies, many nations agreed to limit emissions of
“greenhouse gases” or “GHGs” pursuant to the United Nations Framework Convention on Climate Change,
and the “Kyoto Protocol” to which Costa Rica is a signatory. Greenhouse gas legislation in Costa Rica
could have a material adverse effect on our business, financial condition, and results of operations.
Employees
The Company is a development stage company and currently has four employees. Our management uses
consultants, attorneys, and accountants to assist in the conduct of our business.
ITEM 1A.
ITEM 1A.
RISK FACTORS
Not required of smaller reporting companies.
ITEM 1B.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.
ITEM 2.
PROPERTIES
Costa Rican Properties
The Company owns approximately 20 hectares of undeveloped prime land in Guanacaste Province, Costa
Rica, approximately 12 hectares of which was purchased subsequent to period end. The property is
contiguous and is the site that the Company intends to utilize to build the Paradisus Papagayo Bay Resort &
Luxury Villas. The purchase of the additional 12 hectares was based on an agreement dated March 22, 2010
with DIA S.A. (“DIA”) of San Jose, Costa Rica. The purchase price of $12,700,000 was paid on terms, of
which $8,700,000 had been paid against the purchase price of the property as of December 31, 2012.
Subsequent to period end, on March 8, 2013, the Company concluded the purchase of the 12 hectares from
DIA for a total amount paid of $10,700,000 and an interest free loan in the amount of $2,000,000 due on
March 8, 2014.
DIA is currently in the process of transferring the concession and land, both held by a company called
"Altos del Risco S.A." to SunVesta AG.
On April 20, 2012, SunVesta AG entered into an agreement with Meridian to purchase two additional
concession properties. The additional concession properties have a total surface of approximately 230,000
square meters purchased for a total of $22,895,806, on terms whereby fifty percent was to be paid in cash
and the other fifty percent with the transfer of a ten percent equity interest in La Punta (the concession
properties in Polo Papagayo on which the second project will be located) and a five percent equity interest
in Paradisus Papagayo Bay Resort & Luxury Villas. The Company intends to develop a second hotel on
these grounds once development of the Paradisus Papagayo Bay Resort & Luxury Villas is complete.
The agreement with Meridian was amended on November 13, 2012, to decrease the total cash purchase
price to $17.2 million and to delete the equity component for both La Punta and the Paradisus Papagayo
Bay Resort & Luxury Villas without detailing new terms and conditions for the payment of the reduced
purchase price. SunVesta AG had paid down-payments on the purchase of the additional concession properties of approximately $1,400,000 as of December 31, 2012.
Subsequent to period end, on May 7, 2013, 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 due of $15,830,299. The new agreement includes a payment plan for the remainder due divided
amongst Meridian and a third party. 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
that amount to be paid to the Meridian based on a sliding scale determined as of the full satisfaction date.
Subsequent to the period of this report, the Company obtained all necessary permits for the development of
the Paradisus Papagayo Bay Resort & Luxury Villas.
Executive Offices
We maintain our offices at Seestrasse 97, Oberrieden Switzerland CH-8942. Prior to December 1, 2012, we
leased these premises on a month to month lease from Sportiva AG, an entity for which Josef Mettler, our
chief executive officer, is a shareholder, an officer and a director, for $9,000 per month. On December 1,
2012 we entered into a new lease agreement with an unrelated entity for the same premises for annual rental
expenses of $130,000 per annum through December 31, 2017.
The Company recognized lease expenses of $125,000 and $83,000 for the years ended December 31, 2012
and 2011, respectively, for the use of these executive offices and owed unpaid lease payments of
approximately $10,500 and zero as of December 31, 2012 and 2011, respectively. We believe that we have
sufficient office space for the foreseeable future in order to pursue the completion of the project described
herein.
ITEM 3.
ITEM 3.
LEGAL PROCEEDINGS
None.
ITEM 4.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
ITEM 5.
MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS,
AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s common stock is quoted on the Over the Counter Pink Sheets, a service maintained by
OTC Link under the symbol “SVSA.” Trading in the common stock over-the-counter market has been
limited and sporadic and the quotations set forth below are not necessarily indicative of actual market
conditions. These prices reflect inter-dealer prices without retail mark-up, mark-down, or commission, and
may not necessarily reflect actual transactions. The high and low bid prices for the common stock for each
quarter of the years ended December 31, 2012 and 2011 are as follows:
Year
Quarter Ended
High
Low
December 31
$0.15
$0.01
September 30
$0.20
$0.03
June 30
$0.30
$0.09
March 31
$0.30
$0.03
December 31
$0.31
$0.06
September 30
$0.31
$0.08
June 30
$0.09
$0.08
March 31
$0.20
$0.02
Capital Stock
The following is a summary of the material terms of the Company’s capital stock. This summary is subject
to and qualified by our articles of incorporation and bylaws.
Common Stock
As of December 31, 2012, there were 83 shareholders of record holding a total of 54,092,186 shares of fully
paid and non-assessable common stock of the 200,000,000 shares of common stock, par value $0.01,
authorized. The board of directors believes that the number of beneficial owners is greater than the number
of record holders because a portion of our outstanding common stock is held in broker “street names” for
the benefit of individual investors. The holders of the common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders. Holders of the common stock have no
preemptive rights and no right to convert their common stock into any other securities. There are no
redemption or sinking fund provisions applicable to the common stock.
Preferred Stock
As of December 31, 2012, there were no shares issued and outstanding of the 50,000,000 shares of
preferred stock authorized. The par value of the preferred stock is $0.01 per share. Our preferred stock may
have such rights, preferences and designations and may be issued in such series as determined by the board
of directors.
Stock Options
As of December 31, 2012, we had no outstanding stock options to purchase shares of our common stock.
Dividends
We have not declared any cash dividends since inception and do not anticipate paying any dividends in the
near future. The payment of dividends is within the discretion of the board of directors and will depend on
our earnings, capital requirements, financial condition, and other relevant factors. There are no restrictions
that currently limit our ability to pay dividends on its common stock other than those generally imposed by
applicable state law.
Transfer Agent and Registrar
Our transfer agent and registrar is Standard Register & Company, Inc., located at 12528 South 1840 East,
Draper, Utah 84020 and their phone number is (801) 571-8844.
Purchases of Equity Securities made by the Issuer and Affiliated Purchasers
None.
Recent Sales of Unregistered Securities
On January 1, 2013, the Company authorized the issuance of 3,500,000 shares of restricted common shares,
valued at $0.04 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 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 December 31, 2012, the Company authorized the issuance of 17,949,417 shares of restricted common
shares to Hans Rigendinger in exchange for the settlement of debt of $717,976.71 or $0.04 a share 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 6.
ITEM 6.
SELECTED FINANCIAL DATA
Not required.
ITEM 7.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other
parts of this current report contain forward-looking statements that involve risks and uncertainties.
Forward-looking statements can also be identified by words such as “anticipates,” “expects,” “believes,”
“plans,” “predicts,” and similar terms. Forward-looking statements are not guarantees of future
performance and our actual results may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause such differences include but are not limited to those
discussed in the subsection entitled Forward-Looking Statements and Factors That May Affect Future
Results and Financial Condition below. The following discussion should be read in conjunction with our
financial statements and notes thereto included in this current report. Our fiscal year end is December 31.
Discussion and Analysis
Our plan of operation through November 2014 is to complete the Paradisus Papagayo Bay Resort & Luxury
Villas project that will require a total investment of approximately $180 million, of which approximately
$25 million has been expended as of December 31, 2012. 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 $75 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,
shareholder loans and the guaranty agreement in place as described herein.
Results of Operations
During the year ended December 31, 2012, our operations were focused on (i) amending the terms of an
agreement with DIA to purchase 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) entering into a new replacement agreement with Meridian for the purchase of
purchasing two additional concession properties in Guanacaste Province, Costa Rica for the development
of a secondary hospitality project; (iii) executing an agreement to acquire a hotel and entertainment
property for redevelopment in Atlanta, Georgia, U.S.A. (iv) deliberations with local authorities to obtain
building permits for the development of 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; (vii) revising the management agreement with Sol Meliá to extend the deadline for purchasing the
Paradisus Papagayo Bay Resort & Luxury Villas property; and (viii) converting certain debt to equity.
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 December 31,
2012, the Company had incurred comprehensive losses of $29,867,945.
Comprehensive losses for the year ended December 31, 2012 were $7,339,215 as compared to $10,361,355
for the year ended December 31, 2011. The decrease in comprehensive losses over the comparative twelve
month period periods can primarily be attributed to a decrease in general and administrative expenses to
$4,467,015, from $8,262,540, of which significant components were a decrease in finder’s fees of
$1,531,000, associated with the management contract with Sol Meliá, and a decrease in bonuses paid to
related parties for services rendered of $2,500,000, offset by an increase in investor relations of $161,000,
and an increase in other expenses of $119,000. Other contributing factors to the decrease in comprehensive
losses over the comparative twelve month periods include the decrease in marketing costs to zero from
$148,662, which is associated with the Paradisus Papagayo Bay Resort & Luxury Villas development, the
impairment of property and equipment to zero from $1,311,000, in connection with costs associated with
the original planning for the Papagayo Gulf Tourism project which has since been abandoned in favor of the
Paradisus Papagayo Bay Resort & Luxury Villas, the increase in interest income to $101,086 from zero,
and the increase in the gain on currency exchange difference of $206,821 from a gain of $169,236, offset by
an increase in interest expenses on outstanding debt that rose to $1,511,137 from $447,594, due to maturing
bond and credit line debt obligations, an increase in the amortization of debt issuance costs and
commissions to $428,868 from $375,370, due to amounts associated with debt obligations, an increase in
other expenses to $35,435 from $7,000, the recognition of an income tax obligation of $140,136, due to
potential penalties for the late filing of tax returns with the Internal Revenue Service from zero and the
transition to a loss on foreign currency translation of $1,064,531 from a gain of $21,575, 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 financial
condition and results of operations of our foreign subsidiaries.
