UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011 .
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
___ to
.
Commission file number: 000-28731
SUNVESTA, INC.
(Exact name of registrant as specified in its charter)
Florida
98-0211356
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
Seestrasse 97, Oberrieden, Switzerland CH-8942
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: 011 41 43 388 40 60
Securities registered under Section 12(b) of the Act: none.
Securities registered under Section 12(g) of the Act: common stock (title of class), $0.01 par value.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No þ
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act. Smaller reporting company þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
The aggregate market value of the registrant's common stock, $0.01 par value (the only class of voting stock), held by non-affiliates
(50,890,672 shares) was approximately $3,562,347 based on the closing price ($0.07 ) for the common stock on February 13, 2013.
At February 14, 2013 the number of shares outstanding of the registrant's common stock, $0.01 par value (the only class of voting
stock), was 57,092,186.
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TABLE OF CONTENTS
PART I
Item1.
3
Item 1A.
11
Item 1B.
11
Item 2.
12
Item 3.
13
PART II
Item 5.
Market for Registrant’s Common Equity , Related Stockholder Matters, and Issuer Purchases of
14
Equity Securities
Item 6.
15
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
15
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
21
Item 8.
Financial Statements and Supplementary Data
21
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
22
Item 9A.
22
Item 9B.
24
PART III
Item 10.
Directors, Executive Officers , and Corporate Governance
25
Item 11.
27
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
29
Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
29
Item 14.
Principal Accountant Fees and Services
32
PART IV
Item 15.
Exhibits, Financial Statement Schedules
33
34
PART I
2
ITEM 1.
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
as a wholly-owned subsidiary.
SunVesta Holding AG was incorporated under the laws of Switzerland on December 18, 2001 and is
domiciled in the Canton of Zurich, Switzerland. SunVesta Holding 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)
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, 1 st 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
3
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; and
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
4
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 metres 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 metres 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. (“Meliá”). “Paradisus” is Meliá’s
five star all-inclusive luxury hotel brand that is well recognized in the hospitality industry around the world.
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 Meliá, Meliá, ME by Meliá, Innside by
Meliá, Tryp, Sol, 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):
o 496 oversized suites; and
o 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):
o 184 rooms “Residential Concierge Suites”; and
o 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):
o 884 oversized suites (500 - 1000+ sq ft); and
o 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):
o 132 residential suites; and
o pools (with partially underwater pool beds, water features, etc), private beach, spa,
cabanas, etc.
La Esmeralda at Playa del Carmen (Mexico opening November 2011)
o 512 suites including 56 swim-up suites; and
o spas, meeting spaces, 11 restaurants, 10 bars, etc. (partially shared with La Perla at Playa
del Carmen).
La Perla at Playa del Carmen (Mexico opening November 2011)
5
o 394 suites including 60 swim-up suites;
o Paradisus’ adults-only “Royal Service” level of accommodations; and
o 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 Meliá until
April 30, 2011. Our project is part of Meliá’s master expansion plan, which includes the opening of two
resorts in Playa del Carmen, Mexico in November of 2011. 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
Subsequent to the period of this report, on April 20, 2012, SunVesta AG entered into an agreement with
Meridian IBG to purchase two additional concession properties. 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
Subsequent to the period of this report, on November 13, 2012, the purchase agreement for additional
concession properties in Polo Papagayo was amended 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. New terms and conditions for the payment of the new purchase price are yet to be defined.
SunVesta AG has paid down-payments on the purchase of the additional concession properties of
approximately $1,400,000 as of the date of this report.
Hotel and Entertainment Complex (Atlanta, Georgia, U.S.A)
Subsequent to the period of this report, during the third quarter 2012, the Company entered into an
agreement to purchase a hotel and entertainment complex in Atlanta, Georgia, U.S.A. The entire purchase
amount of $26 million for the assets has no firm financing commitment. Additionally, approximately an
additional $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. Nonwithstanding 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.
Finance
6
Our plan of operation over the next twenty-two months will require a total investment of approximately
$180 million to complete the Paradisus Papagayo Bay Resort & Luxury Villas. We expect to realize a
minimum of $20 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 $160,000,000 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, a fixed line of credit and the guaranty agreement in place as described
in the going concern paragraph.
SunVesta Holding AG (“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 $9,883,000 in the twelve months ended December 31, 2011, for a total of
approximately $14,500,000 as of the date of this report, in connection with the Euro bond offering. The
CHF bonds, first offered on September 1, 2011, 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
$4,189,000 in the twelve months ended December 31, 2011, for a total of approximately $5,900,000 as of
the date of this report in connection with the CHF bond offering.
SunVesta AG entered into a line of credit agreement with Aires International Investment, Inc. (“Aires”) on
July 27, 2011 allowing it to borrow up to CHF 6,000,000 by February 29, 2012. The line of credit bears
interest at 7.25% and was secured by 10% of the stock of Rich Land. Interest payments are due September
30 of each year with the line of credit maturing on September 30, 2015. Prior to maturity, if the maximum
credit limit was borrowed, Aires had the option to convert the balance of the line of credit into a 10%
ownership interest in Rich Land.
Subsequent to the period of this report, on May 11, 2012, the parties to the Aires line of credit agreement
executed an addendum to the existing line of credit agreement that includes the following clauses:
The line of credit amount was increased by CHF 4,000,000 to a total amount of CHF 10,000,000.
The additional CHF 4,000,000 to be paid in installments through the end of July 2012.
Should the entire amount of CHF 10,000,000 be drawn down, Aires will have the right to convert
the entire line of credit of CHF 10,000,000 into a 20% holding of the capital of SunVesta.
The conversion right granted in the original contract to convert the balance of the line of credit into
a 10% ownership interest in Rich Land was cancelled.
The entire amount of CHF 10,000,000 is subordinated in favor of other creditors.
Subsequent to the period of this report, on June 21, 2012, pursuant to a letter agreement, Aires agreed to
increase the line of credit by CHF 2,000,000 to a total amount of CHF 12,000,000. SunVesta AG and Aires
are currently in the process of negotiating a revised conversion option to replace the existing option to
convert CHF 10,000,000 into a 20% holding in the capital of SunVesta. The major contemplated change is
that Aires will convert its receivable at the time of conversion into 20% of the preferred shares of SunVesta,
at a price and with preferential rights yet to be determined. As of December 31, 2011 SunVesta AG had
borrowed CHF 3,000,000 ($3,195,000) from the Aires line of credit, for a total of approximately
$ 12,900,000 as of the date of this report.
The Company expects that the remaining amounts required to complete the Paradisus Papagayo Bay Resort
7
& Luxury Villas will be realized in the form of a construction loan and equity placements as necessary.
Timeline
Our expected timeline for developing the Paradisus Papagayo Bay Resort & Luxury Villas is as follows:
Complete revisions of architectural plans which will incorporate Meliá requirements in the 4 th
quarter of 2012;
Receive traditional construction loan in the 1 st quarter of 2013;
Receive final building permits in 1 st quarter of 2013;
Begin construction in the 1 st quarter of 2013; and
Complete construction work in the 4 th 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 own location in Guanacaste Province, Costa Rica.
The consumption habits of our prospective customer.
The capacity 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 Papagayo Costa Rica
Resort & Spa, 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 depending on the facility size (basketball court, tennis courts, golf course, soccer field)
Fitness Center, Wellness Centre and Spa Areas
All of our competitors are managed by leading international chains or experienced domestic companies.
8
Despite what might be construed as obvious obstacles to entry as a result of robust competition in the
hospitality sector, 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
The five star level of all-inclusive service offered
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 2011 TI determined that the number of visitors rose to a historical record of 2.2 million, which
number represented a 94% increase over the past decade. The continuing increase in visitors to Costa Rica
over the period indicates a mature demand market attractor with very positive worldwide destination
positioning.
9
The 2011 Travel and Tourism Competitiveness Index (TTCI), indicates that Costa Rica reached the 44th
place in the world ranking, classified as the second most competitive among Latin American countries after
Mexico, and ranking fifth in the Americas. Just considering the sub index measuring human, cultural, and
natural resources, Costa Rica ranks in the 33rd place at a worldwide level, and 6th when considering just the
natural resources criteria. The TTCI report also notes Costa Rica's main weaknesses, limited number of
cultural sites (104th), time required to start a business (125th), poor condition of ground transport
infrastructure (111th), and poor quality of port infrastructure (132nd).
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 lead 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.
Costa Rica’s Guanacaste Province is bounded 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.
Hotel records in Guanacaste, as detailed by TI statistics, evidence that the number of hotels in the 4 to 5 start
category has not increased since 2008 while the number of 4 or 5 start 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 five star category and the attendant
additional rooms that new resort construction will bring to the area.
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
10
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.
Not required of smaller reporting companies.
ITEM 1B.
Not applicable
11
ITEM 2.
Costa Rican Properties
We own 8.5 hectares of undeveloped prime land and have contracted to purchase an additional 12 hectares
with direct beach access that is contiguous to our existing property in Guanacaste Province, Costa Rica on
which the Company intends to build the Paradisus Papagayo Bay Resort & Luxury Villas. The purchase of
the additional hectares is based on an agreement dated March 22, 2010 with DIA S.A. of San Jose, Costa
Rica. The purchase price of $12,500,000 is to be paid on terms. The seller 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. As at December 31, 2011 $ 3.1million had been paid against the purchase price of the property.
Subsequent to period end, on November 12, 2012 we entered into a sixth addendum to the purchase
agreement with DIA S.A. that stipulates that:
$8.5 million was paid against the purchase price as of November 12, 2012
$4.0 million must be guaranteed against the purchase price.
Subsequent to the period of this report, on April 20, 2012, SunVesta AG entered into an agreement with
Meridian IBG to purchase on terms two additional concession properties. 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 Company intends to develop a second hotel on these grounds once development of the
Paradisus Papagayo Bay Resort & Luxury Villas is complete.
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
Subsequent to the period of this report, on November 13, 2012, the purchase agreement with Meridian IBG
was amended 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. New terms and conditions for
the payment of the new purchase price are yet to be defined. SunVesta AG has paid down-payments on the
purchase of the additional concession properties of approximately $1,400,000 as of the date of this report.
