UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
(Mark One)
FORM 10-K
þ
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF1934
For the fiscal year ended
December 31, 2016
.
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF1934
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:
+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
þ
No
o
Indicate
by
check
mark
whether
the registrant
has
submitted
electronically
and
posted
on
its
corporate
Web
site, if
any,
every
Interactive
Data
File
required
to
be
submitted
and
posted
pursuant
to
Rule
405
of
Regulation
S-T
(§
232.405
of
this
chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post suchfiles).
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.
o
Indicate
by
check
mark
whether
the
registrant
is
a
large
accelerated
filer,
an
accelerated
filer,
a
non-accelerated
filer,
or
a
smaller
reporting
company.
See
the
definitions
of
“large
accelerated
filer,”
“accelerated
filer”
and
“smaller
reporting
company” in Rule 12b-2 of the Exchange Act. 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
22,192,297
shares
was
approximately
$2,441,153
based
on
the
based
on
the
average
closing
bid
and
ask
prices
($0.11) for the common stock on March 17,
2017.
At
March
17,
2017,
the
number
of
shares
outstanding
of
the
registrant’s
common
stock,
$0.01
par
value
(the
only
class
of
voting stock), was 101,841,603
.
1
TABLE OF CONTENTS
TABLE OF CONTENTS
PART I
Item1
.
Business
3
Item 1A
.
Risk Factors
12
Item 1B.
Unresolved Staff Comments
12
Item 2.
Properties
13
Item 3.
Legal Proceedings
13
Item 4
.
Mine Safety Disclosures
13
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of
14
Equity Securities
Item 6
.
Selected Financial Data
15
Item 7
.
Management's Discussion and Analysis of Financial Condition and Results of Operations
16
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
.
Controls and Procedures
22
Item 9B
.
Other Information
24
PART III
Item 10
.
Directors, Executive Officers, and Corporate Governance
25
Item 11
.
Executive Compensation
29
Item 12
.
Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
32
Matters
Item 13
.
Certain Relationships and Related Transactions, and Director Independence
33
Item 14
.
Principal Accountant Fees and Services
34
PART IV
Item 15
.
Exhibits, Financial Statement Schedules
Form 10-K
Summary
35
Signatures
36
2
PART I
ITEM 1.
BUSINESS
As used herein the terms “Company,” “we,” “our,” and “us” refer to SunVesta, Inc., its predecessors,
and its subsidiaries, unless context indicates otherwise.
Corporate History
The Company was incorporated in the State of Florida on September 12, 1989, and acquired SunVesta
Holding AG (“SunVesta AG”) as a wholly-owned subsidiary on August 24, 2007. SunVesta AG was
incorporated in Switzerland on December 18, 2001, and is domiciled in the Canton of Zurich,
Switzerland. SunVesta AG operates through two wholly owned subsidiaries SunVesta España Holding
SL (Spain) which wholly owns SunVesta Costa Rica SA (Costa Rica) the result of the May 2016 merger
of three Costa Rican companies ( SunVesta Costa Rica Limitada, Rich Land Investments Limitada and
Altos del Risco SA) into Altos del Risco SA which was then renamed SunVesta Costa Rica SA and
SunVesta Projects & Management AG .
The Company’s principal place of business is located at Seestrasse 97, Oberrieden, Switzerland CH-8942
and its telephone number is + 41 43 388 40 60.
The Company’s registered agent is Hubco Registered Agents Services, Inc., located at 155 Office Plaza
Drive, first Floor, Tallahassee, Florida, 32301. Hubco’s telephone number is (800) 443-8177.
SunVesta
Business Overview
We are in the business of developing high-end luxury
hotels and resorts in countries that are emerging as
popular tourist destinations. Our intention is to develop luxury hotel products located in countries such as
Costa Rica that are emerging as popular tourist destinations. Our first hospitality development, to be
constructed on 20.5 hectares of prime land located in Guanacaste Province, Costa Rica is the Paradisus
Papagayo Bay Resort & Luxury Villas, a five-star luxury hotel. All permitting for the project is in place,
including permission to incorporate the beachfront adjacent to the two concessions into the development
and all significant site work completed. Vertical construction is expected to commence at the beginning of
the second quarter of 2017, while the opening of the Paradisus Papagayo Bay Resort & Luxury Villas is
scheduled for the fourth quarter 2018. The estimated commencement of construction and opening dates
are subject to securing sufficient capital commitments to complete the development.