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
December 31, 2012, in connection with the purchase of land that includes a hotel concession in Costa Rica
and expects to incur future cash outflows on capital expenditure as discussed in the "Liquidity and Capital
Resources" and the "Going Concern" paragraphs below.
Liquidity and Capital Resources
The Company has been in the development stage since inception and has experienced significant changes in
liquidity, capital resources, and stockholders’ equity.
As of December 31, 2012, we had a working capital deficit of $22,045,029. We had current assets of
$299,758 and total assets of $29,310,158. Our current assets consisted of $260,520 in cash, and $39,238 in
other assets. Our total assets consisted of current assets and property and equipment of $16,799,540, net
debt issuance costs of $1,649,216, down payments for property and equipment of $10,320,144 and other
assets of $241,500.
As of December 31, 2012, we had current liabilities of $22,344,787 and total liabilities of $39,233,967. Our
current liabilities consisted of $827,102 in accounts payable, $3,868,914 in accrued expenses, $3,432,064
in notes payable to related parties and $14,216,707 in Euro bond debt. Our non-current liabilities consisted
of CHF bond debt of $5,689,364, notes payable to related parties of $11,125,741 and pension liabilities of
$74,075. Total stockholders’ deficit in the Company was $9,923,809 at December 31, 2012.
For the period from January 1, 2005 to December 31, 2012, our net cash used in operating activities was
$17,617,927.
Net cash used in operating activities for the twelve months ended December 31, 2012, was $4,648,535 as
compared to $5,955,062 for the twelve months ended December 31, 2011, which differences reflect the
decrease in general and administrative expenses and changes in working capital. Net cash used in operating
activities in the current twelve 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 and changes in other assets, accounts
payable and accrued expenses. Net cash used in operating activities in the prior twelve month period can
also be primarily attributed to general and administrative expenses and changes in other assets, accounts
payable and accrued expenses.
We expect negative 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 December 31, 2012, our net cash used in investing activities was
$28,511,405.
Net cash used in investing activities for the twelve months ended December 31, 2012, was $13,190,950 as
compared to $7,255,350 for the twelve months ended December 31, 2011. Net cash used in investing
activities in the current twelve month period is comprised of receivables from related parties, the purchase
of property and equipment, and down payments for property and equipment offset by short term
investments. Net cash used in investing activities in the prior twelve month period is comprised of short
term investments, receivables from related parties, the purchase of property and equipment, down payments
for property and other non-current assets.
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 December 31, 2012, our net cash provided by financing activities was
$47,047,689. Net cash provided by financing activities for the twelve months ended December 31, 2012,
was $17,603,793 as compared to $13,828,162 for the year ended December 31, 2011. Net cash provided by
financing activities in the current twelve month period is comprised of proceeds from SunVesta AG’s bond
issuance and advances from related parties offset by the repayment of bonds and the payment of debt
issuance costs. Net cash provided by financing activities in the prior twelve month period ended December
31, 2011 was comprised of proceeds from notes payable related parties, and proceeds from bond issuance
offset by the repayment of notes payable to related parties, a note payable and 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
$19,380,000 through its Euro and CHF bond offerings, drawn down approximately $24,150,000 against the
line of credit with Aires, a related party and borrowed on a short term basis $2,780,000 from Dr. Rӧssler, a
related party.
We had no lines of credit or other bank financing arrangements as of December 31, 2012. SunVesta AG has
borrowed $10,497,764 as of December 31, 2012 against a credit line with Aires and approximately
$21,190,000 as of the filing date of this report. Since the amount borrowed from Aires to date is 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 $18,000,000 as of
December 31, 2012, in connection with the development of the Paradisus Papagayo Bay Resort & Luxury
Villas including $4,000,000 to DIA for the purchase of property contiguous to the site, 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. Subsequent to period end, the purchase of the
property contiguous to the site of the Paradisus Papagayo Bay Resort & Luxury Villas was completed and
$2,000,000 of that amount due at December 31, 2012, converted into a $2,000,000 non-interest bearing
promissory note due on March 8, 2014.
The fourth addendum (dated February 5, 2013) to the management agreement with Sol Meliá stipulates
that should the completion of the construction not occur by February 28, 2015, Sol Meliá will be entitled to
terminate the management agreement and to receive a termination amount of $5,000,000, 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 $41,550,000 as of December 31, 2012, including
$15,800,000 to Meridian for the purchase of two additional concession properties in Polo Papagayo,
Guanacaste, Costa Rica and $25,750,000 to Fundus for the purchase of a hotel and entertainment complex
in Atlanta, Georgia, U.S.A. Subsequent to period end, the agreement with Meridian for the purchase of two
additional concession properties was terminated and a new replacement agreement agreed to increase the
total purchase price to $17,500,000 of which $15,830,299 remains to be paid on terms through August 31,
2014. Subsequent to period end, the purchase agreement with Fundus was extended.
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 December 31, 2012.
We have no current plans for significant purchases or sales of plant or equipment, except in connection with
the planned construction of the Paradisus Papagayo Bay Resort & Luxury Villas and discussed above.
We have no current plans to make any changes in the number of our employees as of December 31, 2012.
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 December 31, 2012, we had no significant off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to
stockholders.
Going Concern
The Company intends to build a hotel in the Papagayo Gulf Tourism Project area of Guanacaste, Costa
Rica. The total net investment is estimated to be approximately $180 million.
The project is expected to open in the fourth quarter of 2014. Until the completion of the project, the
following expenditures are estimated to be incurred:
a. Gross project cost
$
195,000,000
b. Less: Proceeds from sale of villas
(24,000,000)
c. Net project cost
171,000,000
d. Overhead expenses
21,000,000
e. Less: Recuperated in gross project cost
(12,000,000)
f Total, excluding other potential projects
$
180,000,000
Sixty percent (60% ) of 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” and the cost of potential “other projects” 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, Mr Josef
Mettler, shareholder, director and chief executive officer.
On July 16, 2012, certain principal shareholders of the Company or principal lenders to the project entered
into a guaranty agreement in favour of SunVesta AG. The purpose of the guarantee is to ensure that until
such time as financing is secured for the entire project that they will act as a guarantor to creditors to the
extent of the project’s ongoing capital requirements. The guaranty agreement requires that within 30 days
of receiving a demand notice, the guarantors are required to pay to SunVesta AG that amount required for
ongoing capital requirements, until such time as financing of the project is secured. The guaranty may not
be terminated until such time as SunVesta AG has secured financing for the completion of the project.
Based on this guaranty agreement, management believes that available funds are sufficient to finance cash
flows for the twelve months subsequent to December 31, 2012 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 elsewhere in this report. We
also wish to advise readers not to place any undue reliance on the forward-looking statements contained in
this report, which reflect our beliefs and expectations only as of the date of this report. We assume no
obligation to update or revise these forward-looking statements to reflect new events or circumstances or
any changes in our beliefs or expectations, other than as required by law.
Recent Accounting Pronouncements
Please see Note 2 to the accompanying consolidated financial statements for recent accounting
pronouncements.
ITEM 7A.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required.
ITEM 8.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our audited financial statements for the years ended December 31, 2012 and 2011 are attached hereto as
through.
SUNVESTA, INC.
(A Development Stage Company)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
Page
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders’ Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
BDO
Tel. +41 44 444 35 55
BDO Visura International AG
Fax +41 44 444 37 66
Fabrikstrasse 50
8031 Zürich
Switzerland
Report of Independent Registered Public Accounting Firm
Board of Directors
SunVesta, Inc. (a Development Stage Company)
Oberrieden, Switzerland
We have audited the accompanying consolidated balance sheets of SunVesta, Inc. (a Development Stage
Company) as of December 31, 2012 and 2011 and the related consolidated statements of comprehensive
loss, stockholders’ equity (deficit), and cash flows for the years ended December 31, 2012 and 2011 and the
period from January 1, 2005 (date of inception of the development stage) to December 31, 2012. These
financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audits. We did not audit the financial statements of
SunVesta, Inc. for the period from inception to December 31, 2010. Such statements are included in the
cumulative inception to December 31, 2012 totals of the statements of comprehensive loss and cash flows
and reflect total revenues and net losses of 0% and 41%, respectively of the related cumulative totals. Those
statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as
it relates to amounts for the period from inception to December 31, 2010, included in the cumulative totals,
is based solely on the report of the other auditors.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audits included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the consolidated financial statements
referred to above present fairly, in all material respects, the financial position of SunVesta, Inc. (a
Development Stage Company) at December 31, 2012 and 2011, and the results of its operations and its cash
flows for the years ended December 31, 2012 and 2011 and the period from January 1, 2005 (date of
inception of the development stage) to December 31, 2012, in conformity with accounting principles
generally accepted in the United States of America.
Zürich, June 28, 2013
BDO Visura International AG
/s/ Andreas Wyss
/s/ Christoph Tschumi
Auditor in Charge
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
SunVesta, Inc. and Subsidiaries
Oberrieden, Switzerland
We have audited the consolidated statements of operations and comprehensive loss, stockholders' equity
(deficit) and cash flows of SunVesta, Inc. and Subsidiaries [a Development Stage Company] for the period
from inception of the development stage on January 1, 2005 through December 31, 2010 (which financial
statements are not presented separately herein). SunVesta, Inc. and Subsidiaries’ management is
responsible for these consolidated financial statements. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. SunVesta, Inc. and
Subsidiaries is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of SunVesta, Inc. and Subsidiaries’ internal control over
financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the results of operations and cash flows of SunVesta, Inc. and Subsidiaries [a Development Stage
Company] for the period from inception of the development stage on January 1, 2005 through December
31, 2010, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming SunVesta, Inc. and Subsidiaries will
continue as a going concern. As discussed in Note 3 to the financial statements, SunVesta, Inc. and
Subsidiaries has incurred losses since its inception and has not yet established profitable operations. These
factors raise substantial doubt about the ability of SunVesta, Inc. and Subsidiaries to continue as a going
concern. Management’s plans in regards to these matters are also described in Note 3. The financial
statements do not include any adjustments that might result from the outcome of these uncertainties.
/s/ PRITCHETT, SILER & HARDY, P.C.
PRITCHETT, SILER & HARDY, P.C.