Subsequent to the period of this report, the Company obtained all necessary permits for the development of
the Paradisus Papagayo Bay Resort & Luxury Villas.
12
Executive Offices
We maintain our offices at Seestrasse 97, Oberrieden Switzerland CH-8942 based on a month to month
lease with Sportiva AG for which Josef Mettler, our chief executive officer, is a shareholder, an officer and
a director. The Company has verbally committed to lease this office space for CHF 6,500 per month. The
Company recognized lease expenses of $83,000 and $83,000 for the years ended December 31, 2011 and
2010, respectively, for the use of this office and owed unpaid lease payments of approximately $0, and
$83,000 as of December 31, 2011 and 2010, respectively. We believe that we have sufficient office space
for the foreseeable future in order to pursue the completion of the project described herein.
Subsequent to the period, on December 1, 2012, the Company entered into a new lease agreement for the
premises with an unrelated entity. The annual rental expense amounts to approximately $130,000 on a fixed
term expiring on December 31, 2017.
ITEM 3.
None.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
13
PART II
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 Group, Inc. 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, 2011 and 2010 are as follows:
Year
Quarter Ended
High
Low
2011
December 31
$0.31
$0.06
September 30
$0.31
$0.08
June 30
$0.09
$0.08
March 31
$0.20
$0.02
2010
December 31
$0.09
$0.02
September 30
$0.35
$0.04
June 30
$0.06
$0.06
March 31
$0.07
$0.06
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, 2011 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, 2011
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, 2011 we had no outstanding stock options to purchase shares of our common stock.
14
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
None.
ITEM 6.
Not required.
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
over
the
next
thirty
three
months
is
to
complete
the
Paradisus
Papagayo
Bay
Resort
&
Luxury Villas project which will require a total investment of approximately $180 million. We expect to
realize
a
minimum
of
$20,000,000
in
new
funding
over
the
next
twelve
months,
though
our
actual
financing
requirements may be adjusted to suit that amount realized, and an additional $160,000,000 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, a fixed line of credit and the guaranty agreement in place as described
in the going concern paragraph.
15
Results of Operations
During the year ended December 31, 2011, our operations were focused on (i) funding the terms of an
agreement with DIA S.A. to purchase an additional 12 hectares contiguous with our existing property that
will provide the project with direct private beach access; (ii) deliberations with local authorities to obtain
building permits for the development of the property; (iii) discussions with prospective project
development partners; (iv) pursuing additional debt or equity financing arrangements including a bond
offering through SunVesta Holding AG in Europe and a line of credit with Aires; (v) entering into a
management agreement with Meliá; and (vi) terminating a development agreement with WingField.
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,
2011, the Company had incurred comprehensive losses of $22,528,730.
Comprehensive
losses for
the year ended
December
31, 2011
were
$10,361,355
as
compared
to
$1,162,309
for the year ended December 31, 2010.
The increase in comprehensive losses over the comparative periods can primarily
be attributed to increases
in general and administrative expenses to $8,262,540 for the twelve months ended December 31, 2011,
from $850,497 in the twelve months ended December 31, 2010, of which significant components were
termination fees and finder’s fees associated with the management contract with Meliá of $2,500,000,
bonuses paid to related parties for services rendered of $2,500,000,the increase in payroll expense of
$460,000, an accrual for a penalty to Melia Hotel International S.A. of $1,000,000 and the addition of
service providers of approximately $500,000. Other contributing factors to the increase in comprehensive
losses include the increase in marketing costs to $148,662 in the twelve months ended December 31, 2011,
from $15,552 in the twelve months ended December 31, 2010, which expense is associated with the
Paradisus Papagayo Bay Resort & Luxury Villas development, the impairment of property and equipment
of $1,311,000 in the twelve months ended December 31, 2011, from $0 in the twelve months ended
December 31, 2010, 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 expenses on outstanding debt to $447,594 in the twelve months ended
December 31, 2012, from $48,361 in the twelve months ended December 31, 2010, which expense can be
primarily attributed to debt associated with the bond offerings, the non-cash amortization of debt issuance
costs to $375,370 in the twelve months ended December 31, 2011 from $0 in the twelve months ended
December
31, 2010, which
expense
is connected
to
the
bond
offerings
,
and
other
expenses
to $7,000
for
the
twelve months ended December 31, 2011, from $0 in the twelve months ended December 31, 2010.
The increases in losses over the comparative twelve month periods were offset by the gain on exchange
differences
of
$169,236
in
the
twelve
month
period
ended
December 31,
2011,
from
$0
in
the
twelve
month
period
ended
December
31,
2010,
which
gain
can
be
attributed
to
volatility
in
the
respective
values
of
Swiss
Francs and Euros and an increase in gain on foreign currency translation adjustment to 21,575 for the
twelve months ended December 31, 2011, from $10,983 in the twelve months ended December 31, 2010
relating to the volatility between Swiss Francs and US Dollars.
We did not generate revenue during this period and we expect to continue to incur losses through the year
ended December 31, 2012.
16
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, 2011, 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, 2011, we had a working capital deficit of $2,885,572. We had current assets of
$1,031,774 and total assets of $17,275,370. Our current assets consisted of $505,500 in cash, $75,000 in
short term investments, $443,499 in receivables from related parties and $7,775
in other assets. Our total
assets consisted of
current
assets and
property
and equipment
of
$11,390,280 and net
debt
issuance
costs
of
$1,511,759, down payments for property and equipment of $3,100,057 and other assets of $241,500. We
had current liabilities of $3,917,316 and total liabilities of $20,577,940. Our current liabilities consisted of
$1,401,137 in accounts payable, $2,421,864 in accrued expenses, and $94,315 in notes payable to related
parties. Our total liabilities consisted of current liabilities and EUR bond debt of $9,598,537, CHF bond
debt of $3,818,898, note payable to related parties of $3,192,848 and pension liabilities of $50,341.
Total
stockholders’ deficit in the Company was $3,302,570
at December 31, 2011.
For the period from January 1, 2005 to December 31, 2011, our net cash used in development stage
activities was $12,969,392. Net cash used in development stage activities for the twelve months ended
December
31,
2011,
was
$5,955,062
as
compared
to
$1,022,372
for
the
twelve months
ended
December
31,
2010. The significant increase in net cash used in development stage activities in the current comparative
twelve month period over
the prior comparative twelve month period can be attributed
to the dramatic shift
in the Company’s business plan in 2011. The original business model anticipated the operation and sale of
“fractional
units” for
the
entire
property.
The
current
business model
is
dedicated
to
becoming
a full
service
hotel
and
resort
property
with
the
exception
of
20
units
which will
be
sold
and
leased back.
Net
cash
used
in
development stage activities in the current twelve month period ended December 31, 2011, includes a
number of items that are book expense items which do not affect the total amount relative to actual cash
used including pension fund commitments, depreciation, amortization of debt issuance cost and
commissions, unrealized gain on exchange difference and impairment of property and equipment. Actual
cash items provided by development stage activities, that are not income statement related items, such as
general and administrative expenses, include accrued expenses, accounts payable and other current assets.
Net cash used in development stage activities in the prior twelve month period ended December 31, 2010,
also includes a
number
of items that
are
book expense
items which
do
not
affect
the total
amount
relative
to
actual cash used including loss on extinguishment of debt, amortization of debt issuance cost and
commissions and depreciation. Actual cash items used, that are not income statement related include
accrued expenses, accounts payable and accrued expenses.
We expect to continue to generate negative net cash in development stage 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.
17
For the period from January 1, 2005 to December 31, 2011, our net cash used in investing activities was
$15,320,455. Net cash used in investing activities for the twelve months ended December 31, 2011, was
$7,255,350 as compared to $12,169 for the twelve months ended December 31, 2010. Net cash used in
investing activities in the current twelve month period can be attributed to receivables from related parties,
the purchase
of property
and equipment, down payments for property
and equipment and
other non-current
assets. Net cash used in investing activities in the prior
twelve month period ended December 31, 2010 can
be attributed to the purchase of property and equipment offset by other non-current assets.
We expect to continue to generate negative net cash in investing activities in future periods while we
develop the Paradisus Papagayo Bay Resort & Luxury Villas.
For the period January 1, 2005 to December 31, 2011, our net cash provided by financing activities was
$29,443,895. Net cash provided by financing activities for the twelve months ended December 31, 2011,
was $13,828,162
as compared to $1,161,821
for the year ended December 31, 2010. Net cash provided by
financing activities in the current twelve month period ended December 31, 2011, can be attributed to
proceeds from SunVesta AG’s bond issuance and advances from related parties offset by the repayment of
notes payable to related parties, a decrease in a note payable third parties and debt
issuance costs. Net cash
provided by financing activities in the prior twelve month period ended December 31, 2010 can be
attributed to proceeds from notes payable and advances from related parties and proceeds from bond
issuance offset by the purchase of treasury stock and debt issuance costs.
We expect to continue to generate net cash flow provided by financing activities in future periods from
SunVesta AG’s bond offering and the credit line with Aires.
Management believes that our cash on hand in addition to, the line of credit 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 bond offerings in progress and a credit line
commitment agreed with Aires that permits us to draw capital as necessary to meet ongoing operational
requirements. The Company has, as of the date of this filing, realized $20,400,000 through its Euro and
CHF bond offerings and drawn down approximately $12,900,000 against the line of credit with Aires.
We have a line of credit in place with Aires against which SunVesta Holding AG has borrowed CHF
3,000,000 ($3,195,000) as of December 31, 2011, and CHF 11,820,000 ($12,900,000) as of
the date of this
filing
and
may
borrow
up
to
an
additional
CHF
180,000.
Otherwise, we had no lines of credit
or
other bank
financing arrangements as of December 31, 2011.
We
have commitments
to
DIA, S.A and
other
third
parties as
of
December 31, 2011, in connection
with
the
purchase of property parcels made part of the development and certain commitments to the Costa Rican
government for water and development rights as well as certain commitments for the planning and
construction of the resort project. As of the date of this report our commitment to DIA, S.A. amounts to
$4,000,000.