Specifications
Paradisus Papagayo Bay Resort & Luxury Villas’ initial specifications are to be as follows:
—eco-luxury all-inclusive resort
—382-keys
—direct beach access
—Nine restaurants and eleven bars and lounges
—Yhi Spa and Health Club
—Paradisus’ adults-only “Royal Service” level of accommodations
—Paradisus’ “Family Concierge” program
—19,000 square feet of meeting facilities with the business traveler in mind
3
Vista Mar
Family Concierge
The Family Concierge will be a family orientated part of the Paradisus Papagayo Bay Resort &
Luxury Villas. The accommodations will be designed to satisfy the needs of the modern family.
The Family Concierge area will include:
— 166 Junior Suites Deluxe
(47* square meters)
— 34 Suites Deluxe
(87* square meters)
— 33 Suites Premium
(93* square meters)
— 6 Handicapped Junior Suites Deluxe
(47* square meters)
— 1 Bridal Suites
(93* square meters)
— 2 Deluxe Suites Presidential
(88* square meters)
— 1 Presidential Suite
(194* square meters)
*
Room size does not include balconies and terraces.
All ground floor suites will have direct access to swim-up pools. Each of the suites and villas will
have a full view of the sea. Family Concierge guests will furthermore have access to restaurants,
bars, and lounges. The planned Night Club and the Gabi Club will be located near the beach.
Vista Bahia
Royal Service
Our Royal Service will include an extensive range of services such as a butler service, private
pools for each Garden Villa and/or a Jacuzzi in every suite.
The Royal Service area will include:
— 108 Junior Suites Grand Deluxe
(43-60* square meters)
— 2 Junior Suites Grand Deluxe for Handicapped Guests
(53* square meters)
— 6 Grand Master Suites
(87* square meters)
— 2 Deluxe Suites Presidential
(60 square meters)
— 1 Grand Presidential Suite (4 bedrooms)
(145* square meters)
— 20 one or two-bedroom Garden Villas
(91–212* square meters)
* Room size does not include balconies and terraces.
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.
4
The Paradisus Papagayo Bay Resort & Luxury Villa’s will feature other highlights including:
—
more than 65 private, swim up and resort pools including the world’s second largest
Infinity Pool all within idyllic landscaped grounds
— a wedding chapel with a stunning ocean view
— rain forest walkways that permit guests to experience the flora and fauna of the rain forest
— a multipurpose convention hall with over 2,000 square meters of space that can be utilized
whole or divided to create smaller meeting rooms
— a full service spa committed to providing for the wellbeing of our guests. The spa will
be located with a 180-degree sea view within approximately 1,000 square meters that
will include 12 large treatment rooms, a hairdresser, relaxation areas, pools, saunas and
— sthteea2m0rporoivmaste villas will be located within the Royal Service area of the resort. The
present intention being that
these villas will be sold to individuals who will then lease
them back to the resort when not occupied by the owners.
Management
Overall project development is led by Hans Rigendinger, our Chairman of the Board and Chief
Executive Officer, Charles Fessel, Project Director Paradisus Papagayo Bay Resort & Luxury Villas
and Ernst Rosenberger, the Company’s Corporate Controller. The lead architect is Ossenbach,
Pendones & Bonilla, one of Costa Rica’s largest architectural offices with over 45 architects and
designers. Civil engineering services are provided by DEHC Engineers and structural engineering
services by IEAC. Landscape architects are TPA and interior designers are led by Laboratorio
Quattro.
Resort management is to be provided by Melía Hotels International (“Melía”). “Paradisus” is
Meliá’s five-star all-inclusive luxury hotel brand that is well recognized in the hospitality industry
around the world. Melía was founded in 1956 in Palma de Mallorca, Spain and is today one of the
world’s largest resort hotel chains, as well as Spain’s leading hotel chain for business or leisure.
Melía offers more than 300 hotels in 26 countries over four continents under its Gran Sol Melía,
Sol Melía, ME by Sol Melía, Innside by Sol Melía, Tryp, Sol Melía, Sol Melía Vacation Club, and
Paradisus brands. The Paradisus brand represents all-inclusive luxury resorts with hotels in Mexico
and the Dominican Republic.