Salt Lake City, Utah
September 6, 2011
SUNVESTA, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
December 31, 2012
December 31, 2011
Assets
Current assets
Cash and cash equivalents
$
260,520
505,500
Short term investments
-
75,000
Other assets
39,238
7,775
Receivable from related parties
-
443,499
Total current assets
299,758
1,031,774
Non-current assets
Property and equipment - net
16,799,540
11,390,280
Debt issuance costs - net
1,649,216
1,511,759
Down payment for property and equipment
10,320,144
3,100,057
Others
241,500
241,500
Total non-current assets
29,010,400
16,243,596
Total assets
$
29,310,158
17,275,370
Liabilities and stockholders' equity (deficit)
Current liabilities
Accounts payable
827,102
1,401,137
Accrued expenses
3,868,914
2,482,257
Notes payable to related parties
3,432,064
31,928
EUR-Bond
14,216,707
-
Total current liabilities
22,344,787
3,915,322
Non-current liabilities
EUR-Bond
-
9,598,537
CHF-Bond
5,689,364
3,818,898
Notes payable to related parties
11,125,741
3,194,842
Pension liabilities
74,075
50,341
Total non-current liabilities
16,889,180
16,662,618
Total liabilities
$
39,233,967
20,577,940
Stockholders' equity (deficit)
Preferred stock, $0.01 par value; 50,000,000 shares
authorized, no shares issued and outstanding
-
-
Common stock, $0.01 par value; 200,000,000 shares
authorized; 54,092,186 shares issued and outstanding
540,922
540,922
Additional paid-in capital
19,446,367
18,728,391
Accumulated other comprehensive loss
(1,102,408)
(37,877)
Retained earnings prior to development stage
1,602
1,602
Deficit accumulated during the development stage
(28,786,537)
(22,511,853)
Treasury stock, 157,220 and 157,220 shares
(23,755)
(23,755)
Total stockholders' equity (deficit)
(9,923,809)
(3,302,570)
Total liabilities and stockholders' equity (deficit)
$
29,310,158
17,275,370
The accompanying notes are an integral part of these consolidated financial statements.
SUNVESTA, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Years Ended December 31, 2012 and 2011 and Cumulative Amounts
Cumulative
Amounts*
Revenues
Revenues, net
$
-
-
-
Cost of revenues
-
-
-
Gross profit
-
-
-
Operating expenses
General and administrative expenses
4,467,015
8,262,540
21,209,257
Sales and marketing
-
148,662
480,872
Impairment of property and equipment
-
1,311,000
1,311,000
Total operating expenses
(4,467,015)
(9,722,202)
(23,001,129)
Loss from operations
$
(4,467,015)
(9,722,202)
(23,001,129)
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
101,086
-
167,967
Interest expense
(1,511,137)
(447,594)
(2,474,983)
Amortization of debt issuance costs and commissions
(428,868)
(375,370)
(804,238)
Exchange differences
206,821
169,236
376,057
Other income / - expenses
(35,435)
(7,000)
37,099
Total other income / - expenses
(1,667,533)
(660,728)
(5,645,272)
Loss before income taxes
(6,134,548)
(10,382,930)
(28,646,401)
Income Taxes
(140,136)
-
(140,136)
Net loss
(6,274,684)
(10,382,930)
(28,786,537)
Comprehensive loss:
Foreign currency translation
(1,064,531)
21,575
(1,081,408)
Comprehensive loss
$
(7,339,215)
(10,361,355 )
(29,867,945)
Loss per common share
Basic and diluted
$
(0.12)
(0.19)
Weighted average common shares
Basic and diluted
54,092,186
54,092,186
* Cumulative amounts: January 1, 2005 (date of inception of the development stage) to December 31, 2012
The accompanying notes are an integral part of these consolidated financial statements.
SUNVESTA, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
January 1, 2005 (Date of Inception) to December 31, 2012
Common
Additional
Accumulated
Prior
Deficit
Treasury
Total
Stock
Paid in Capital
Other
Earnings
Accumulated
Stock
Stockholders’
Comprehensive
During
Equity (Deficit)
Income (Loss)
Development
Stage
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
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
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)
Stock compensation expense
-
717,976
-
-
-
-
717,976
December 31, 2012
$
540,922 $
19,446,367 $
(1,102,408) $
1,602 $
(28,786,537) $
(23,755) $
(9,923,809)
The accompanying notes are an integral part of these consolidated financial statements.
SUNVESTA, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2012 and 2011 and Cumulative Amounts
Cumulative*
Cash flows from operating activities
Amounts
Net loss
$
(6,274,684)
(10,382,930)
(28,786,537)
Adjustments to reconcile net loss to net cash
Depreciation and amortization
31,350
15,990
320,085
Other income/expenses
(60,700)
-
(60,700)
Impairment of property and equipment
-
1,311,000
1,311,000
Amortization of debt issuance cost and commissions
428 ,867
375,370
811,936
Unrealized exchange differences
(206,821)
(169,236)
(376,057)
Stock compensation expense
717,976
-
825,245
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
Increase in pension fund commitments
23,734
50,341
74,075
- Increase / decrease in:
Other current assets
(41,273)
1,646
(49,877)
Accounts payable
(574,034)
486,717
1,362,919
Accrued expenses
1,307,050
2,356,040
4,131,644
Net cash used in operating activities
(4,648,535)
(5,955,062)
(17,617,927)
Cash flows from investing activities
Proceeds from securities available-for-sale
-
-
1,740,381
Short term investments
75,000
(75,000)
-
Other receivables from related parties
(1,728,835)
(443,499)
(2,172,334)
Purchase of property and equipment
(4,567,028)
(3,395,294)
(17,767,808)
Down payments for property and equipment
(6,970,086)
(3,100,057)
(10,070,143)
Other non-current assets
-
(241,500)
(241,500)
Net cash used in investing activities
(13,190,950)
(7,255,350)
(28,511,405)
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
13,070,429
3,254,160
27,219,721
Repayment of notes payable related parties
-
(778,243)
(778,243)
Advances from third parties
-
-
700,000
Note payable
-
(551,155)
(714,819)
Proceeds from bond issuance, net of commissions
7,085,507
13,528,048
21,422,801
Repayment of bonds
(1,474,823)
-
(1,474,823)
Payment for debt issuance costs
(1,077,320)
(1,624,648)
(3,267,611)
Purchase of treasury stock
-
-
(23,755)
Net cash provided by financing activities
17,603,793
13,828,162
47,047,689
Effect of exchange rate changes
(9,289)
(159,269)
(658,392)
Net increase / - decrease in cash
(244,980)
458,481
259,965
Cash and cash equivalents, beginning of period
505,500
44,018
Cash and cash equivalents, end of period
$
260,520
502,500
260,520
Additional information
Interest paid
832,530
462,000
Income taxes paid
-
-
Assumption of receivables in settlement of related party
payable (non-cash)
2,506,035
-
* Cumulative amounts: January 1, 2005 (date of inception of the development stage) to December 31, 2012
The accompanying notes are an integral part of these consolidated financial statements
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
1.
CORPORATE INFORMATION
In January 2005 (date of inception of development stage), SunVesta, Inc. (SunVesta) 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”.
On August 27, 2007, 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.
These consolidated financial statements are prepared in US Dollars on the basis of generally
accepted accounting principles in the United States of America (US GAAP).
2.
SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include those of SunVesta Inc. and its subsidiaries. 100% of
assets and liabilities as well as revenues and expenses of all consolidated companies are included.
Receivables, payables, as well as revenues and expenses between consolidated companies are
eliminated. Unrealized intercompany profits, which may be included in assets as of the ends of the
periods are eliminated as well.
Use of estimates in the preparation of the consolidated financial statements
The preparation of consolidated financial statements requires management to make assumptions
and estimates, which have an impact on the reported assets and liabilities as well as on the
disclosure of contingent assets and liabilities at the balance sheet dates, as well as on the reported
income statement items. While the effective amounts may vary from the estimates, management is
convinced that all relevant information having an impact on the estimates have been taken into
consideration and are appropriately disclosed. Management is of the opinion that in particular the
valuation of property and equipment and contingent liabilities includes substantial estimates.
Cash and cash equivalents
Cash and cash equivalents include petty cash, post and bank accounts as well as possible time
deposits with maturities of less than three months.
Debt issuance costs
Debt issuance costs arise as a result of issuing non-current debt, i.e. the EUR bonds, CHF bonds
and the loan with Aires International Investments Inc., and are amortized over the life of the debt
using the effective interest method. The costs comprise of finder's fees of generally between 3 and
12 percent of the amount issued and costs incurred in connection with issuing the bonds, such as
legal and accounting fees, stamp duty taxes. The accumulated amortization of debt issuance costs
was $562,657 and $324,582 as of December 31, 2012 and December 31, 2011, respectively.
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
2.
SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Property and equipment
Property and equipment are valued at cost less accumulated depreciation. Repair and maintenance
expenses are charged to the income statement when incurred. The cost of fixed assets, including
leasehold improvements are capitalized and depreciated over the following useful lives:
- Land (concession)
not depreciated
- IT equipment
3 years
- Other equipment and furniture
5 years
- Leasehold improvements
5 years
- Project in process
not depreciated
The cost and the related accumulated depreciation are removed from the balance sheet at the time
of the disposals.
Project in process relates to costs incurred that are directly related to the planning and construction
of the hotel in the Papagayo Gulf Tourism Project of Costa Rica and are reasonably expected to be
recovered from future hotel and rental operations or the sale of certain apartments.
Interest capitalization
Interest expense is capitalized on the carrying value of the construction in progress during the
construction period, in accordance with ASC 835-20 ("capitalization of interest"). With respect to
the construction in progress, the Company capitalized $1,215,000 and $106,000 of interest expense
as of December 31, 2012 and December 31, 2011, respectively.
Long-lived assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable. The carrying value of a
long-lived asset or asset group is considered to be impaired when the undiscounted expected cash
flows from the asset or asset group are less than its carrying amount. In that event, an impairment
loss is recognized to the extent that the carrying value exceeds its fair value. Fair value is
determined based on quoted market prices, where available, or is estimated as the present value of
the expected future cash flows from the asset or asset group discounted at a rate commensurate with
the risk involved.