As of the date of this filing, the Company had the following cancellable commitments which are not
included in the required financing of $180 million to complete the Papagayo Gulf Tourism Project.
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 $17.2
million. The terms and conditions of the cash payment are yet to be defined. Furthermore, all payments by
the Company to date and in the future are refundable.
18
The
Company
entered
into
an
agreement
to
purchase
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, approximately an additional $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 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.
We maintain a defined benefit plan that covers all of our Swiss employees though we have no contractual
commitment with our sole officer and director.
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.
Future Financings
We will continue to rely on debt or equity sales of our shares of common stock to fund our business
operations.
Unfortunately,
there
is
no
assurance
that
we will
be
able
to
secure
the
financing
requisite
to
fund
our business.
Off-Balance Sheet Arrangements
As
of
December
31,
2011,
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:
USD $1,000
a.
Gross project cost
195,000
b. Less: Proceeds from sale of villas
-24,000
c.
Net project cost
171,000
d. Overhead expenses
21,000
e.
Less: Recuperated in gross project cost
-12,000
f Total, excluding other potential projects
180,000
Sixty percent (60%) of net project cost is expected to be financed by traditional mortgage loans, for which
negotiations have been initiated. The remaining forty percent (40%) of net project
cost, as well as
non-recuperated
overhead
expenses and
the
cost
of
prospective
“other projects”
are
expected
to
be
financed
by the primary promoters of the project, i.e.:
19
a.
Zypam Ltd.
b.
Mr. Hans Rigendinger
c.
Mr. Max Rössler
d.
Mr. Josef Mettler
Based on the guaranty agreement, management therefore believes that available funds are sufficient to
finance cash flows for the next twelve months though future anticipated cash outflows for investing
activities will continue to depend on the availability of financing and can be adjusted as necessary.
Subsequent to period end, certain principal shareholders of the Company
or principal lenders to the project
entered into a guaranty agreement in favor of SunVesta Holding AG. The purpose of the guarantee is to
ensure that until such time as financing is secured for the entire project that they will act as a guarantor to
creditors to the extent of the project’s ongoing capital requirements. The guaranty agreement requires that
within 30 days of receiving a demand notice, the guarantors are required to pay to SunVesta AG that
amount
required
for
ongoing
capital
requirements,
until
such
time
as
financing
of
the
project
is
secured.
The
guaranty may not be terminated until such time as SunVesta Holding AG has secured financing for the
completion of the project.
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; and
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 including the factors set
forth in the section entitled
Risk Factors
included 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.
20
ITEM 7A.
QUANTITATIVE
AND
QUALITATIVE DISCLOSURES
ABOUT MARKET
RISK
Not required.
ITEM 8.
FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
Our
audited
financial
statements
for
the
years
ended
December
31,
2011
and
2010
are
attached
hereto
as
F-1 through F-29.
21
SUNVESTA, INC.
(A Development Stage Company)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
Page
Report of Independent Registered Public Accounting Firm
F-2
Report of Independent Registered Public Accounting Firm
F-3
Consolidated Balance Sheets
F-4
Consolidated Statements of Operations and Comprehensive Loss
F-5
Consolidated Statements of Stockholders’ Equity (Deficit)
F-6
Consolidated Statements of Cash Flows
F-7
Notes to Consolidated Financial Statements
F-8
F-1
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 sheet of SunVesta, Inc. (a Development Stage
Company) as of December 31, 2011 and the related consolidated statements of operations and
comprehensive loss, stockholders’ equity (deficit), and cash flows for the year ended December 31, 2011
and the period from January 1, 2005 (date of inception of the development stage) to December 31, 2011.
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 audit. 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, 2011 totals of the statements of operations and cash
flows and reflect total revenues and net losses of 0% and 54%, 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 audit 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 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 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 audit
provide a reasonable basis for our opinion.
In our opinion, based on our audit 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, 2011, and the results of its operations and its cash flows for
the year ended December 31, 2011 and the period from January 1, 2005 (date of inception of the
development stage) to December 31, 2011, in conformity with accounting principles generally accepted in
the United States of America.
Zürich, February 14, 2013
BDO Visura International AG
/s/ Andreas Wyss
/s/ Christoph Tschumi
Auditor in Charge
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
SunVesta, Inc. and Subsidiaries
Oberrieden, Switzerland
We
have
audited
the
accompanying
consolidated
balance
sheet
of
SunVesta,
Inc.
and
Subsidiaries
as
of
December 31, 2010 and the related consolidated
statements of operations and comprehensive loss,
stockholders'
equity
(deficit) and cash flows for the year ended
December 31, 2010 and for the period from
inception of the development stage on January 1, 2005 through December 31, 2010 (not presented 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 financial position of SunVesta, Inc. and Subsidiaries as of December 31, 2010 and the results
of
their
operations
and
their
cash
flows
for
the
year
ended
December
31,
2010
and
for
the
period
from
inception of the development stage on January 1, 2005 through December 31, 2010 (not presented herein),
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
F-3
SUNVESTA, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
December 31, 2011
December 31, 2010
Assets
Current assets
Cash and cash equivalents
$
505,500
44,018
Short term investments
75,000
-
Other assets
7,775
9,421
Receivables from related parties
443,499
-
Total current assets
1,031,774
53,439
Non-current assets
Property and equipment - net
11,390,280
9,321,976
Debt issuance cost - net
1,511,759
291,288
Down payments for property and equipment
3,100,057
-
Others
241,500
-
Total non-current assets
16,243,596
9,613,264
Total assets
$
17,275,370
9,666,703
Liabilities and stockholders' equity (deficit)
Current liabilities
Accounts payable
1,401,137
914,420
Accrued expenses
2,421,864
65,824
Notes payable to third parties
-
551,155
Notes payable to related parties
94,315
811,246
Total current liabilities
3,917,316
2,342,645
Non-current liabilities
EUR-Bond
9,598,537
265,273
CHF-Bond
3,818,898
-
Notes payable to related parties
3,192,848
-
Pension liabilities
50,341
-
Total non-current liabilities
16,660,624
265,273
Total liabilities
$
20,577,940
2,607,918
Stockholders' equity (deficit)
Preferred stock, $ 0.01 par value;
50,000,000 share authorized
no shares issued and outstanding
-
-
Common stock, $0.01 par value;
200,000,000 share authorized;
54,092,186 shares issued and outstanding
540,922
540,922
Additional paid-in capital
18,728,391
18,728,391
Accumulated other comprehensive loss
(37,877)
(59,452)
Retained earnings prior to development stage
1,602
1,602
Deficit accumulated during the development stage
(22,511,853)
(12,128,923)
Treasury stock, 157,220 and 157,220 shares
(23,755)
(23,755)
Total stockholders' equity (deficit)
(3,302,570)
7,058,785
Total liabilities and stockholders' equity (deficit)
$
17,275,370
9,666,703
The accompanying notes are an integral part of these consolidated financial statements.
F-4
SUNVESTA, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Years Ended December 31, 2011 and 2010 and Cumulative Amounts
Cumulative*
2011
2010
amounts
Revenues
Revenues, net
$
-
-
-
Cost of revenues
-
-
-
Gross profit
-
-
-
Operating expenses
General and administrative expenses
8,262,540
850,497
16,742,242
Marketing
148,662
15,552
480,872
Impairment of property and equipment
1,311,000
-
1,311,000
Total operating expenses
9,722,202
866,049
18,534,114
Loss from operations
$
(9,722,202)
(866,049 )
(18,534,114 )
Other income / - expenses
Loss on disposals of assets
-
-
(3,258)
Loss on sale of investments
-
-
(1,137,158)
Loss on extinguishment of debt
-
(258,882)
(1,806,758)
Interest income
-
-
66,881
Interest expense
(447,594)
(48,361)
(963,846)
Amortization of debt issuance cost and
commissions
(375,370)
-
(375,370)
Exchange differences
169,236
-
169,236
Other income / - expenses
(7,000)
-
72,534
Total other income / - expenses
(660,728)
(307,243)
(3,977,739)
Loss before income taxes
(10,382,930)
(1,173,292)
(22,511,853)
Income taxes
-
-
-
Net loss
$
(10,382,930)
(1,173,292)
(22,511,853)
Comprehensive loss:
Foreign currency translation
21,575
10,983
(16,877)
Comprehensive loss
$
(10,361,355)
(1,162,309)
(22,528,730)
Loss per common share
Basic and diluted
$
(0.19)
(0.02)
Weighted average common shares
Basic and diluted
54,092,186
50,880,048
* Cumulative amounts: January 1, 2005 (date of inception of the development stage) to December 31, 2011
The accompanying notes are an integral part of these consolidated financial statements.
F-5
SUNVESTA, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
January 1, 2005 (Date of Inception) to December 31, 2011
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
417
61,852
-
-
-
-
62,269
Issuance of stock for debt
18,182
2,709,091
-
-
-
-
2,727,273
December 31, 2008
306,911
13,731,409
(471,895)
1,602
(8,483,786)
-
5,084,241
)
Net loss
-
-
-
-
(2,471,845)
-
(2,471,845)
Translation adjustments
-
-
401,460
-
-
-
401,460
Issuance of stock for compensation
600
44,400
-
-
-
-
45,000
Issuance of stock for cash
10,000
290,000
-
-
-
-
300,000
Issuance of stock for debt
77,259
3,785,668
-
-
-
-
3,862,927
Purchase of treasury stock
-
-
-
-
-
(12,200)
(12,200)
December 31, 2009
394,770
17,851,477
(70,435))
1,602
(10,955,631)
(12,200)
7,209,583
Net loss
-
-
-
-
(1,173,292)
-
(1,173,292)
Translation adjustments
-
-
10,983
-
-
-
10,983
Issuance of stock for debt
146,152
876,914
-
-
-
-
1,023,066
Purchase of treasury stock
-
-
-
-
-
(11,555)
(11,555)
December 31, 2010
540,922
18,728,391
(59,452)
1,602
(12,128,923)
(23,755)
7,058,785
Net loss
-
-
-
-
(10,382,930)
-
(10,382,930)
Translation adjustments
-
-
21,575
-
-
-
21,575
December 31, 2011
$
540,922 $
18,728,391 $
(37,877) $
1,602 $
(22,511,853) $
(23,755) $
(3,302,570)
The accompanying notes are an integral part of these consolidated financial statements.