Since the completion date for the Paradisus Papagayo Bay Resort & Luxury Villas development has
been delayed to the fourth quarter of 2018, the Company reached an agreement dated April 28, 2016,
to amend the original agreement with Meliá dated March 8, 2011. The current agreement stipulates
the following major conditions:
a.
New completion date: September 15, 2018 (subject to force
majeure)
b.
Should the completion not occur by September 15, 2018 and should the Parties not have
agreed in writing an extension to such date, after September 15, 2018 the Owner shall pay
the Manager a daily amount of $ 2,000 as liquidated
damages.
c.
Should the completion not occur by November 15, 2018, and should the parties to the
management agreement not agree to an extension, the Company will be obligated to pay
Meliá $5,000,000 as liquidated damages.
5
Additional Concessions
The Company entered into a Purchase and Sale Agreement dated April 24, 2013, with Meridian IBG,
Inc., (“Meridian”) to purchase Marina Rose Ltda. (“Marina Rose”), a Costa Rican company that held
certain concessions located in the Gulf of Papagayo, Guanacaste Province, Costa Rica (“Meridian
Agreement”) for $17,500,000. One of the concessions lies adjacent to the SunVesta Costa Rica SA
concessions (La Punta) and the other is in close proximity. The Meridian Agreement caused the
Company to enter into a Purchase and Sale Agreement dated April 24, 2013, with RBAT Costa Rica
LLC, an entity controlled by Varde Investment Partners LP (“Varde”) to pay $8,000,000 of the purchase
price payable to Meridian to Varde (“Varde Agreement”). Varde delivered a notice of termination of the
Varde Agreement to the Company on January 4, 2014, and the Company noticed cancellation of the
Meridian Agreement to Meridian on February 24, 2017.
The Meridian Agreement entitled the Company to reimbursement for all amounts paid as deposits against
the purchase of Marina Rose less a liquidated damages penalty of 5% on providing notice of cancellation.
The Varde Agreement entitled the Company to reimbursement for all amounts paid as deposits minus a
non-refundable payment of $300,000 and a 5% liquidated damages penalty on receiving notice of
termination. The Company has delivered notice of its claims for reimbursement to the respective parties.
Swiss Hospitality Project
The Company signed an option agreement dated September 19, 2015, to acquire four existing hotels in
the Canton of Graubünden, Switzerland. Consideration of CHF 300,000 was paid for the option. On May
10, 2016, the Company, QuadEquity Holdings AG (“QuadEquity”) and the seller concluded an
agreement, by which QuadEquity assumed all of the Company’s rights and obligations from the original
contract, in exchange for which assumption QuadEquity paid the Company the amount of $302,000 (CHF
300,000) on June 1, 2016.
Finance
The anticipated completion of the Paradisus Papagayo Bay Resort & Luxury Villas in the fourth quarter
of 2018 will require a net investment of approximately $192 million (excluding non-recuperated overhead
expenses), of which approximately $66 million has been expended as of December 31, 2016. We aim to
realize a minimum of $140 million in new funding over the next twelve months. New funding over the
next twelve months is expected to be raised from debt financing through bonds, shareholder loans and, if
necessary, the guaranty agreement borne by certain principal shareholders and participants in
management. Detailed below is a brief description of material debt obligations as of period
end.
Bonds
SunVesta AG, has five bond issues outstanding, denominated in either EUR (
€
) or Swiss Francs (CHF).
EUR (
€
) Bonds
The Company initiated an unsecured EUR bond offering on December 2, 2013, of up to
€
15,000,000 in
units of
€
10,000 that bear interest at 7.25% per annum payable each December 1 over a three-year term
that matured on December 2, 2016. We had realized $6,861,936 as of December 31, 2015 and
$7,058,966 as of the maturity date. This bond was substantially repaid, though an amount of $31,541
remained outstanding as of December 31, 2016, pending the receipt of payment instructions from certain
bondholders. At the date of this report $0 remained outstanding.
6
The Company initiated a parallel offering of unsecured EUR bonds on December 2, 2013, of up to
€
15,000,000 in units of
€
10,000 that bear interest at 7.25% per annum payable each December 2 over a
three-year term that matured on December 2, 2016. We had realized $1,626,695 as of December 31,
2015 and $1,686,789 as of the maturity date. This bond was substantially repaid, though an amount of
$511,805 remained outstanding as of December 31, 2016, pending the receipt of payment instructions
from certain bondholders. At the date of this report $0 remained outstanding.