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
2.
SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Income taxes
The Company has not incurred material current taxes on income as it has not generated taxable
income in any of the jurisdictions it operates in.
Deferred taxes are calculated on the temporary differences that arise between the tax base of an
asset or liability and its carrying value in the balance sheet of the Company prepared for
consolidation purposes, with the exception of temporary differences arising on investments in
foreign subsidiaries where the Company has plans to permanently reinvest profits into the foreign
subsidiaries.
Deferred tax assets on tax loss carry-forwards are only recognized to the extent that it is more likely
than not, that future profits will be available and the tax loss carry-forward can be utilized.
Changes to tax laws or tax rates enacted at the balance sheet date are taken into account in the
determination of the applicable tax rate provided that they are likely to be applicable in the period
when the deferred tax assets or tax liabilities are realized.
The Company is subject to income taxes in a number of countries. Significant judgment is required
in determining income tax provisions and in evaluating tax positions.
The Company recognizes the benefit of uncertain tax positions in the financial statements when it is
more likely than not that the position will be sustained on examination by the tax authorities. The
benefit recognized is the largest amount of tax benefit that is greater than 50 percent likely of being
realized on settlement with the tax authority, assuming full knowledge of the position and all
relevant facts. The Company adjusts its recognition of these uncertain tax benefits in the period in
which new information is available impacting either the recognition of measurement of its
uncertain tax position. Interest and penalties related to uncertain tax positions are recognized as
income tax expense.
Concentration of risks
Financial instruments that potentially subject the Company to concentrations of credit risk are
primarily cash and cash equivalents. Cash and cash equivalents are maintained with several
financial institutions. Deposits held with banks may exceed the amount of insurance provided on
such deposits. Generally, these deposits may be redeemed upon demand. Cash and cash equivalents
are subject to currency exchange rate fluctuations.
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
2.
SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Foreign Currency Translation and Transactions
The consolidated financial statements of the Company are presented in US dollars (“$”) which is
also the functional currency of the parent company. The financial position and results of operations
of our foreign subsidiaries are determined using the currency of the environment in which an entity
primarily generates and expends cash as the functional currency. Assets and liabilities of these
subsidiaries are translated at the exchange rate in effect at each year-end. Statement of
comprehensive loss accounts are translated at the average rate of exchange prevailing during the
year. Translation adjustments arising from the use of differing exchange rates from period to period
are included in accumulated other comprehensive income in stockholders’ equity. Gains and losses
resulting from foreign currency transactions are included in earnings.
Bonds
Bonds comprise of bonds payable in EUR and CHF, which bear fixed interest rates. Bonds are
carried at notional value. If a bond becomes repayable within the next 12 months from the balance
sheet date on, such bond or the corresponding portion of this bond will be categorized as current.
Commissions paid to bondholders themselves are reflected as debt discounts and amortized over
the term of the bond, based on the “effective interest method”.
The amortization expense is reflected in amortization of debt issuance cost and commissions.
Pension Plan
The Company maintains a pension plan covering all employees in Switzerland; it is considered a
defined benefit plan and accounted in accordance with ASC 715 ("compensation - retirement
benefits"). This model allocates pension costs over the service period of employees in the plan. The
underlying principle is that employees render services ratably over this period, and therefore, the
statement of comprehensive loss effects of pensions should follow a similar pattern. ASC 715
requires recognition of the funded status, or difference between the fair value of plan assets and the
projected benefit obligations of the pension plan on the balance sheet, with a corresponding
adjustment to accumulate other comprehensive income. If the projected benefit obligation exceeds
the fair value of plan assets, then that difference or unfunded status represents the pension liability.
The Company records a net periodic pension cost in the statement of comprehensive loss. The
liabilities and annual income or expense of the pension plan is determined using methodologies that
involve several actuarial assumptions, the most significant of which are the discount rate and the
long-term rate of asset return (based on the market-related value of assets). The fair values of plan
assets are determined based on prevailing market prices.
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
2.
SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Related parties
Parties are considered to be related if one party directly or indirectly controls, is controlled by, or is
under common control with the other party, if it has an interest in the other party that gives its
significant influence over the party, if it has joint control over the party, or if it is an associate or a
joint venture. Senior management of the Company or close family members is also deemed to be
related parties.
Earnings per Share
Basic earnings per share are calculated using the Company’s weighted-average outstanding
common shares. When the effects are not anti-dilutive, diluted earnings per share is calculated
using the weighted-average outstanding common shares and the dilutive effect of warrants and
stock options, if any, as determined under the treasury stock method.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, short term investments,
receivables from related parties, accounts payable to third or related parties, note payables to third
or related parties and bonds. The fair value of these financial instruments approximate their
carrying value due to the short maturities of these instruments, unless otherwises explicit noted.
ASC 820 (Fair Value Measurements) establishes a three-tier fair value hierarchy, which prioritizes
the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs
such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active
markets that are either directly or indirectly observable; and Level 3, defined as unobservable
inputs in which little or no market data exists, therefore requiring an entity to develop its own
assumptions.
Stock-based compensation
Stock-based compensation costs are recognized in earnings using the fair-value based method for
all awards granted. Compensation costs for unvested stock options and awards are recognized in
earnings over the requisite service period based on the fair value of those options and awards. For
employees fair value is estimated at the grant date and for non-employees fair value is re-measured
at each reporting date as required by ASC 718, Compensation-Stock Compensation, and ASC
505-50, Equity-Based Payments to Non-Employees . Fair values of awards granted under the share
option plans are estimated using a Black-Scholes option pricing model. The model input
assumptions are determined based on available internal and external data sources. The risk free
rate used in the model is based on the US treasury rate for the expected contractual term. Expected
volatility is based on the Company’s own historical share price volatility.
Reclassifications
Certain prior year financial statement amounts have been reclassified to conform to the 2012
presentation.
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
2.
SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
New accounting standards - adopted
In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update ("ASU") 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve
Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, which
results in a consistent definition of fair value and common requirements for measurement of and
disclosure about fair value between accounting principles generally accepted in the United States
and IFRS. ASU 2011-04 is effective for interim and annual periods beginning after December 15,
2011. The adoption of this standard had no effect on our results of operation or our financial
position. See Note 6 for additional information.
New accounting standards - not yet 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 ASUs 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. This Accounting Standards 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 in financial statements. However, the amendments require
an entity to provide information about the amounts reclassified out of accumulated other
comprehensive income by component. In addition, an entity is required to present, either on the
face of the statement where net income is presented or in the notes, significant amounts reclassified
out of accumulated other comprehensive income by the respective line items of net income but only
if the amount 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 adoption of this ASU is not expected to materially impact the Company’s
consolidated financial statements.
In December 2011, the FASB released ASU 2011-11, Balance Sheet (Topic 210): Disclosures
about Offsetting Assets and Liabilities. ASU 2011-11 requires companies to provide new
disclosures about offsetting and related arrangements for financial instruments and derivatives. The
provisions of ASU 2011−11 are effective for annual reporting periods beginning on or after
January 1, 2013, and are required to be applied retrospectively. When adopted, ASU 2011-11 is not
expected to materially impact the Company's consolidated financial statements.
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
2.
SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
In December 2011, the FASB released ASU 2011-10, Property, Plant and Equipment (Topic 360):
Derecognition of in Substance Real Estate - a Scope Clarification (a consensus of the FASB
Emerging Issues Task Force). ASU 2011-10 clarifies when a parent (reporting entity) ceases to
have a controlling financial interest in a subsidiary that is in substance real estate as a result of
default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance for
Real Estate Sale (Subtopic 360-20). The provisions of ASU 2011-10 are effective for public
companies for fiscal years and interim periods within those years, beginning on or after June 15,
2012. When adopted, ASU 2011−10 is not expected to materially impact the Company's
consolidated financial statements.
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:
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 Roessler, majority shareholder of Aires
International Investment, Inc. (also refer to Note 7), Mr Josef Mettler, shareholder, director and
chief executive officer.
On July 16, 2012, certain principal shareholders of the Company or principal lenders to the project
entered into a guaranty agreement in favour of SunVesta AG. The purpose of the guarantee is to
ensure that until such time as financing is secured for the entire project that they will act as a
guarantor to creditors to the extent of the project’s ongoing capital requirements. The guaranty
agreement requires that within 30 days of receiving a demand notice, the guarantors are required to
pay to SunVesta AG that amount required for ongoing capital requirements, until such time as
financing of the project is secured. The guaranty may not be terminated until such time as SunVesta
AG has secured financing for the completion of the project.
Based on this guaranty agreement, management believes that available funds are sufficient to
finance cash flows for the twelve months subsequent to December 31, 2012 and the filing date,
though future anticipated cash outflows for investing activities will continue to depend on the
availability of financing and can be adjusted as necessary.
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
4.
PROPERTY & EQUIPMENT
December 31, 2012
December 31, 2011
Land
$
7,000,000
7,000,000
IT Equipment
185,846
185,846
Other equipment and furniture
284,901
53,440
Leasehold improvements
66,617
66,617
Construction in-process
9,591,958
4,382,809
Gross
17,129,322
11,688,712
Less accumulated depreciation
(329,782)
(298,432)
Net
$
16,799,540
11,390,280
Depreciation expenses for the year
31,350
15,990
The Company possesses a concession for a piece of land (~84,000 m2), i.e. a right to build a hotel
and apartments in the “Papagayo Gulf Tourism Project”, Guanacaste, Costa Rica, which was
acquired for $7 million and recorded as land in property and equipment.
The 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 no significant change in government policies takes place. The current concession expires in June
2022.
The construction in process amount that was spent up to December 31, 2012 is represented
primarily by architectural work related to the hotel and apartments.
5.