F-6
SUNVESTA, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2011 and 2010 and Cumulative Amounts
2011
2010
Cumulative*
Cash flows from operating activities
Amounts
Net loss
$ (10,382,930)
(1,173,292)
(22,511,853)
Adjustments to reconcile net loss to net cash
Depreciation and amortization
15,990
1,240
288,735
Impairment of property and equipment
1,311,000
-
1,311,000
Amortization of debt issuance cost and commissions
375,370
7,699
383,069
Unrealized exchange gains
(169,236)
-
(169,236)
Stock compensation expense
-
-
107,269
Loss on securities acquired as deposit on stock
-
-
1,008,324
Loss on disposal of assets
-
-
3,258
Loss on extinguishment of debt
-
258,882
1,806,758
Increase in pension fund commitments
50,341
-
50,341
- Increase / decrease in:
Other current assets
1,646
(1,030)
(8,604)
Accounts payable
486,717
(98,753)
1,936,953
Accrued expenses
2,356,040
(17,118)
2,824,594
Net cash used in operating activities
(5,955,062)
(1,022,372)
(12,969,392)
Cash flows from investing activities
Proceeds from securities available-for-sale
-
-
1,740,381
Short term investments
(75,000)
-
(75,000)
Increase in receivables from related parties
(443,499)
-
(443,499)
Purchase of property and equipment
(3,395,294)
(14,032)
(13,200,780)
Down payments for property and equipment
(3,100,057)
-
(3,100,057)
Other non-current assets
(241,500)
1,863
(241,500)
Net cash used in investing activities
(7,255,350)
(12,169)
(15,320,455)
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
3,254,160
83,000
14,149,292
Repayment of notes payable related parties
(778,243)
(778,243)
Advances from third parties
-
846,773
700,000
Decrease in note payable third parties
(551,155)
0-
(714,819)
Proceeds from bond issuance, net of commissions
13,528,048
265,273
14,337,294
Payment for debt issuance costs
(1,624,648)
(21,670)
(2,190,291)
Purchase of treasury stock
-
(11,555)
(23,755)
Net cash provided by financing activities
13,828,162
1,161,821
29,443,895
Effect of exchange rate changes
(156,269)
(157,207)
-649,104
Net increase / - decrease in cash
461,482
(29,927 )
504,945
Cash and cash equivalents, beginning of period
44,018
73,945
555
Cash and cash equivalents, end of period
$
505,500
44,018
505,500
Additional information
Interest paid
462,000
74,000
Income taxes paid
-
-
Debt settlements
-
1,023,066
* Cumulative amounts: January 1, 2005 (date of inception of the development stage) to December 31, 2011
The accompanying notes are an integral part of these consolidated financial statements
F-7
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
1.
CORPORATE INFORMATION
On August 27, 2007, SunVesta (A Development Stage Company) (SunVesta) acquired SunVesta
Holding AG (SunVesta AG) (collectively the Company). SunVesta AG has three wholly-owned
subsidiaries: SunVesta Projects and Management AG, a Swiss Company; Rich Land Investments
Limitada, a Costa Rican Company (Rich Land); and SunVesta Costa Rica Limitada, a Costa Rican
Company.
In January 2005 (date of inception of development stage), the Company changed its business focus
to the development of private equity financial products, whose funds will be invested primarily in
the hospitality and related industry. The Company has not materialized any revenues yet and is
therefore a “development stage company”.
These consolidated financial statements are prepared in US Dollars 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.
F-8
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
2.
SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Short term investments
Short-term investments consist of short-term deposits with a maturity of over three months which
are classified as available-for-sale and are recognized at fair value and are classified as level 3 fair
value which approximates its initial costs due to the short term nature. Unrealized gains and losses
are included in accumulated other comprehensive income (loss), which is reflected as a separate
component of shareholders’ equity (deficit). Gains are recognized when realized in the
consolidated statements of operations and comprehensive loss. Losses are recognized as realized,
or when the Company determined that another-than-temporary decline in fair value had occurred.
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 10 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 $324,582 and $7,699 as of December 31, 2011 and December 31, 2010, respectively.
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 $106,000 and $0 of interest expense during
the years ended December 31, 2011 and December 31, 2010, respectively.
F-9
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
2.
SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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. Refer to Note 4 for the discussion of the impairment recorded in the year ended
December 31, 2011.
Income taxes
The Company has not incurred 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 companies 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.
F-10
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
2.
SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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.
Foreign Currency Translation and Transactions
The consolidated financial statements of the Company are presented in US dollars (“USD”) 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 operations 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.
Non-current liabilities
Non-current liabilities comprise of bonds payable in EUR and CHF, which bear fixed interest rates.
The non-current liabilities are carried at notional value.
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
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 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 operations. The liabilities and
annual income or expense of the pension plan is determined using methodologies that involve
several actuarial assumptions, the most significant of which are the discount rate and the long-term
rate of asset return (based on the market-related value of assets). The fair values of plan assets are
determined based on prevailing market prices.
F-11
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
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 are 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, note payables and bonds. The fair value of these
financial instruments approximate their carrying value due to the short maturities of these
instruments, unless otherwise 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.
New accounting standards
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 Company expects the adoption of this standard will have no significant impact on the
Company's consolidated financial statements and related disclosures.
F-12
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
2.
SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
New accounting standards - continued
In June 2011, the FASB issued amendments to Topic 220, Comprehensive Income, in this Update,
an entity has the option to present the total of comprehensive income, the components of net
income, and the components of other comprehensive income either in a single continuous
statement of comprehensive income or in two separate but consecutive statements. In both choices,
an entity is required to present each component of net income along with total net income, each
component of other comprehensive income along with a total for other comprehensive income, and
a total amount for comprehensive income. This Update eliminates the option to present the
components of other comprehensive income as part of the statement of changes in stockholders'
equity. The amendments in this Update do not change the items that must be reported in other
comprehensive income or when an item of other comprehensive income must be reclassified to net
income. Effective for annual periods beginning after December 15, 2011. The Company expects
the adoption of this standard will have no significant impact on the Company's consolidated
financial statements and related disclosures.
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.
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.
In December 2011, the FASB released ASU 2011 − 12, Comprehensive Income (Topic 220):
Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items
Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011 − 05.
ASU 2011 − 12 defers only those changes in ASU 2011 − 05 that relate to the presentation of
reclassification adjustments out of accumulated other comprehensive income. The provisions of
ASU 2011 − 12 are effective for public companies in fiscal years beginning after December 15,
2011. When adopted, ASU 2011 − 12 is not expected to materially impact the Company's
consolidated financial statements.
F-13
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
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:
$1,000
a. Gross project cost
195,000
b. Less: Proceeds from sale of villas
-24,000
c. Net project cost
171,000
d. Overhead expenses
21,000
e. Less: Recuperated in gross project cost
-12,000
f Total, excluding other potential projects
180,000
Sixty percent (60%) of “Net project cost” is expected to be financed by traditional mortgage loans,
for which negotiations have been initiated. The remaining forty percent (40%) of “Net project
cost”, as well as “non-recuperated overhead expenses” and the cost of prospective “other projects”
are expected to be financed by four of the Company’s principal shareholders or principal lenders to
the project, i.e.:
a.
Zypam Ltd., shareholder and company owned by the Company's director and chief
executive officer
b.
Mr. Hans Rigendinger, shareholder and board member of SunVesta Holding AG
c.
Mr. Max Rössler, majority shareholder of Aires International Investment, Inc. (also
refer to Note 7 and Note 18)
d.
Mr. Josef Mettler, shareholder, director and chief executive officer
Subsequent to December 31, 2011, those individuals detailed above signed a Guaranty Agreement.
(Refer to Note 18). Based on this guaranty agreement, management therefore believes that
available funds are sufficient to finance cash flows for the twelve months subsequent to December
31, 2011 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.
F-14
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
4.
PROPERTY & EQUIPMENT
December 31, 2011
December 31, 2010
Land
$
7,000,000
7,000,000
IT Equipment
185,846
185,846
Other equipment and furniture
53,440
29,979
Leasehold improvements
66,617
66,617
Construction in-process
4,382,809
2,311,276
Gross
11,688,712
9,593,718
Less accumulated depreciation
(298,432)
(271,742)
Net
$
11,390,280
9,321,976
Depreciation expenses for the year
15,990
1,240
In December 2011, the Company chose to approve the construction plans to build the Papagayo
Gulf Tourism Project. At the time the decision was made to approve these specific construction
plans, as one of the alternatives available to them, management reviewed their existing property
and equipment costs capitalized during which it was noted that certain costs capitalized in
connection with the Papagayo Gulf Tourism Project related to a differing alternative set of
construction plans for the project i.e. architecture work and certain construction plans that were
significantly in excess of the amount originally expected to incur at this stage of the project. As
these items are not being used in the final project they have been deemed as irrecoverable as their
expenditure is not expected to generate any future cash flows and as they have no alternative use.
Management has therefore decided to write off such costs in the amount the carrying amount
exceeds its fair value. The impairment loss recorded in the year ended December 31, 2011
amounted to $1,311,000.
5.
CONSTRUCTION IN PROCESS
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, 2011 is represented
primarily by architectural work related to the hotel and apartments.
6.
NOTE PAYABLE TO THIRD PARTIES
The Company’s note payable was to Bruesa Construccione S.A. (Bruesa), a Spanish construction
contractor. The note was repayable in Euros and was collateralized by a 10% interest in Rich Land
and bore interest at 6%. The note payable balance sheet amounts of $551,155 for December 31,
2010 included related accrued interest of approximately $59,000. As of June 17, 2011 the amount
due was paid in full and Bruesa’s interest in Rich Land was returned to the Company.