Swiss Francs (CHF) Convertible Bonds
The Company initiated a new offering of senior unsecured CHF bonds on October 1, 2015, of up to
CHF 15,000,000 in units of CHF 5,000 that bear interest at 6.00% per annum payable each September
30, over a three-year term that matures on September 30, 2018, which are convertible into shares of
SunVesta Holding AG at CHF 8.00. We had realized $3,015,474 as of December 31, 2016 and
$2,250,048 as of the year ended December 31, 2015.
The Company initiated a parallel offering of senior unsecured CHF bonds on October 1, 2015, of up to
CHF 45,000,000 in units of CHF 5,000 that bear interest at 6.00% per annum payable each September 30,
over a three-year term that matures on September 30, 2018, which are convertible into shares of SunVesta
Holding AG at CHF 8.00. We had realized $34,570,259 as of the year ended December 31, 2016 and
$23,694,423 as of December 31, 2015. Included in these amounts is approximately $6.2 million (CHF
6.32 million), that by agreement with certain bondholders deviated from the standard terms to provide for
repayment
by
February
28,
2017.
As per date of this report, approximately $1.1 million has been repaid,
the remaining amount has been extended until converted into a new planned bond issue during May 2017.
Swiss Francs (CHF) Bonds
The Company initiated a new offering of senior unsecured CHF bonds on September 21, 2016, of up to
CHF 20,000,000 in units of CHF 5,000 that bear interest at 6.50% per annum payable each August 15,
over a four-year term that matures on August 15, 2020. We had realized $15,601,398 as of the year
ended December 31, 2016. At the date of this report CHF Bonds in the amount of $16,602,100 were
outstanding.
The Company initiated a new parallel offering of senior unsecured CHF bonds on September 21, 2016,
of up to CHF 20,000,000 in units of CHF 5,000 that bear interest at 6.50% per annum payable each
August 16, over a four year term that matures on August 15, 2020. We had realized $961,595 as of the
year ended December 31, 2016.
Aires International Investment, Inc.
On July 27, 2011, the Company entered into a line of credit agreement with Aires International
Investments Inc. (
“
Aires
”
), a company owned by Dr. R
ӧ
ssler (a director of the Company). The loan
agreement was amended on May 11, 2012 and on June 21, 2012. On October 31, 2013, the line of
credit agreement was replaced by a new loan agreement, that included the following conditions:
—All existing loan agreements or credit facilities, including amendments, between the Company
and Aires were cancelled and superseded by a new loan agreement.
—The loans are now due not before December 31, 2020.
—Despite the scheduled repayment date, either party has the option to cancel the loan agreement
with a prior notice period of 90 days, requiring repayment of the loans in full.
—Loan amounts outstanding including any additional amounts and additions are subordinated.
—Interest on the loan amounts is 7.25% per annum, which charge is accrued.
7
The Company had borrowed $51,473,793 from Aires as of December 31, 2016 (including accrued interest
of $4,489,666) and $47,198,362 as of December 31, 2015 (excluding accrued interest of $6,370,579 that
was recorded under accrued expenses as per 31 December, 2015.
Loans from Dr. Max R
ӧ
ssler and Global Care AG
During 2016, Dr. Max Rössler provided additional financing of approximately $16.7 million for a total
loan balance of approximately $17.1 million.
In April 2016, Global Care AG (a related party controlled by Dr. Max Rössler, himself board member and
related party) assumed a liability of CHF 4.5 million from Aires International Investment Inc., (also a
related party controlled by Dr. Max Rössler). This CHF 4.5 million was subsequently subscribed into
bonds of the CHF-Convertible Bond issue. As this conversion includes a significant conversion option,
the exchange is treated as an extinguishment of debt and an amount of $1,071,317 has been reclassified
in the statement of profit or loss from revaluation of conversion feature to extinguishment of debt.
In June 2016, there were the following changes to the debt structure:
- A liability of CHF 2,656,083 was transferred from Dr. Max Rössler to Global Care AG
- A liability of CHF 1.5 million was transferred from Sportiva participations ag to Global Care AG
– A liability of CHF 1.4 million was transferred from Global Care AG to Dr. Max Rössler.