PLEDGES
December 31, 2012
December 31, 2011
Pledge of shares of Rich Land Investments
10%
0%
Ltda. in favor of Zypam Ltd. for Zypam Ltd's
(1 share)
(0 shares)
liabilities
Pledge of shares of Rich Land Investments
20%
0%
Ltda. in favor of Meliá Hotels International
(2 shares)
(0 shares)
for bonds of EUR 2 million
The Company pledged the above shares as part of the bond agreement with Melia and
corresponding contracts in Zypam Ltd. Subsequent to period end the share pledges were released
back to the Company due to the repayment of the bond due to Melia subsequent to year end and
the amendment of the corresponding contracts in Zypam Ltd.
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
6.
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 a 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 December 31, 2012 and December 31, 2011, respectively, there are no financial assets or
liabilities measured on a recurring basis at fair value.
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
6.
FAIR VALUE MEASUREMENT - CONTINUED
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.
- Cash and cash equivalents - carrying amount approximated fair value.
- Short term investments - carrying amount approximated fair value.
- Receivables from related parties (current) - carrying amount approximated fair value
due to the short term nature of the receivables.
- Receivables related parties (non-current) - The fair values of the receivables due from
related parties (non-current) 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 for similar transactions of 3.00%. Hence, the carrying value
approximates fair value.
- Accounts Payable - carrying amount approximated fair value.
- 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 - 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.
- 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
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
6.
FAIR VALUE MEASUREMENT - CONTINUED
The fair value of our financial instruments is presented in the table below:
December 31, 2012
December 31, 2011
Carrying
Carrying
Fair Value
Amount
Fair Value
Amount
Fair Value
Levels
Reference
Cash and cash
equivalents
260,520
260,520
505,500
505,500
None
Short term
investments
-
-
75,000
75,000
None
Receivables from
related parties
-
-
443,499
443,499
Note 8
(current)
Accounts Payable
827,102
827,102
1,401,137
1,401,137
None
Notes payable to
related parties - other
149,328
149,328
31,928
31,928
Note 8
(current)
Notes payable to
related parties - Dr.
2,682,736
2,594,284
-
-
Note 8
M. Roessler (current)
Notes payable to
related parties -
600,000
600,000
-
-
Note 8
Rigendinger (current)
EUR-bond
14,216,707
14,216,707
9,598,537
9,598,537
Note 9
CHF-bond
5,689,364
5,689,364
3,818,898
3,818,898
Note 9
Notes payable to
related parties - Aires
10,407,764
10,407,764
3,192,848
3,192,848
Note 7, 8,
(non-current)
Notes payable to
related parties -
717,977
717,977
-
-
Note 7,8
Rigendinger
(non-current)
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
7.
RECEIVABLES FROM AND NOTES TO RELATED PARTIES
The advances from (to) related parties are composed as follows:
Receivables
Payables
December
December 31,
December 31,
December
31,
31,
Hans Rigendinger
-
53,212
600,000
-
Josef Mettler
-
185,759
-
-
Turan Tokay
-
128,539
-
-
Adrian Oehler
-
-
37,380
31,928
Zypam Ltd
-
39,118
-
-
Sportiva
-
36,872
31,948
-
Aires International
-
-
10,407,764
3,194,842
Dr. Max Roessler
-
-
2,682,736
-
Hans Rigendinger
-
-
717,977
-
Akyinyi Interiors
-
-
80,000
-
Total excluding interest
-
443,499
14,557,805
3,226,770
Accrued interest
-
-
566,093
60,393
Total
-
443,499
15,123,898
3,287,163
of which non-current
-
-
11,125,741
3,192,848
Related party
Capacity
Interest Repayment Security
Rate
Terms
01R Hans Rigendinger
Shareholder and chairman of the SunVesta AG
board
0%
None
None
01P
Hans Rigendinger
Shareholder and chairman of the SunVesta AG
board
0%
None
None
Josef Mettler
Shareholder, chief executive officer, Company
3.00% assumed by Aires
director and SunVesta AG board member
International as per 12/31/12
Turan Tokay
Shareholder
3.00% assumed by Aires
International as per 12/31/12
Adrian Oehler
Shareholder and SunVesta AG board member
0%
None
None
Zypam Ltd
Shareholder and company owned by the
3.00% assumed by Aires
Company's director and chief executive officer
International as per 12/31/12
06R Sportiva
Company owned by the Company's director, and
chief executive officer
0%
None
None
06P
Sportiva
Company owned by the Company's director, and
chief executive officer
0%
None
None
Aires International
*** see hereinafter ***
Dr. Max Roessler
Member of the board of directors of SunVesta AG
*** see hereinafter ***
Hans Rigendinger
Shareholder and chairman of the board of SunVesta
AG
*** see hereinafter ***
10 Akyinyi Interiors
Company owned by a member of the SunVesta
AG’s board of directors wife
0%
01/31/13
None
R = Receivables / P = Payable
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
7.
RECEIVABLES FROM AND NOTES TO RELATED PARTIES - CONTINUED
Loan agreement with 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 SunVesta AG, 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 10% ownership interest in Rich Land was cancelled.
- Once the entire amount of CHF 10,000,000 has been drawn down, Aires has now
the right to convert its entire loan of CHF 10,000,000 into a 20% holding of the
capital of the Company (instead of Rich Land).
- In principle, the loan will become due on September 30, 2015 being the latest date
in time when 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 were met during 2012. The Company has
analyzed the accounting threatment 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 derviative 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 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, 2013 (the date when the loan became
convertible) and December 31, 2012 the fair value of the conversion feature was immaterial.
As of the date of this report the Company has borrowed CHF 19.39 million (approximately $21.19
million) from Aires.
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
7.
RECEIVABLES FROM AND NOTES 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 December 17, 2012, 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 deliverly of 10,000 shares of Intershop Holding AG, a publicaly 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 December 31,
2012, 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 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 December 17, 2012, 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 deliverly of 10,000 shares of Schindler Holding AG, a publicaly 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
December 31, 2012 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 December 17, 2012, or on demandwithin 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 deliverly of 700 shares of Zug Estates Holding AG, a
publicaly 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 December 31, 2012, the Company would have recognized a gain. The Company has
not recorded such gain and the fair value of the loan approximates the carrying value of the loan.
Therefore the fair value of the loan approximates the carrying value of the loan.
On December 17, 2012, the Company was unable to repay these short term loans as originally
stipulated. Therefore the Company entered into an agreement with Mr. Roessler subsequent to year
end. Refer to Note 21.
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
8.
RELATED PARTY TRANSACTIONS
Debt Settlement Agreements
On December 31, 2012 the Company concluded a debt settlement agreement with Mr. Hans
Rigendinger, who was appointed as chief operating officer as of February 4, 2013. 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 of its common stock ($0.01 par value) at a
conversion price of $0.04 to Mr Rigendinger for the purposes of this debt settlement
agreement.
- The difference between carrying value of this debt and the fair value of the common
stock issued amounted to $717,976. This difference has been recorded as stock
compensation expense in general and administrative expense in the year ended
December 31, 2012.
- To determine the fair value of the common stock issued the quoted market price as
per December 31, 2012 has been used.
- The shares have not been formally issued as per December 31, 2012 and therefore
the note payable was not derecognized as of December 31, 2012. The derecognition
of the note payable will be recorded upon issuance of the shares.
Receivables from related parties
On December 31, 2012 the Company has entered into an agreement with Aires International Ltd
under which Aires International Ltd assumed certain of the Company's receivables from related
parties.. The fair values of these receivables have been the corresponding carrying values on
December 31, 2012. Therefore, Aires International Ltd. assumed all these receivables based on
their carrying values as per settlement date.
Consequently this transaction reduced the debt of the Company due to Aires International Ltd. in
the amount of the carrying values of these receivables. The total amount of these receivables
assumed by Aires International Ltd. amounted to $2,506,035.
This transaction constitutes a non-cash transaction.
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
9.
BONDS
SunVesta AG has two bonds 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 Swiss law Bond in accordance with Swiss law
Approval by SunVesta AG BOD May 12, 2010
June 3, 2011
Volume:
Up to € 25,000,000
Up to CHF 15,000,000
Units:
€1,000
CHF 50,000
Offering period:
11/10/2010 - 04/30/2011
09/01/2011 - 02/28/2012
Due date:
November 30, 2013
August 31, 2015
Issuance price:
100 %
100%
Issuance day::
December 1, 2010
September 1, 2011
Interest rate:
8.25% p.a.
7.25% p.a.
Interest due dates:
November 30 of each year,
August 31 of each year,
the first time November 30, 2011
the first time August 31, 2012
Applicable law:
Swiss
Swiss
The nominal amounts have changed as follows:
EUR-Bond
CHF Bond
EUR-Bond
CHF Bond
USD
USD
USD
USD
Balances January 1
9,598,537
3,818,898
265,273
-
Cash inflows
4,015,549
3,191,888
9,883,151
4,188,870
Cash outflows
-
1,474,823
-
-
Foreign currency adjustments
692,295
463,849
(360,179)
(91,382)
Sub-total (Fair value)
14,306,380
5,999,813
9,788,245
4,097,488
Commissions paid to bondholders
(248,195)
(417,709)
(248,195)
(295,778)
Amortization of such commissions
158,522
107,260
58,487
17,188
Balance December 31 (Carrying value)
14,216,707
5,689,364
9,598,537
3,818,898
Should the refinancing of the EUR bonds not be completed by November 30, 2013, certain
principal shareholders of the Company or principal lenders to the project would provide bridge
financing according to the guaranty agreement (see Note 3).
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
10.
INCOME TAXES
The components of loss before income taxes are as follows:
December 31, 2012
December 31, 2011
Domestic
(682,801)
(947,625)
Foreign
(5,451,747)
(9,435,305)
Loss before income tax
(6,134,548)
(10,382,930)
Income taxes relating to the Company’s operations are as follows:
December 31, 2012
December 31, 2011
Current income taxes
US Federal, state and local
140,000
-
Foreign
-
-
Deferred income taxes
US Federal, state and local
-
-
Foreign
-
Income tax expense/recovery
140,136
-
Income taxes at the United States federal statutory rate compared to the Company’s income tax
expenses as reported are as follows:
December 31, 2012
December 31, 2011
Net loss before income tax
(6,134,548)
(10,328,930)
Statutory rate
35%
35%
Expected income tax recovery
(2,147,092)
(3,615,126)
Impact on income tax expense/recovery from
Change in valuation allowance
2,055,991
2,418,573
Different tax rates in foreign jurisdictions
378,674
1,113,622
Expiration of unused tax loss carry forwards
-
295,621
Permanent differences
(141,903)
-
Tax penalty US Federal, state and local
140,000
-
Others
(145,534)
(212,692)
Income tax expense
140,136
-
The Company’s deferred tax assets and liabilities consist of the following:
December 31, 2012
December 31, 2011
Deferred tax assets
Tax loss carry forward
8,774,564
(6,718,573)
Valuation allowance
(8,774,564)
(6,718,573)
Deferred tax assets/liabilities
-
-
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
10.