F-15
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
7.
RECEIVABLES FROM AND NOTES TO RELATED PARTIES
The advances from (to) related parties are composed as follows:
Receivables
Payables
December
December 31,
31,
December 31,
December 31
2011
2010
2011
2010
-
-
01 Hans Rigendinger
53,212
-
02 Josef Mettler
185,759
-
-
-
03 Turan Turkay
128,539
-
-
-
04 Adrian Oehler
-
-
31,928
31,887
05 Zypam Ltd
39,118
-
-
685,621
06 Sportiva
36,872
-
-
83,000
07 Aires International
-
-
3,194,842
-
Total excluding interest
443,499
-
3,226,770
800,508
Accrued interest
-
-
62,387
10,738
Total
443,499
-
3,287,163
811,246
of which non-current
-
-
3,192,848
-
Related party
Capacity
Interest
Repayment
Security
Rate
Terms
01 Hans Rigendinger
Shareholder and board
NA
None
None
member of SunVesta
Holding AG
02 Josef Mettler
Shareholder
3.00%
12.31.2012
None
03 Turan Tokay
Shareholder
3.00%
12.31.2012
None
04 Adrian Oehler
Shareholder
3.00%
None
None
05 Zypam Ltd
Shareholder and
NA
None
None
company owned by the
Company's director and
chief executive officer
06 Sportiva
An entity owned by the
NA
None
None
Company's director and
chief executive officer
07 Aires International
See below
F-16
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
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., a
company owned by a board member of SunVesta Holding AG, which includes the following major
conditions:
§
The lender grants SunVesta a terminable, interest bearing and non-secured loan in
the maximum amount of CHF 6 million.
§
The loan is to be paid out in various portions between September 23, 2011, and
December 9, 2011, optionally not later than February 29, 2012 with the option to
exercise a conversion option.
§
In principle, the loan will become due on September 30, 2015. This is also the latest
point in time, when the lender can exercise his conversion option.
§
The interest rate is 7.25 % and interest is due on September 30 each year.
Provided that the entire amount of CHF 6 Million is paid in, the lender has the right to convert this
amount into 10% of the shares of Rich Land Investments Ltda. This conversion option is valid until
September 30, 2015.
As the conversion option is contingent upon payment of the entire amount of CHF 6 million and
this contingency was not resolved as of December 31, 2011, the loan was valued at fair value,
which equals face value.
The loan agreement was amended subsequent to year end. Refer to Note 18.
The fair values of the notes payable to Aires International Investments, Inc. is classified as level 3
fair value. The fair values of the note 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.
F-17
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
8.
RELATED PARTY TRANSACTIONS
Debt Settlement Agreements
During the year ending December 31, 2010 the Company concluded debt settlement agreements.
The issuances of shares of the Company were recorded at fair value in the year ended December 31,
2010 and the difference between the carrying value of the payables and the fair value was recorded
as loss on extinguishment of debt in the statement of operations for the year ended December 31,
2010.The details are as follows:
a. A “Debt Settlement Agreement”, whereby a payable of SunVesta Holding AG to Zypam
Ltd. in the amount of USD 900,000 was settled by the issuance of 13,846,154 shares of the
Company.
b. A “Debt Settlement Agreement”, whereby a payable by SunVesta Holding AG to H.
Rigendinger. In the amount of USD 49,990 was settled by the issuance of 769,076 shares of
the Company.
Receivables from related parties
All the shareholders listed under Note 7 have – directly or indirectly - invested significant amounts
of money in the Company. As a result, some of them incurred short term cash needs, which the
Company satisfied by short term advances.
Other transactions
During the year ending December 31, 2011 the Company paid and/or credited related parties with
bonuses for services rendered in connection with work performed for the Papagayo Gulf Tourism
project in the amount of $2,500,000, which is included in general and administrative expenses. The
bonuses were granted to Zypam Ltd., a shareholder and company owned by the Company's director
and chief executive officer, in the amount of $1,900,000 and to H. Rigendinger, shareholder and
board member of SunVesta Holding AG, in the amount of $600,000.
F-18
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
9.
NON-CURRENT LIABILITIES
SunVesta Holding 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 30 November 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
2011
2011
2010
2010
USD
USD
USD
USD
Balances January 1
265,273
-
-
-
Cash inflows
9,883,151
4,188,870
265,273
-
Foreign currency adjustments
(360,179)
(91,382)
-
-
Sub-total (Fair value)
9,788,245
4,097,488
265,273
-
Commissions paid to bondholders
(248,195)
(295,778)
-
-
Amortization of such commissions
58,487
17,188
-
-
Balance December 31, 2011 (Carrying
value
9,598,537
3,818,898
265,273
-
The fair values of the bonds payable are classified as level 3 fair value. 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 and 7.25% for CHF bonds which represent the current market rates
based on the creditworthiness of the Company. Hence, the carrying values approximate fair value.
F-19
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
10.
INCOME TAXES
The components of loss before income taxes are as follows:
December 31, 2011
December 31, 2010
Domestic
(947,625)
(258,882)
Foreign
(9,435,305)
(914,410)
Loss before income tax
(10,382,930)
(1,173,292)
Income taxes relating to the Company’s operations are as follows:
December 31, 2011
December 31, 2010
Current income taxes
US Federal, state and local
-
-
Foreign
-
-
Deferred income taxes
US Federal, state and local
-
-
Foreign
-
-
Income tax expense/recovery
-
-
Income taxes at the United States federal statutory rate compared to the Company’s income tax
expenses as reported are as follows:
December 31, 2011
December 31, 2010
Net loss before income tax
(10,328,930)
(1,173,292)
Statutory rate
35%
35%
Expected income tax recovery
(3,615,126)
(410,652)
Impact on income tax expense/recovery from
Change in valuation allowance
2,418,573
400,000
Different tax rates in foreign jurisdictions
1,113,622
-
Expiration of unused tax loss carry forwards
295,621
-
Others
(212,692)
10,652
Income tax expense
-
-
The Company’s deferred tax assets and liabilities consist of the following:
December 31, 2011
December 31, 2010
Deferred tax assets
-
-
Tax loss carry forward
(6,718,573)
(4,300,000)
Valuation allowance
(6,718,573))
(4,300,000)
Deferred tax assets/liabilities
-
-
F-20
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
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 December 31, 2011 and 2010, there were no known uncertain tax positions. 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
2011
-
-
2012
-
-
2013
-
3,766,686
2014
-
1,346,568
2015
-
21,286
2016
-
700,076
2017
-
587,613
2018
-
4,713,988
Beyond 2018
11,241,484
-
Total operating loss carry forwards
$
11,241,484
11,136,217
The following tax years remain subject to examination:
United States of America
Switzerland
Costa Rica*
2008
YES
NO
N/A
2009
YES
YES
N/A
2010
YES
YES
N/A
2011
YES
YES
N/A
* The Costa Rican company Rich Land Investments Ltda will become taxable only once it
commences operations.
F-21
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
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 operations. The liabilities and
annual income or expense of the pension plan is determined using methodologies that involve
several actuarial assumptions, the most significant of which are the discount rate and the long-term
rate of asset return (based on the market-related value of assets). The fair values of plan assets are
determined based on prevailing market prices.
Actuarial valuation
The actuarial valuation was carried out the first time as of December 31, 2011. No previous
valuations were done because management concluded that the failure did not materially impact the
financial statements for the year ended December 31, 2011 and December 31, 2010, respectively.
Net periodic pension cost has been included in the Company’s results as follows:
2011
2010
Projected Benefit Obligations beginning of year $
122,073
-
Service cost - current
101,533
-
Service cost - previous
-
-
Interest expense
3,086
-
Benefit payments and transfers
(17,774)
-
Actuarial gains/losses
319
-
Currency translation losses
-
-
Projected Benefit Obligations end of year
$
209,238
-
Fair Asset Values beginning of year
$
93,350
-
Expected returns
2,767
-
Company contributions
40,656
-
Employee contributions
40,656
-
Benefits paid and transfers
(17,774)
-
Actuarial gains/losses
(958)
-
Currency translation losses
-
-
Fair Asset Value of assets end of year
$
158,897
-
Net liabilities
$
(50,341)
-
F-22
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
11.
PENSION PLAN - CONTINUED
The following were the primary assumptions:
December 31, 2011
December 31, 2010
Assumptions at year end
Discount rate
2.50%
-
Expected rate of return on plan assets
3.00%
-
Future salary increases
1.50%
-
Future pension increases
1.50%
-
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 cost has been included in the Company’s results as follows:
December 31, 2011
December 31, 2010
Pension expense
Current service cost
$
101,533
-
Past service cost
-
-
Interest cost
3,086
-
Expected return on assets
(2,767)
-
Employee contributions
(40,656)
-
Net periodic pension cost
$
61,196
-
During the twelve-month periods ended December 31, 2011 and December 31, 2010 the Company
made cash contributions of $40,000 and $0, 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, 2012 are $40,000.
F-23
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
12.
AGREEMENT TO PURCHASE A NEIGBORING PIECE OF LAND
In 2010 SunVesta Holding AG concluded a sale and purchase agreement with a company called
DIA S.A. (“DIA”), being domiciled in San José, Costa Rica. The scope is the acquisition of a
neighboring piece of land with approximately 120,000 m2 having direct beach access through
acquisition of 100% of the shares of Altos del Risco S.A. shares of DIA. The total purchase
consideration is $12.5 million. Upon payment of the entire amount, ownership will be transferred to
the Company. As at December 31, 2011 and December 31, 2010, $3.1 million and $0 has been
paid, respectively.
The sixth addendum dated November 12, 2012, stipulates that:
§
$8.5 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 neighbouring
piece of land is expected to be completed during the 1 st quarter of 2013.
13.
FUTURE LEASE COMMITMENTS
Since January 1, 2010 the Company has had a sub-rental agreement for its Swiss office with a
related party called “Sportiva”. The annual sub-rental expense is approx. $80,000. The sub-rental
agreement is concluded for an undetermined period of time, however, there is a verbal agreement to
maintain the agreement at least until December 31, 2013.