In December 2016, Dr. Max Rössler subscribed a loan in the amount of CHF 15.2 million into bonds of
the new CHF-Bond issue 2016-2020. As this conversion did not represent a significant change of the
conditions between the old debt and the new debt, the exchange was not treated as an extinguishment of
debt.
Loans to the late Josef Mettler
On September 12, 2016, Josef Mettler, the Company’s former Chief Executive officer, passed away and
companies formerly owned by him are no longer related parties to the company. As of December 31,
2016, there are no receivables and payables to the late Josef Mettler. As of December 31, 2015, there was
a payable to Mr. Mettler of $70,135 (CHF 69,609).
Current account Sportiva participations ag (a Josef Mettler company)
For the
year
ended
December
31, 2016,
the
Company
owed
nil to
Sportiva
participations
ag.
As
of
December
31, 2015,
the
payable
balance
amounted
to
$528,660
(CHF
524,695).
The
amount
due
to
Sportiva Participations AG carried an interest rate of 3%.
Loan from Blue Dot SA (formerly DIA S.A)
On March 8, 2013, the Company entered into an interest free loan agreement with Blue Dot SA
(formerly DIA SA) in connection with the purchase of the land concession for the Paradisus Papagayo
Bay Resort & Luxury Villas project held by Altos del Risco SA. The terms of the loan agreement were
amended on March 16, 2015, to extend the due date for said payable until March 2016.
On April 21, 2016, the Company signed a new agreement, which stipulated new payment terms. The total
amount of $2,000,000 is now repayable in four quarterly installments of $500,000 each, starting on
August 21, 2016.
8
On September 21, 2016, the Company signed a new agreement, which stipulated new payment terms.
The total amount of $2,000,000 is now repayable in four quarterly installments of $500,000 each,
starting on November 21, 2016.
As of December 31, 2016, the outstanding balance amounts to $1,500,000.
Timeline
Our expected timeline for developing the Paradisus Papagayo Bay Resort & Luxury Villas has been
extended due to delays associated with administrative hurdles and securing necessary financing for
the development as follows:
— commence onsite vertical construction at the beginning of the second quarter of 2017
— complete construction in the fourth quarter of 2018
— handover to Melía in the fourth quarter of 2018
Competition
Three key factors have been taken into consideration when defining our hotel competitors in relation
to the Paradisus Papagayo Bay Resort & Luxury Villas:
— the proximity of competitors to our location in Guanacaste Province, Costa Rica
—
the consumption habits of prospective clientele
—
the ability to compete based on product similarity in relation to service standards,
facilities, the availability of equipment and the number or variety of services offered.
Based on our criteria we have determined that our prospective competitors are those characterized as
five- star holiday resorts in geographic proximity to our planned location.
Luxury Hotel Resorts
We distinguish between primary and secondary competitors.
Primary competition in Guanacaste Province is comprised of the following properties:
— Four Seasons Peninsula Papagayo
— JW Marriot Guanacaste
— Hilton Papagayo Costa Rica
— Westin Golf Resort & Spa Playa Conchal
— Andaz Peninsula Papagayo Resort
— Dreams Las Mareas Costa Rica
The closest direct and most prominent competition for our Guanacaste property will be the Four Seasons
Hotel.
9
All of our primary competitive establishments have common characteristics with a standard vacation
resort format with much more equipment and many more facilities to offer than hotels based in a city such
as:
—several modules/ lodging buildings around central services
—ample water areas with outdoor swimming pools, areas for hammocks and sun bathing
—children and entertainment activity areas
—restaurant pool areas with bars and service throughout the day
—large lounges for breakfast, lunch and dinner services
—alternative gastronomic or theme restaurants
—sports areas (basketball court, tennis courts, golf course, soccer field)
—Fitness Center, Wellness Center and Spa Areas
Our competitors are managed by leading international chains or experienced domestic companies. Despite
what might be construed as obvious obstacles to entry, including robust competition within the hospitality
industry in Guanacaste Province, we believe that our development of the Paradisus Papagayo Bay Resort
& Luxury Villas will be successful based principally on the following factors:
—the beach front location of the development
—
environmental integrity in project development and operation
—
the reputation of the Paradisus brand in the region and internationally
Furthermore, 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
—
outstanding product with unique features
—
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 and is emerging as a regional hotel investment hot-spot, including
the development of upscale and luxury hotels. This environment 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 (“ICT”) is responsible for collecting information on the number and economic impact of tourists
that visit Costa Rica. ICT also collects information related to hotel rooms and the country of origin for
tourists arriving in Costa Rica. Records produced by ICT detail that the number of tourists visiting Costa
Rica reached 2.93 million in 2016, representing an increase of 10 % over 2015.