INCOME TAXES - CONTINUED
The Company assesses the recoverability of its deferred tax assets and, to the extent recoverability
does not satisfy the “more likely than not” recognition criterion under ASC740, records a valuation
allowance against its deferred tax assets. The Company considered its recent operating results and
anticipated future taxable income in assessing the need for its valuation allowance.
As of April 2, 2012 the Company was advised by the Internal Revenue Services (IRS) of aggregate
penalties amounting to $140,000. This penalty concerns failures to file certain tax returns for the
years ended 2008, 2009 and 2010. Depsite of an ongoing appeal process the Company changed its
assessment during the year ended December 31, 2012 and determinded that it is more likey than not
that it will have to pay the penalty. Therefore the Company recorded $140,0000 in income tax
expense.
As of December 31, 2012 and 2011, there were no known uncertain tax positions with the
exception of the above mentioned potential tax penalty. We have not identified any tax positions
for which it is reasonably possible that a significant change will occur during the next 12 months.
The Company’s operating loss carry forward of all jurisdictions expire according to the following
schedule:
Domestic
Foreign
-
3,866,686
-
1,382,317
-
21,851
-
718,662
-
603,213
-
4,812,589
-
6,802,936
Beyond 2019
12,064,285
-
Total operating loss carry forwards
$
12,064,285
18,208,254
The following tax years remain subject to examination:
United States of America
Switzerland
Costa Rica*
YES
NO
N/A
YES
YES
N/A
YES
YES
N/A
YES
YES
N/A
YES
YES
YES
* The Costa Rican company Rich Land Investments Ltda is taxable only once it commences
operations, which operations commenced in 2012.
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
11.
PENSION PLAN
The Company maintains a pension plan covering all employees in Switzerland; it is considered a
defined benefit plan and accounted in accordance with ASC 715 ("compensation - retirement
benefits"). This model allocates pension costs over the service period of employees in the plan. The
underlying principle is that employees render services ratably over this period, and therefore, the
income statement effects of pensions should follow a similar pattern. ASC 715 requires
recognition of the funded status, or difference between the fair value of plan assets and the
projected benefit obligations of the pension plan on the balance sheet, with a corresponding
adjustment to accumulated other comprehensive income. If the projected benefit obligation
exceeds the fair value of plan assets, then that difference or unfunded status represents the pension
liability.
The Company records a net periodic pension cost in the statement of comprehensive loss. The
liabilities and annual income or expense of the pension plan is determined using methodologies that
involve several actuarial assumptions, the most significant of which are the discount rate and the
long-term rate of asset return (based on the market-related value of assets). The fair values of plan
assets are determined based on prevailing market prices.
Net periodic pension cost has been included in the Company’s results as follows:
Projected Benefit Obligations beginning of year $
209,238
122,073
Service cost - current
107,178
101,533
Interest expense
5,353
3,086
Benefit payments and transfers
(43,702)
(17,774)
Actuarial gains/losses
(44,576)
Currency translation losses
5,555
-
Projected Benefit Obligations end of year
$
239,046
209,238
Fair Asset Values beginning of year
$
158,897
93,550
Expected returns
4,915
2,767
Contributions paid
41,515
81,312
Benefits paid and transfers
(43,702)
(17,774)
Actuarial gains/losses
(874)
(958)
Currency translation losses
4,222
-
Fair Asset Value of assets end of year
$
164,970
158,897
Net liabilities
$
(74,075)
(50,341)
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
11.
PENSION PLAN - CONTINUED
The following were the primary assumptions:
December 31, 2012
December 31, 2011
Assumptions at year end
Discount rate
2.00%
2.50%
Expected rate of return on plan assets
3.00%
3.00%
Future salary increases
1.50%
1.50%
Future pension increases
0.00%
0.00%
Future benefits, to the extent that they are based on compensation, include salary increases, as
presented above, consistent with past experiences and estimates of future increases in the Swiss
labor market.
Net periodic pension costs have been included in the Company’s results as follows:
December 31, 2012
December 31, 2011
Pension expense
Current service cost
$
107,178
101,533
Interest cost
5,353
3,086
Expected return on assets
(4,915)
(2,767)
Employee contributions
(20,758)
(40,656)
Net periodic pension cost
$
86,858
61,196
During the twelve-month periods ended December 31, 2012 and December 31, 2011 the Company
made cash contributions of $38,000 and $40,000, 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 $22,185.
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
12.
AGREEMENT TO PURCHASE A NEIGHBORING PIECE OF LAND
In 2010 SunVesta AG concluded 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 is $12.7 million. Upon payment of the entire amount, ownership of DIA
will be transferred to the Company. As at December 31, 2012 and December 31, 2011, $8.7 million
and $3.1 has been paid, respectively.
The sixth addendum dated November 12, 2012, stipulates that:
- $8.7 million has been paid
- $4.0 million has still to be paid
The current contractual situation does not call for any penalties.
The purchase of the neighboring piece of land was completed during the 1st quarter of 2013. As
part of the completion of the purchase, the parties agreed that the remaining part of the purchase
price of $2,000,000be converted into a non interest bearing and uncollateralized loan payable
which is due for payment on March 8, 2014.
13.
FUTURE LEASE COMMITMENTS
On December 1, 2012, the Company entered into a new lease agreement for the premises for its
Swiss office with an unrelated entity. The annual rental expense amounts to approximately
$130,000 on a fixed term expiring on December 31, 2017.
14.
WINGFIELD CORPORATION INC.
On August 31, 2009 the Company concluded a development agreement with WingField
Corporation Inc. (“WingField”), which included various services to be provided by WingField. A
major item was the procurement of a management contract for the management of the planned
resort in Guanacaste, Costa Rica. The management agreement with Meliá Hotel International, S.A.
in the first quarter of 2011 satisfied this item. The Company has since decided to build up its own
internal project organisation and consequently reached an agreement with Wingfield in October
2011 to terminate the development agreement by paying a flat remuneration of $2,500,000,
including a “finders fee” which is recorded in general and administrative expense in the year ended
December 31, 2011.
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
15.
MANGEMENT AGREEMENT WITH MELIÁ 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 have been paid.
Therefore the 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.
Regarding the current situation subsequent to December 31, 2012 refer to Note 21 (Subsequent
Events).
16.
SEGMENT INFORMATION
The chief operating decision maker (“CODM”) is the Company CEO. Neither the CODM nor the
Directors receive disaggregated financial information about the locations in which project
development is occurring. Therefore, the Company considers that it has only one reporting
segment.
The following table presents the Company’s tangible fixed assets by geographic region:
December 31, 2012
December 31, 2011
Location of tangible assets
Switzerland
$
207,582
7,471
Costa Rica
16,591,958
11,382,809
Total
$
16,799,540
11,390,280
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
17.
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 December 31, 2012 which is included in down
payment for property and equipment.
Subsequent to the balance sheet date December 31, 2012 the Company entered into a new, revised
agreement regarding Polo Papagayo, Guanacaste (refer to Note 21).
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
18.
OPENING DATE “Paradisius Papagayo Bay Resort & Luxury Villas”
During the 3rd Quarter 2012, the Company postponed the opening date for Papagayo Gulf Tourism
Project of Costa Rica, which is now scheduled for winter 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.
19.
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 and is confident that it will be able to procure such financing.
Notwithstanding of all other factors, the Company may terminate this agreement within a due
dilligence period, if it is not satisfied with the property after an examination of the assets. The
agreement includes a non-refundable deposit of $250,000 as of December 31, 2012.
Regarding current situation subsequent to balance sheet date refer to Note 21.
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
20.
EARNINGS PER SHARE
Basic earnings per share are the result of dividing the Company’s net income (or net loss) by the
weighted average number of shares outstanding for the contemplated period. Diluted earnings per
share are calculated applying the treasury stock method. When there is a net income dilutive effect
all stock-based compensation awards or participating financial instruments are considered. When
the Company posts a loss, 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
Year Ended
December 31, 2012
December 31, 2011
Company posted
Net loss
Net loss
Basic weighted average shares outstanding
54,092,186
54,092,186
Dilutive effect of common stock equivalents
None
None
Dilutive weighted average shares outstanding
54,092,186
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.
Stock Equivalents
Year Ended
December 31, 2012
December 31, 2011
Conversion feature loan to Aires International
13,523,047
None
AG
Shares to be issued to Mr. Rigendinger in
17,949,417
None
connection with the debt settlement agreement
Total
31,472,464
None
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
21.
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:
Advisory Services Agreements
In order to raise the necessary funds for the completion of the project, various advisory service
agreements have been concluded, both in Europe as well as Central America. In addition, a
European rating agency has been engaged in order to receive a rating. While the basic cost for the
advisory services are not significant, the actual funding will be accompanied by costs (finders’
fees).
Hotel Project Atlanta
The Company has not been able to complete a financing package for this project but has concluded
a new agreement to extend the terms of the purchase agreement. Should the Company conclude the
transaction on or before July 10, 2013 those amounts paid on deposit and for extensions will be
credited to the purchase price. Otherwise, the Company will lose non-refundable deposits of
$750,000 of which $250,000 was paid in the year ended December 31, 2012 and $500,000
subsequent to year end.
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 ($11.53 million) has been realized by the Company
from the initial date up to the date of this filing.
Since December 31, 2012 the Company has repaid EUR 2.0 million ($2.44 million) in Euro bonds.
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 5.55 million ($5.85 million) has been realized by the Company from
the initial date up to the date of this filing.
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
21.