Subsequent to the period, 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.
RELATIONSHIP WITH WIMBERLY ALLISON TONG & GOO (“WTAG”)
Legal proceedings were initiated by Wimberley Allison Tong & Goo (WATG) against SunVesta
Projects and Management AG on November 6, 2008 in the Superior Court of the State of
California, County of Orange. The claim was based on an alleged failure to satisfy the terms of a
promissory note executed in exchange for certain design services rendered in connection with the
El Cielo Hideaway Eco Resort and Spa. The claim sought approximately $355,000 plus accrued
interest in addition to legal fees incurred in prosecuting the suit. The Company engaged legal
counsel and paid $100,000 in 2009 to Wimberley Allison Tong & Goo against the amount due.
In 2010, WATG engaged a debt collector for the remaining amount of approximately $255,000
plus accrued interest and legal fees. The Company returned to settlement negotiations and agreed to
settle the outstanding amount, without interest or legal fees, in equal installments due on April 30,
May 31, June 30, and July 31, 2010. This agreement was then extended to August 31, 2010. As of
March 31, 2011, the Company has paid approximately $195,000, leaving a remaining balance due
of approximately $60,000 as of that date. As of May 26, 2011, the Company finalized the
settlement and paid the remaining balance due.
F-24
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
15.
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.
16.
MANGEMENT AGREEMENT WITH MELIÁ HOTELS & RESORTS
In March 2011 the Company concluded a management agreement with Meliá Hotel International,
S.A. for the management of the planned resort in Guanacaste, Costa Rica. This agreement includes
clause that provides that if the Company is unable to conclude the purchase of the property
described in Note 12 by November 30, 2011, a penalty of $1,000,000 would become due to Meliá
Hotel International, S.A. Subsequent to year end the maturity date of this penalty has been extended
to June 30, 2012. The Company recorded a liability in the full amount as of December 31, 2011
with the corresponing expense recroded in general and administrative expense in the year ended
December 31, 2011. Any future reduction or elimination of this obligation would be accounted for
as a contingent gain and will be recorded at such time as an agreement is finalized.
The Company is yet to conclude the purchase of the property described in Note 12 and is presently
negotiating with Meliá Hotel International, S.A. to include an addendum to the management
agreement that would circumvent this penalty.
17.
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, 2011
December 31, 2010
Location of tangible assets
Switzerland
$
7,471
-
Costa Rica
11,382,809
9,321,976
Total
$
11,390,280
9,321,976
F-25
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
18.
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:
EUR Bond Offering
The Company initiated a EUR bond offering on December 1, 2010 of up to € 25,000,000 in units of
€ 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 € 10.9 million ($ 14.5 million) has been realized by the Company from the
initial date up to the date of this filing.
CHF Bond Offering
The Company initiated a CHF bond offering on September 1, 2011 of up to CHF 15,000,000 in
units of CHF 50,000 that bear 7.25 % interest per annum payable each August 31 over the term of
the bonds due August 31, 2015.
A cumulative amount of CHF 5.5 million ($ 5.9 million) has been realized by the Company from
the initial date up to the date of this filing.
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 are yet 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.
F-26
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
18.
SUBSEQUENT EVENTS - CONTINUED
Advisory service 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).
Amendments to Line of Credit Agreement with Aires International Investment, Inc.
An addendum to the existing line of credit agreement with Aires as described in Note 7 was signed
on May 11, 2012 that includes the following clauses:
The line of credit amount was increased by CHF 4,000,000 to a total amount of CHF
10,000,000. The additional CHF 4,000,000 to be paid in installments through the end of
July 2012.
Should the entire amount of CHF 10,000,000 be drawn down, Aires will have the right to
convert the entire line of credit of CHF 10,000,000 into a 20% holding of the capital of the
Company.
The conversion right granted in the original contract to convert the balance of the line of
credit into a 10% ownership interest in Rich Land was cancelled.
The entire amount of CHF 10,000,000 is subordinated in favor of other creditors.
A letter agreement signed by Aires on June 21, 2012, agreed to increase the line of credit by
CHF 2,000,000 to a total amount of CHF 12,000,000.
The Company and Aires are currently negotiating a revised conversion option to replace the one
stated above. The major contemplated change is that Aires International will convert its receivable
into preferred shares of shares of the Company with a fixed interest payment with the option to
convert into shares of the Company’s common stock at a discount to market within a limited time
frame. The parties are yet to come to an agreement.
As of the date of this report the Company has borrowed CHF 11.8 million ($12,900,000) from the
Aires line of credit.
Tax Liability Contingency
During April 2012, the Company was advised by the Internal Revenue Service (IRS) of aggregate
penalties amounting to $140,000 in connection with its failure to file certain tax returns for the
years ended 2008, 2009 and 2010. The Company is in correspondence with the IRS in order to seek
an abatement of the penalties.
F-27
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
18.
SUBSEQUENT EVENTS - CONTINUED
Guaranty Agreement
On July 16, 2012, certain principal shareholders of the Company or principal lenders to the
project entered into a guaranty agreement in favor of SunVesta AG. The purpose of the
guarantee is to ensure that until such time as financing is secured for the entire project that they
will act as a guarantor to creditors to the extent of the project’s ongoing capital requirements. The
guaranty agreement requires that within 30 days of receiving a demand notice, the guarantors are
required to pay to SunVesta AG that amount required for ongoing capital requirements, until such
time as financing of the project is secured. The guaranty may not be terminated until such time as
SunVesta AG has secured financing for the completion of the project.
Hotel Project Atlanta
During the third quarter 2012 the Company entered into an agreement to purchase 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, approximately an additional $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 all other factors, the Company may terminate this agreement, within a due
diligence 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.
F-28
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010
19.
UNAUDITED QUARTERLY FINANCIAL DATA
During the three month period ended September 30, 2011 the Company reversed a previous interest
of $217,750 due to the fact that the Company initially intended to pay interest expense starting from
the EUR bond offering date (Dec 1, 2010) as opposed to the bond issuance dates. However, during
the three month period ended September 30, 2011, the Company's board of directors changed its
policy and reversed the interest accrued for the period from the bond offering date to the respective
bond issuance dates. The Company decided to record this change in policy retrospectively as an
error since there was no contractual obligation to pay interest from the bond issuance date.
Management has concluded that the impact of the error is not material to the previously filed
quarterly reports for the quarters ended March 31, 2011 and June 30, 2011 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 June 30, 2012 will be
updated to reflect the restatement recorded in the three months period ended June 30, 2011. The
table below summarizes the impact of the restatement, which will be reported when the relevant
quarterly report is filed in 2012.
2011
2011
2010
2010
As reported
As restated
As reported
As restated
Quarter ended March 31
Loss from operations
$
(444,002)
$
(158,104)
Interest expense
$
(33,626)
$
(10,011)
Net loss
$
(477,628)
$
(426,997)
Basic and diluted loss per share $
(0.01)
$
(0.01)
Quarter ended June 30
Loss from operations
$ (2,034,752)
$
(253,011)
Interest expense
$
(268,690) $
(50,940) $
(9,308)
Net loss
$ (2,689,085) $ (2,471,335) $
(262,319)
Basic and diluted loss per share $
(0.05) $
(0.04) $
(0.00)
Quarter ended September 30
Loss from operations
$ (1,079,389)
$
(309,055)
Interest expense
$
(115,677)
$
(8,406)
Net loss
$ (1,087,665)
$
(317,461)
Basic and diluted loss per share $
(0.02)
$
(0.01)
F-29
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
CONTROLS AND PROCEDURES
Management's Annual Report on Internal Control over Financial Reporting
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this annual report, an evaluation was carried out by the Company’s
management, with the participation of the chief executive officer and chief financial officer, of the
effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) under the
Securities Exchange Act of 1934 (“Exchange Act”)). Disclosure controls and procedures are designed to
ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules
and forms, and that such information is accumulated and communicated to management, including the chief
executive officer and chief financial officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, the Company’s management concluded, as of the end of the period covered by
this report, that the Company’s disclosure controls and procedures were ineffective in recording,
processing, summarizing, and reporting information required to be disclosed, within the time periods
specified in the Commission’s rules and forms, and such information was not accumulated and
communicated to management, including the chief executive officer and the chief financial officer, to allow
timely decisions regarding required disclosures.
Management’s Report on Internal Control over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control
over financial reporting. The Company’s internal control over financial reporting is a process, under the
supervision of the chief executive officer and the chief financial officer, designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of the Company’s financial
statements for external purposes in accordance with United States generally accepted accounting principles
(GAAP). Internal control over financial reporting includes those policies and procedures that:
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the Company’s assets;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of
the financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures are being made only in accordance with authorizations of management
and the board of directors; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the Company’s assets that could have a material effect on the financial
statements.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions or that the degree of compliance
with the policies or procedures may deteriorate.
22
The Company’s management conducted an assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2011, based on criteria established in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, which
assessment identified material weaknesses in internal control over financial reporting.
A material weakness is a control deficiency, or a combination of deficiencies in internal control over
financial reporting that creates a reasonable possibility that a material misstatement in annual or interim
financial statements will not be prevented or detected on a timely basis. Since the assessment of the
effectiveness of our internal control over financial reporting did identify material weaknesses, management
considers its internal control over financial reporting to be ineffective.
The matters involving internal control over financial reporting that our management considered to be
material weaknesses were:
Lack of Appropriate Independent Oversight . The board of directors has not provided an appropriate level
of oversight of the Company’s consolidated financial reporting and procedures for internal control over
financial reporting since there was, over the annual period, only one director who also acts as the
Company’s sole executive officer, that cannot provide an appropriate level of oversight, including
challenging management’s accounting for and reporting of transactions due to his dual roles within
management. This control deficiency resulted in some audit adjustments to our 2011 annual financial
statements. Accordingly we have determined that this control deficiency constitutes a material weakness.
Failure to Segregate Duties . Management has not maintained any segregation of duties within the
Company due to its reliance on a single individual to fill the role of the board of directors, chief executive
officer, chief financial officer and principal accounting officer. This control deficiency resulted in some
audit adjustments to our 2011 annual financial statements. Accordingly we have determined that this
control deficiency constitutes a material weakness.