SUBSEQUENT EVENTS - CONTINUED
Management Agreement with Sol Meliá Hotels & Resorts
On February 5, 2013, the Company extended the deadline to complete the purchase of the property
described in Note 12, 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 will be
eliminated as of March 9, 2013. Therefore, the Company will recognize a gain related to this
transaction in the 1st Quarter 2013.
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 December 31, 2012.
As of June 28, 2013 the Company has borrowed CHF 22.10 million (approximately $24.15 million).
Loans Dr. Max Roessler
As described in Note 7, the Company entered into various short term loan agreements with Dr. Max
Roessler that have not been repaid as originally stipulated on or before December 17, 2012.
Therefore the Company agreed with Mr. Roessler on February 5, 2013, that all of these short term
loans will be repayable on or before May 30, 2013.
Additionally to mentioned short term loan agreements in Note 7, the Company entered into one
additional short term loan agreement with Dr. Max Roessler in the amount of approximately
$50,000, which will be repayable on or before July 31, 2013.
Intention to purchase two additional concession properties at Polo Papagayo, Guanacaste
On May 7, 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
17) has been cancelled and replaced by a new contract which includes the following clauses:
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
21.
SUBSEQUENT EVENTS - CONTINUED
Intention to purchase two additional concession properties at Polo Papagayo, Guanacaste
On May 7, 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
17) has been cancelled and replaced by a new contract which includes the following clauses:
- The Company has paid approximately $1,669,701 as of May 7, 2013
- All down-payments do not bear any interest
- The title on two concessions will be transferred after all payments have been made.
- The total purchase price is $17,500,000 and the remaining balance as of May 7, 2013 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 7, 2013 and is non-refundable
- $1,000,000 on June 30, 2013, which is refundable
- $1,000,000 on July 31, 2013, which is refundable
- $1,000,000 on August 31, 2013, which is refundable
- $1,500,000 on September 30, 2013, which is refundable
- $1,500,000 on October 31, 2013, which is refundable
- $1,700,000 on November 30, 2013, which is refundable
$8,000,000 in total to Third Party
Original Seller
- $1,000,000 on January 31, 2014
- $1,000,000 on February 28, 2014
- $1,000,000 on March 31, 2014
- $1,000,000 on April 30, 2014
- $1,000,000 on May 31, 2014
- $1,000,000 on June 30, 2014
- $1,000,000 on July 31, 2014
- $1,130,000 on August 31, 2014
$8, 130,000 in total to Original Seller
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
21.
SUBSEQUENT EVENTS - CONTINUED
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
Issuances of securities
On January 1, 2013, the Company authorized the issuance of 3,500,000 shares of restricted
common shares, valued at $0.04 a share, and granted 10,000,000 stock options from the SunVesta,
Inc. 2013 Stock Option Plan, with an exercise price of $0.05 a share, 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.
On December 31, 2012, the Company authorized the issuance of 17,949,417 shares of restricted
common shares to Hans Rigendinger in exchange for the settlement of debt of $717,976.71 or
$0.04 a share. The shares were issued to Mr. Rigendinger subsequent to year end.
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and 2011
22.
UNAUDITED QUARTERLY FINANCIAL DATA
During the year ended December 31, 2012 the Company determined that the interest capitalized
was understated in the quarters ended March 31, 2012, June 30, 2012 and September 30, 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 concluded that the impact of the error of $128,000 is not material to the year ended
December 31, 2011 and therefore did not restate the comparative numbers in this form 10-K.
Management also concluded that the impact of the error is not material to the previously filed
quarterly reports for the quarters ended March 31, 2012, June 30, 2012 and September 30, 2012 and
therefore does not plan to file amendments to the previously filed quarterly reports on Form 10-Q
for those periods. Instead the comparatives for the quarterly reports filed for the quarters ended
March 31, 2013, June 30, 2013 and September 30, 2013 will be updated to reflect the effect of this
error. The table below summarizes the impact of the restatement, which will be reported when the
relevant quarterly report is filed in 2013. Please note that the impact from the year ended December
31, 2011 is included in the quarter ended March 31, 2012.
Quarter to date
Year to date
as reported
as restated
as reported
as restated
Period ended March 31
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)
Period ended June 30
Property and equipment, net
$13,435,782
$13,793,782
Shareholders' equity (deficit)
$(6,422,892)
$(6,064,892)
Total assets
$25,086,039
$25,444,039
Amortization of debt issuance
$(268,747)
$(140,747)
$(498,035)
$(140,035)
costs and commissions
Net loss
$(2,201,233)
$(2,073,233)
$(3,535,758)
$(3,177,758)
Basic and diluted loss per share
$(0.04)
$(0.04)
$(0.07)
$(0.06)
Period ended September 30
Property and equipment, net
$14,200,751
$14,699,751
Shareholders' equity (deficit)
$(8,366,250)
$(7,867,250)
Total assets
$26,417,764
$26,916,764
Amortization of debt issuance
$(291,894)
$(150,894)
$(789,929)
$(290,929)
costs and commissions
Net loss
$(1,435,919)
$(1,294,919)
$(4,971,677)
$(4,472,677)
Basic and diluted loss per share
$(0.03)
$(0.02)
$(0.09)
$(0.08)
ITEM 9.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Officers and Directors
The following table sets forth the name, age and position of the director and executive officers of the
Company:
Name
Age
Year
Positions Held
Appointed
Josef Mettler
CEO, CFO, PAO and Director
Hans Rigendinger
COO and Director
Josef Mettler was appointed chief executive officer, chief financial officer, principal accounting officer,
and director on September 16, 2008.
Mr. Mettler also serves as a director of SunVesta AG, a wholly owned subsidiary of the Company.
Business Experience
From 1995 until 2005 Mr. Mettler was co-owner and managing director of BonneVille Group AG, a Swiss
company specializing in information technology services. Mr. Mettler was responsible for marketing,
business development, and IT project management. While at BonneVille he co-founded OpenLimit
Holding AG, a Swiss IT company specializing in encryption and digital signature technologies. Between
2005 and 2007 Mr. Mettler formed SunVesta AG and developed the SunVesta business model. In 2008 Mr.
Mettler launched QuadEquity SPC, a private equity hedge fund.
Officer and Director Responsibilities and Qualifications
Mr. Mettler is responsible for the overall management of the Company and is involved in many of its
day-to-day operations, finance and administration.
Mr. Mettler earned a BA in Economics from OEKREAL Business & Management School, Zurich
(Switzerland). He also graduated as a Business Data Processing Specialist.
Other Public Company Directorships in the Last Five Years
None.
Hans Rigendinger was appointed as chief operating officer and as a director on January 1, 2013.
Mr. Rigendinger also serves as a director of SunVesta AG, a wholly owned subsidiary of the Company.
Business Experience
Since early 1972 to present, Mr. Rigendinger has led his own engineering firm in the planning and
implementation of a variety of commercial projects employing a staff of up to 40 employees. Over this time
span Mr. Rigendinger and his company have been responsible for the planning and implementation of over
300 bridge structures, approximately 500 buildings and a few dozen large industrial plants. Since 1995, Mr.
Rigendinger has been involved in several real estate projects that have included commercial, residential and
tourist properties. He has also spent the last 15 years supporting the development and expansion of an
industrial waste glass recycling company. Mr. Rigendinger has been actively involved in the development
of SunVesta AG since 2007.
Officer and Director Responsibilities and Qualifications
Mr. Rigendinger’s knowledge, experience and solid know-how in the field of civil engineering and real
estate is extremely valuable to the Company’s operations as it moves forward with the development of the
Paradisus Papagayo Bay Resort & Luxury Villas.
Mr. Rigendinger earned a Masters Degree in Civil Engineering, with an emphasis on supporting structures
and foundations (Civil and Structural Engineering) at the Swiss Federal Institute of Technology in 1969.
Other Public Company Directorships in the Last Five Years
None.
Family Relationships
Not applicable as we have only individual serving as an officer and director.
Involvement in Certain Legal Proceedings
During the past ten years there are no events that occurred related to an involvement in legal proceedings
that are material to an evaluation of the ability or integrity of the Company’s directors, or persons
nominated to become directors or executive officers.
Term of Office
Our directors were appointed for a one (1) year term to hold office until the next annual meeting of our
shareholders or until removed from office in accordance with our bylaws. Our officers were appointed by
our board of directors and will hold office until removed by the board.
No other persons are expected to make any significant contributions to the Company’s executive decisions
who are not executive officers or directors of the Company.
Compliance with Section 16(A) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires officers and directors and persons who own
more than ten percent of a registered class of our equity securities to file reports of ownership and changes
in their ownership with the Commission, and forward copies of such filings to us. Based solely upon a
review of Forms 3, 4 and 5 furnished to us, we are not aware of any persons who, during the period ended
December 31, 2012 failed to file, on a timely basis, reports required by Section 16(a) of the Exchange Act.
Code of Ethics
We have adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-K of the Securities
Exchange Act of 1934 that applies to directors and senior officers, such as the principal executive officer,
principal financial officer, controller, and persons performing similar functions. The Company has
incorporated a copy of its Code of Ethics as Exhibit 14 to this Form 10-K. Further, our Code of Ethics is
available in print, at no charge, to any security holder who requests such information by contacting us.
Board of Directors Committees
The board of directors has not established an audit committee. An audit committee typically reviews, acts
on and reports to the board of directors with respect to various auditing and accounting matters, including
the recommendations and performance of independent auditors, the scope of the annual audits, fees to be
paid to the independent auditors, and internal accounting and financial control policies and procedures.
Certain stock exchanges currently require companies to adopt a formal written charter that establishes an
audit committee that specifies the scope of an audit committee’s responsibilities and the means by which it
carries out those responsibilities. In order to be listed on any of these exchanges, the Company will be
required to establish an audit committee. The board of directors has not established a compensation
committee.
Director Compensation
Our directors are currently not reimbursed for out-of-pocket costs incurred in attending meetings and are
not compensated for services as a director of the Company though compensation is paid in certain instances
to directors of our subsidiary companies. The Company has compensated directors in the past and may
adopt additional provisions for compensating directors for their services in the future.
ITEM 11.
ITEM 11.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Our chief executive officer has an employment agreement with our wholly owned subsidiary SunVesta
Projects & Management AG pursuant to which he receives a salary, and entitles him to a bonus for his
service to the Company in addition to certain benefits including per diem allowances, car allowances,
housing allowances, and representation allowances in addition to a fee for serving on its board of directors.
The employment contract was entered into as of January 1, 2011 and has no fixed term being mutually
cancellable by either party with notice periods that range from 2 to 6 months, depending on the length of
service. The compensation package is deemed appropriate for our sole executive officer and was
determined in accordance with compensatory packages similar to other development stage companies.
While we have determined that our current approach to compensation is appropriate at this time, we expect
to expand our compensation program at some future time to include participation in a stock option plan as
the Company realizes its objectives.
For the year ended December 31, 2012 $500,000 was paid to our chief executive officer of which $390,000
was in salary, $39,000 was in housing benefits in Costa Rica, $20,000 was a per diem amount for out of
pocket expenses, $39,000 was for car allowances and $12,000 was for serving on the board of directors of
SunVesta AG and SunVesta Projects & Management AG as compared to $2,360,000 for the year ended
December 31, 2011, which amount included a $1,900,000 bonus paid to a Zypam Ltd., a related company.
The decrease in 2012 annual compensation can be attributed to an extraordinary bonus of $1,900,000 that
was paid to Zypam Ltd., a company owned by Mr. Mettler, by SunVesta AG as part of his compensation
package for the year ended 2011. The bonus payment was authorized by the SunVesta AG board of
directors and paid to Zypam Ltd. for services rendered in maintaining the Company through a difficult
period and assisting with the transition of its business plan to secure Sol Mélia Hotel to manage the
Paradisus Papagayo Bay Resort & Luxury Villas on completion. The level of compensation paid to Mr.
Mettler in 2010 was limited, in part, by the availability of funds to properly compensate him and relied upon
his vested interest as a shareholder.
The following table provides summary information for the years ended December 31, 2012 and 2011
concerning cash and non-cash compensation paid or accrued by the Company to or on behalf of (i) the chief
executive officer and (ii) any other employee to receive compensation in excess of $100,000:
Executive Summary Compensation Table
Name and
Year
Salary
Bonus
Stock
Option
Non-Equity
Change in
All Other
Total
Principal
($)
($)
Awards Awards
Incentive Plan
Pension Value
Compensation
($)
Position
($)
($)
Compensation
and Nonqualified
($)
($)
Deferred
Compensation
($)
Josef
390,000
-
-
-
-
-
110,000
500,000
Mettler
400,000
1,900,000*
-
-
-
-
60,000 2,360,000
CEO, CFO,
PAO
* Paid to Zypam Ltd, a company owned by Mr. Mettler
We have no outstanding option or stock award plans as of December 31, 2012.
We have no agreement that provides for payments to our chief executive officer at, following, or in
connection with the resignation, retirement or other termination, or a change in control of the Company or a
change in our executive officer's responsibilities following a change in control.
We have no plans that provide for the payment of retirement benefits, or benefits that will be paid primarily
following retirement except that we do maintain a pension plan covering all employees in Switzerland. Our
model allocates pension costs over the service period of employees in the plan.
The following table provides summary information for the year ended December 31, 2012 concerning cash
and non-cash compensation paid or accrued by the Company to or on behalf of its directors.
Director Summary Compensation Table
Name
Fees earned or
Stock
Option
Non-equity
Nonqualified
All other
Total
paid in cash
awards
Awards
incentive plan
deferred
compensation
($)
($)
($)
($)
compensation
compensation
($)
($)
($)
Josef Mettler
-
-
-
-
-
-
-
Subsequent to period end, on January 1, 2013, the Company entered into an employment agreement with
Mr. Rigendinger in connection with his appointment as chief operating officer for an initial three year term
and his appointment to the Company’s board of directors. The compensatory terms of the employment
agreement include a signing bonus payable in shares, a base salary, a retention bonus payable in shares per
annum and the grant of stock options that vest according to the achievement of certain milestones
anticipated over the term of the employment agreement.
ITEM 12.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information concerning the ownership of the Company’s 75,541,603
shares of common stock issued and outstanding as of June 28, 2013 with respect to: (i) all directors; (ii)
each person known by us to be the beneficial owner of more than five percent of our common stock; and
(iii) our directors and executive officers as a group.
Names and Addresses of Managers
and Beneficial Owners
Title of Class
Number of
Percent of
Shares
Class
Joseph Mettler
CEO, CFO, PAO and Director
97 Seestrasse, CH-8942
Common
3,191,514***
4.2%
Oberrieden, Switzerland
Hans Rigendinger*
COO and Director
Hartbertstrasse 11, CH-7000
Common
21,459,417
25.1%
Chur, Switzerland
Officer and directors (2) as a group
Common
24,650,931
32.6%
Zypam Ltd.**
Jasmin Court 35A, Regent Street
Common
2,418,180
3.2%
P.O. Box 1777, Belize City, Belize
*
Hans Rigendinger was appointed to our board of directors on January 1, 2013. Mr. Rigendinger in addition to his stock
equity position holds 10,000,000 unvested stock options to purchase the Company’s common stock with an exercise price
of $0.05 subject to vesting based on certain milestones tied to the development of the Paradisus Papagayo Bay Resort &
Luxury Villas.
**
Zypam Ltd. is managed and owned by Josef Mettler, an executive officer and director of the Company.
***
Includes the 2,418,180 number of shares held by Zypam Ltd.
ITEM 13.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND
DIRECTOR INDEPENDENCE
Neither our directors or executive officers, nor any proposed nominee for election as a director, nor any
person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights
attached to all of our outstanding shares, nor any members of the immediate family (including spouse,
parents, children, siblings, and in−laws) of any of the foregoing persons has any material interest, direct or
indirect, in any transaction since the beginning of our last fiscal year or in any presently proposed
transaction which, in either case, has or will materially affect us except as follows:
On July 16, 2012, SunVesta AG entered into a Guaranty Agreement with Josef Mettler, Hans Rigendinger
and Max Roessler, the principal owner of Aires, pursuant to which said individuals guaranteed that until
such time as financing is secured for the completion of the Paradisus Papagayo Bay Resort & Luxury Villas
that they collectively will act as a guarantor to creditors to the extent of ongoing capital requirements. The
guaranty agreement requires that within 30 days of receiving a demand notice, the guarantors are required
to pay to SunVesta Project & Management 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.
Subsequent to the period end, on January 1, 2013, the Company entered into an employment agreement
with Hans Rigendinger in connection with this engagement as chief operating officer for an initial three
year term and his appointment to the Company’s board of directors. The compensatory terms of the
employment agreement include a signing bonus of 3,500,000 shares, a base salary of $60,000 per annum, a
retention bonus of 2,500,000 shares payable annually and a grant of 10,000,000 stock options with an
exercise price of $0.05 that vest according to the achievement of certain milestones tied to the development
of the Paradisus Papagayo Bay Resort & Luxury Villas.
Director Independence
The Company is quoted on the Over the Counter Pink Sheets inter-dealer quotation system, which does not
have director independence requirements. However, for purposes of determining director independence, we
have applied the definitions set out in NASDAQ Rule 4200(a)(15). NASDAQ Rule 4200(a)(15) states that
a director is not considered to be independent if he or she is also an executive officer or employee of the
corporation. Accordingly, we do not consider either of our directors independent.
ITEM 14.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees and Services
BDO Visura International AG (“BDO”) has provided audits of our annual financial statements and a review
of our quarterly financial statements for the periods ended December 31, 2012 and December 31, 2011
respectively. The following is an aggregate of fees billed during each of the last fiscal years for professional
services rendered by each of our principal accountants.
BDO Fees and Services
Audit fees
$
211,000
Audit-related fees
-
Tax fees - preparation and filing of three major tax-related forms and tax planning.
-
All other fees - other services provided by our principal accountants.
-
Total fees paid or accrued to our principal accountants
$
211,000
BDO Fees and Services
Audit fees
$
215,000
Audit-related fees
-
Tax fees - preparation and filing of three major tax-related forms and tax planning.
-
All other fees - other services provided by our principal accountants.
-
Total fees paid or accrued to our principal accountants
$
215,000
Audit Committee Pre-Approval
We do not have a standing audit committee. Therefore, all services provided to us by BDO, as detailed
above, were pre-approved by our board of directors. BDO performed all work with their permanent
full-time employees.
PART IV
ITEM 15.
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Consolidated Financial Statements
The following documents are filed under “Item 8. Financial Statements and Supplementary Data,” pages
through, and are included as part of this Form 10-K:
Financial Statements of the Company for the years ended December 31, 2012 and 2011:
Reports of Independent Registered Public Accounting Firms
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders’ Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(b) Exhibits
The exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits on
page 35 of this Form 10-K, and are incorporated herein by this reference.
(c) Financial Statement Schedules
We are not filing any financial statement schedules as part of this Form 10-K because such schedules are
either not applicable or the required information is included in the financial statements or notes thereto.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SUNVESTA, INC.
Date
/s/ Josef Mettler
June 28, 2013
Josef Mettler
Chief Executive Officer, Chief Financial Officer
Principal Accounting Officer and Director
/s/ Hans Rigendinger
June 28, 2013
Hans Rigendinger
Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Josef Mettler
Director, Chief Executive Officer,
June 28, 2013
Josef Mettler
Chief Financial Officer, and
Principal Accounting Officer
/s/ Hans Rigendinger
Director, Chief Operating Officer
June 28, 2013
Hans Rigendinger
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*
Employment Agreement dated January 1, 2001 between the SunVesta Projects & Management AG
and Josef Mettler.
10.8*
Guaranty Agreement dated July 16, 2012 between SunVesta AG, Josef Mettler, Hans Rigendinger
and Max Rössler.
10.9*
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.
14*
Code of Ethics adopted March 1, 2004 (incorporated by reference from the 10-KSB filed with the
Commission on April 14, 2004).
Subsidiaries of the Company.
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14 of
the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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.