Sufficiency of Accounting Resources . The Company had limited internal accounting personnel to prepare
its financial statements, including the consolidation of the Company and its subsidiaries. This control
deficiency resulted in certain errors in the consolidation of the Company and its subsidiaries that were not
detected by the Company’s internal control over financial reporting.
Lack of US GAAP knowledge . The Company's limited internal accounting personnel who prepares the
financial statements, including the consolidation of the Company and its subsidiaries does not have the
resources to stay current on current US GAAP developments. This control deficiency resulted in certain
errors in the financial reporting of the Company that were not detected by the Company’s internal control
over financial reporting.
As a result of the material weaknesses in internal control over financial reporting described above, the
Company’s management has concluded that, as of December 31, 2011, that the Company’s internal control
over financial reporting was not effective based on the criteria in Internal Control – Integrated Framework
issued by the COSO. The Company intends to remedy its material weaknesses by:
Forming an audit committee made up of independent directors that will oversee management (we
have begun this process by seeking out individuals who might act as independent directors).
Engaging an individual to serve as chief financial officer and principal accounting officer to
segregate the duties of chief executive officer and chief financial officer (our chief executive
officer is in the process of seeking out an individual willing to serve as chief financial officer and
principal accounting officer).
23
The Company has, subsequent to period end, engaged consultants to address the issue of sufficient
accounting resources and the availability of having adequate US GAAP knowledge.
This annual report does not include an attestation report of our independent registered public accounting
firm regarding internal control over financial reporting. We were not required to have, nor have we,
engaged our independent registered public accounting firm to perform an audit of internal control over
financial reporting pursuant to the rules of the Commission that permit us to provide only management’s
report in this annual report.
Changes in Internal Controls over Financial Reporting
During the fiscal quarter ended December 31, 2011, there has been no change in internal control over
financial reporting that has materially affected, or is reasonably likely to materially affect our internal
control over financial reporting.
OTHER INFORMATION
None.
24
PART III
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
52
2008
CEO, CFO, PAO and Director
Hans Rigendinger
67
2013
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
Holding 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 Holding 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 Holding AG, a wholly owned subsidiary of the
Company.
25
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, 2011 failed to file, on a timely basis, reports required by Section 16(a) of the Exchange Act
.
26
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.
The
Company has
compensated
directors
in
the
past
and
may
adopt additional provisions for compensating directors for their services in the future.
ITEM 11.
EXECUTIVE
COMPENSATION
Compensation Discussion and Analysis
Our chief executive officer has an employment agreement with our wholly owned subsidiary SunVesta
Project
&
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 car allowances, housing allowances, and
representation allowances. 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 services. 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 have determined that our current approach to compensation is
appropriate at this time though 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, 2011 $2,360,000 was paid in salary, a bonus and benefits to retain our
executive officer as compared to $0 for the year ended December 31, 2010. An extraordinary bonus of
$1,900,000 was
paid
to Zypam Ltd., a company
owned
by
Mr. Mettler, by
SunVesta Holding
AG as
part of
his compensation package for the year ended 2011. The bonus payment was authorized by the SunVesta
Holding 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 Mélia Hotel
International, S.A. 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.
27
The following table provides summary information for the years ended December 31, 2011 and 2010
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 $100,000:
Summary Compensation Table
Name and
Year
Salary
Bonus
Stock
Option
Non-Equity
Change in
All Other
Total
Principal
($)
($)
Awards Awards
Incentive Plan
Pension Value
Compensation
($)
Position
($)
($)
Compensation
and Nonqualified
($)
($)
Deferred
Compensation
($)
Josef
2011
400,000
1,900,000*
-
-
-
-
60,000
2,360,000
Mettler
2010
-
-
-
-
-
-
-
-
CEO, CFO,
PAO
* Paid to Zypam Ltd, a company owned by Mr. Mettler
We have no outstanding option or stock award plans as of December 31, 2011.
We have no agreement that provides for payments to our executive officer at, following, or in connection
with the resignation, retirement or other termination, or a change in control of the Company or a change in
our executive officer's responsibilities following a change in control.
We have no plans that provide for the payment of retirement benefits, or benefits that will be paid primarily
following retirement except that we do maintain a pension plan covering all employees in Switzerland. Our
model allocates pension costs over the service period of employees in the plan.
The following table provides summary information for the year ended December 31, 2011 concerning cash
and non-cash compensation paid or accrued by the Company to or on behalf of its directors.
Summary Compensation Table
Name
Fees earned or Stock
Option
Non-equity
Nonqualified
All other
Total
paid in cash
awards
Awards
incentive plan
deferred
compensation ($)
($)
($)
($)
compensation
compensation ($)
($)
($)
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.
28
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 57,592,186
shares of common stock issued and outstanding as of February 14, 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***
5.5%
Oberrieden, Switzerland
Hans Rigendinger*
COO and Director
Hartbertstrasse 11, CH-7000
Common
3,510,000
6.1%
Chur, Switzerland
Officer and directors (2) as a group
Common
6,701,514
11.6%
Zypam Ltd.**
Jasmin Court 35A, Regent Street
Common
2,418,180
4.2%
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 stock options with an exercise price of $0.05 subject to vesting based on certain
milestones.
**
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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND
DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
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:
Agreements
The Company maintains its executive offices on a month to month lease basis with Sportiva AG, for which
Josef Mettler, our chief executive officer, chief financial officer and principal accounting officer, is an
officer, shareholder and director of Sportiva. The Company recognized lease expenses of $83,000 and
$83,000 for the years ended December 31, 2011 and 2010, respectively, for the use of this office and owed
unpaid lease payments of approximately $0, and $83,000 as of December 31, 2011 and 2010, respectively.
29
The Company’s wholly owned subsidiary SunVesta Project & Management AG has entered into an
employment agreement dated January 1, 2011 with Josef Mettler, our sole executive officer, pursuant to
which he receives a salary and is entitled to a bonus for his service in addition to certain benefits including
car allowances, housing allowances, and representation allowances. The employment contract 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 services.
Subsequent to the period end, the Company’s wholly owned subsidiary SunVesta Holding AG entered into
a Guaranty Agreement dated July 16, 2012 with Josef Mettler, Hans Rigendinger and Max Rösller, the
principal owner of Aires International, Inc., pursuant to which agreement said individuals personally
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 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 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 Holding AG has secured financing for the completion of the
project.
Subsequent to the period end, the Company entered into an employment agreement dated January 1, 2013
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 payable of 3,500,000 shares, a base salary of $5,000 a
month, a retention bonus payable in shares per annum of 2,500,000 shares and the grant of 10,000,000 stock
options with an exercise price of $0.05 that vest according to the achievement of certain milestones
anticipated over the term of the employment agreement.
Compensation
The Company, through its wholly owned subsidiary, SunVesta Holding AG, paid a bonus in the amount of
$1,900,000 to Zypam Ltd. in the period ended December 31, 2011 for services rendered in connection with
work performed for the Papagayo Gulf Tourism project. Mr. Mettler, our chief executive officer, chief
financial officer and principal accounting officer, is an officer, shareholder and director of Zypam. The
bonus was authorized by SunVesta Holding AG’s board of directors. Mr. Mettler recused himself from any
discussion, as a member of the board of directors of SunVesta AG, related to the payment of the bonus to
Zypam.
The Company, through its wholly owned subsidiary, SunVesta Holding AG, paid a bonus in the amount of
$600,000 to Hans Rigendinger in the period ended December 31, 2011 for services rendered in connection
with work performed for the Papagayo Gulf Tourism project. Mr. Rigendinger is a director of SunVesta
AG. The bonus was authorized by SunVesta AG’s board of directors. Mr. Rigendinger recused himself
from any discussion, as a member of the board of directors of SunVesta AG, related to the payment of the
bonus to him.
30
Indebtedness
Receivables
Name
Nature of
Largest aggregate Nature of the
Amount
Interest
Accrued
relationship
amount of
indebtedness
currently
Rate
Interest
indebtedness
and transaction
outstanding
outstanding
Josef Mettler
Chief Executive
$185,759
Advance
$0
3%
$0
Officer, Chief
Financial Officer,
Director
Turan Turkay
Shareholder
$128,539
Advance
$0
3%
$0
Payables
Name
Nature of
Largest aggregate Nature of the
Amount
Interest
Accrued
relationship
amount of
indebtedness
currently
Rate
Interest
indebtedness
and transaction
outstanding
outstanding
Aires
Shareholder
$12,900,000
Line of credit
$10,400,000
7.25%
$565,000
International
beneficial owner of
Investments, Inc. Aires
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.
31
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees and Services
BDO Visura International AG (“BDO”) and Pritchett, Siler & Hardy (“Pritchett”) have provided audits of
our annual financial statements and a review of our quarterly financial statements for the periods ended
December 31, 2011 and December 31, 2010 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
2011
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
Pritchett Fees and Services
2010
Audit fees
$
33,979
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
$
33,979
Audit Committee Pre-Approval
We do not have a standing audit committee. Therefore, all services provided to us by BDO and Pritchett, as
detailed above, were pre-approved by our board of directors. BDO and Pritchett performed all work with
their permanent full-time employees.
32
PART IV
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
F-1 through F-29, and are included as part of this Form 10-K:
Financial Statements of the Company for the years ended December 31, 2011 and 2010:
Reports of Independent Registered Public Accounting Firms
Consolidated Balance Sheets
Consolidated Statements of Operations and 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.
33
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
February 14, 2013
Josef Mettler
Chief Executive Officer, Chief Financial Officer
Principal Accounting Officer and Director
/s/ Hans Rigendinger
February 14, 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,
February 14, 2013
Josef Mettler
Chief Financial Officer, and
Principal Accounting Officer
/s/ Hans Rigendinger
Director, Chief Operating Officer
February 14, 2013
Hans Rigendinger
34
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).
Employment Agreement dated January 1, 2001 between the
SunVesta Projects &
Management AG
and Josef Mettler.
Guaranty
Agreement dated July 16, 2012 between SunVesta Holding 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
35
Exhibit 10.7
Contract of Employment dated 1 January 2011
between
SunVesta Projects & Management AG
Seestrasse 97
CH-8942 Oberrieden, Switzerland
(hereinafter referred to as "Employer")
and
Josef Mettler
Bachtelstrasse 20
CH-8808 Pfäffikon/SZ, Switzerland
(hereinafter referred to as "Employee")
1.
Position
The Employer appoints the Employee as Chief Executive Officer of SunVesta Projects & Management
AG, Oberrieden, of SunVesta Holding AG, and of SunVesta Inc .
2.
Area of responsibility, duties and authority
The area of responsibility, duties and authority shall be defined in a separate agreement that shall be an
integral component of this contract.
3.
Place of work
The place of work shall be Oberrieden/ZH, Seestrasse 97.
4.
Commencement of employment
This contract of employment shall enter into force on 1 January 2011.
5.
Probationary period
There shall be no probationary period.
6.
Term and termination of the employment contract
This contract shall be of unlimited duration, and may be terminated by either party at the end of a
calendar month with
2 months’ notice up to the 2 nd year of employment
3 months’ notice up to the 5 th year of employment
6 months’ notice from the 5 th year of employment
7.
Duty of care and loyalty
The Employee shall be obliged to perform with due care the tasks assigned to him, and to safeguard the
legitimate interests of the Employer in good faith. He may not compete in any manner with the Employer
within Switzerland during term of his employment, or within two years after termination of his
employment. Any infringement of this prohibition of competition shall be subject to a contract penalty of
CHF 50,000 and any damages. He shall keep the Employer’s industrial and business secrets.
8.
Holding office
The Employer's consent shall be required for holding public office and holding office in professional
associations, if it entails absence from work. Consent shall be granted in the absence of good reason to
the contrary. There shall be no deduction from salary or vacation entitlement when performing such
functions during working hours, unless adequate remuneration is paid for such functions, and provided it
does not entail significant absence from work.
9.
Working hours
The weekly hours of work shall be 42 hours.
As a senior executive, the Employee shall waive any form of compensation for any overtime worked, in
the absence of a written agreement to the contrary.
10.
Vacation
The Employer shall grant 25 days’ paid vacation per calendar year.
If employment begins or ends in the course of a calendar year, vacation entitlement shall apply pro rata
temporis.
11.
Salary
The Employee shall receive a monthly gross salary of CHF 30,000. If the employment relationship ends
in the course of a calendar year, this salary shall be payable pro rata temporis.
12.
Variable component of compensation
Possible agreements about a variable salary component (bonus etc) shall be governed by a separate
agreement (addendum A)
13.
Expenses
Expenses shall be subject to the provisions of the Expenses Regulations and/or of the Code of
Obligations.
14.
Payment of salary in the event of illness or accident
The Employer shall continue to pay the Employee his salary to the extent defined below if he is unable to
work due to illness or accident for which he is not to blame:
In the 1 st year of service
for 4 weeks
From the 2 nd year of service
for 9 weeks
From the 4 th year of service
for 14 weeks
From the 9 th year of service
for 15 weeks
From the 10 th year of service
for 17 weeks
From the 12 th year of service
for 18 weeks
For each further year of service
one week more per year
15.
Military service
In the event of absence from work due to obligatory military service or civil defence, the Employer shall
pay 80% of the salary during the period defined in Article 324a of the Code of Obligations. The
Employer shall be entitled to the compensation under the Income Compensation Scheme.
16.
Occupational pension provision
Occupational pension provision shall be governed by the regulations of the Employer's occupational
pension scheme.
17.
Termination pay
There is no provision for termination pay.
Each party to the contract shall receive one copy of this contract.
Oberrieden, this 5 th day of January 2011
Signed
/s/ Hans Rigendinger
/s/ Josef Mettler
SunVesta Projects & Management AG
Josef Mettler
(Employer)
(Employee)
/s/ Turan Tokay ____________
SunVesta Projects & Management AG
(Employer)
Exhibit 10.8
Guaranty Agreement
between
Josef Mettler, Bachtelstrasse 20, CH-8808 Pfaffikon
Hans Rigendinger, Hartbertstrasse 11, CH-7000 Chur
Max Rossler, Aeschi 4, CH-6052 Hergiswil
Zypam Ltd., 35a Jasmine Court, Regent St, Belize-City, Belize
represented by Josef Mettler
hereinafter referred to as "Guarantors"
and
SunVesta Holding AG
Seestrasse 97
CH-8942 Oberrieden
hereinafter referred to as "Beneficiary"
1. Statements, declaration of intention and principle
1.1 The balance sheet of the beneficiary dated 31.12.2011 prepared on the basis of going concern
values as well as the cash flow planned as of 15 th June 2012 (both documents are listed in
Appendix A for this Agreement) show a capital requirement that is not yet secured at the present
time which has to be covered at any time up to the date when the whole project financing is
secured (construction loan) "Paradisus Papagayo Bay".
1.2 The guarantors are together majority shareholders or principal lenders of the beneficiary and
since the establishment of the beneficiary they have covered the capital requirements that have
arisen. With regard to this and in the endeavour to guarantee cover to creditors of the beneficiary
and for the purpose of ensuring the capital requirement of the beneficiary up to the time of
securing the whole project finance "Paradisus Papagayo Bay" this Guarantee Agreement
(hereinafter referred to as "Agreement") is concluded.
2. Guarantee performance
2.1 The guarantors undertake, irrespective of the validity and legal effectiveness of any further
contracts concluded between them and the beneficiaries and agreeing to waive any right to
objections and arguments from the same, irrevocably, to pay to the beneficiary upon the first
written payment demand, within 30 days from receipt of the demand, the amount necessary to
guarantee the cover mentioned under §1.
2.2 Recourse to this guarantee shall be deemed to have taken place if the written payment
demand is in the possession of the guarantors.
3. Further duties of the guarantors
3.1 The guarantors shall inform the company immediately if they are no longer able to fulfill their
obligations in accordance with this Agreement.
3.2 During the period of this Agreement the guarantors shall refrain from selling, encumbering or
decreasing their current equity holding in the beneficiary. In the same way the liabilities of the
beneficiary in relation to the guarantors shall not be paid off during the period of this Agreement.
The guarantors shall refrain from assigning to third parties any claims they have in relation to the
beneficiary.
3.3 All claims of the guarantors in relation to the beneficiary based on the provision of guarantee
payments to the beneficiary or the latter's creditors shall count in full as subordinated in rank as
defined by Art. 725 OR (code of obligations).
The parties relinquish all rights of offsetting and retention in relation to each other.
4. Assignability
A party is not permitted to transfer or assign to third parties individual rights or all rights of this
Agreement without the prior written consent of the other party. Any transfer or assignment
without such consent shall be invalid.
5. Period of validity
5.1 Notice of termination cannot be issued for this Agreement. It may be cancelled only if the
beneficiary has succeeded in securing the project finance (construction loan) for the project
"Paradisus Papagayo Bay".
6. Approval, credit standing
6.1 This Agreement has been approved by the board of directors of the beneficiary in
acknowledgement of the credit standing of the guarantors.
7. Final provisions
7.1 This Agreement contains the whole contractual intention of the parties concluding the
contract and it replaces all previous written and verbal agreements between the parties relating to
this matter.
7.2 If a party makes no use or only partial use of their right under this Agreement, this shall not
signify a general relinquishment of the entitlement to assert such rights.
7.3 Changes and additions to this Agreement, including this provision, shall require written form
and the consent and signature of both parties.
7.4 If individual provisions of this Agreement are or become invalid, this shall not affect the
validity or effectiveness of the other provisions of the Agreement. The parties undertake to
replace the invalid or ineffective provision with a valid and effective regulation that comes as
close as possible to the sense and purpose of the invalid or ineffective provisions. The same shall
apply, mutatis mutandis , for gaps in the contract.
8. Applicable law and place of jurisdiction
8.1 This Agreement shall be subject to Swiss law with exclusion of any rules concerning conflicts
of laws such as international private law.
8.2 The courts of law at the registered office of the debtor shall have exclusive jurisdiction for
judgment on all disputes from or in connection with this Agreement – including any that relate to
the question of formation of this Agreement or its validity.
City , d ate :
City , d ate :
Oberrieden, 16 th July 2012
Oberrieden, 16 th July 2012
The Guarantors:
SunVesta Holding AG
/s/ Hans Rigendinger
/s/ Hans Rigendinger
Hans Rigendinger
Hans Rigendinger
/s/ Josef Mettler
/s/ Josef Mettler
Josef Mettler
Josef Mettler
/s/ Max Rössler
Max Rössler
/s/ Josef Mettler
Zypam Ltd.
represented by Josef Mettler
Exhibit 31
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Josef Mettler, certify that:
1. I have reviewed this report on Form 10-K of SunVesta, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and
internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)
for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal controls
over financial reporting which are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal controls over financial reporting.
Date: February 14, 2013
/s/ Josef Mettler
Josef Mettler
Chief Executive Officer and Chief Financial Officer
Exhibit 32
CERTIFICATION OF 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
In connection with the report on Form 10-K of SunVesta, Inc. for the annual period ended December 31,
2011, as filed with the Securities and Exchange Commission on the date hereof, I, Josef Mettler, do
hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of
2002, that, to the best of my knowledge and belief:
(1) This report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) The information contained in this report fairly represents, in all material respects, the financial
condition of the registrant at the end of the period covered by this report and results of operations
of the registrant for the period covered by this report.
Date: February 14, 2013
/s/ Josef Mettler
Josef Mettler
Chief Executive Officer and Chief Financial Officer
This certification accompanies this report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall
not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the registrant
for the purposes of §18 of the Securities Exchange Act of 1934, as amended. This certification shall not
be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended (whether made before or after the date of this report),
irrespective of any general incorporation language contained in such filing.
A signed original of this written statement required by §906 has been provided to the registrant and will
be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon
request.