10
The 2015 Travel and Tourism Competitiveness Index (“TTCI”), indicates that Costa Rica reached the
42
nd
place in the world ranking (up 5 places since 2013), classified as the second most competitive among
Latin American countries after Mexico, and ranking sixth in the Americas. Focusing solely on the sub
index measuring natural and cultural resources, Costa Rica ranks 26
th
worldwide, and 5
th
when
considering just the natural resources criteria. The TTCI report also notes Costa Rica's other attractions
such as tourism services infrastructure ranking 32
nd
, qualification of the labour force ranking 37
th
,
business environment ranking 47
th
and air transport infrastructure ranking 47
th
in the world.
ICT has determined that the most relevant origin markets in terms of demand are the United States,
Canada and Mexico which generated approximately 52% (2015: 50%) of all tourists followed by Central
American countries including Guatemala, El Salvador, Panama and Nicaragua, which generated
approximately 25% of the tourists arriving in Costa Rica in 2015. According to official data, the United
States remains the largest source of tourists to Costa Rica with a total of 1,233,277 in 2016 (2015:
1,077,044 ), representing 42.1% (2015: 40.5%) of all visitors. Tourists visiting Costa Rica from European
countries represented approximately 15% of all tourists in 2016 led by the United Kingdom, Germany,
Spain, France and Italy.
Geography
Costa Rica’s Guanacaste Province is bound in the east by a group of vegetated volcanoes and the west
by beaches on the Pacific Ocean. The province contains heavily forested areas and seven national parks,
and includes the Area de Conservación Guanacaste World Heritage Site. Guanacaste is the northern-
most province of Costa Rica, with the Papagayo Bay a 40-minute flight from San Jose and a half hour
car transfer to the beach. Tourism has emerged as the most lucrative revenue source in the province.
Tourists to the Guanacaste Province of Costa Rica are most often motivated by a desire for favorable
weather and beach conditions. Active tourism – those activities including canopying, trekking, visiting
volcanoes and flora or fauna watching – are secondary considerations.
We believe that our development will be well located as a hospitality property.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements and Labor Contracts
The Company holds no patents, trademarks, licenses, franchises, or concessions other than having
registered its “SunVesta” trademark in various countries.
The Company is not subject to any labor contracts.
Governmental and Environmental Regulation
Our operations are subject to a variety of national, federal, provincial and local laws, rules and regulations
relating to, among other things, worker safety and the use, storage, discharge and disposal of
environmentally sensitive materials. We believe that we are in compliance in all material respects with all
laws, rules, regulations and requirements that affect our business. Further, we believe that compliance
with such laws, rules, regulations and requirements do not impose a material impediment on our ability to
conduct business.
11
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.
The Company is not aware of any existing environmental impact issues that could have a material
effect on the development of the Paradisus Papagayo Bay Resort & Luxury Villas.
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.
The Company is not aware of any existing environmental impact issues that could have a material
effect on the development of the Paradisus Papagayo Bay Resort & Luxury Villas.
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. The Company is not aware of any existing environmental impact issues that
could have a material effect on the development of the Paradisus Papagayo Bay Resort & Luxury
Villas.
Employees
The Company is a development stage company and currently has six employees at December 31, 2016
and five employees as of the reporting date. Our management uses consultants, attorneys, and
accountants to assist in the conduct of our business.
ITEM 1A.
RISK
FACTORS
Not required of smaller reporting companies.
ITEM 1B.
UNRESOLVED
STAFF
COMMENTS
Not applicable.
12
ITEM 2.
PROPERTIES
Costa Rican Properties
The Company owns the concession rights for approximately 20 hectares of undeveloped prime land in
Guanacaste Province, Costa Rica. The purchase of the original concession of approximately 8 hectares
was completed for a consideration of $7,000,000. The purchase of the additional 12 hectares was based
on an agreement dated March 22, 2010, with Blue Dot SA (formerly “DIA SA”). The total purchase price
for the concessions was $12,700,000 of which $10,700,000 was paid as of December 31, 2014. The
remaining $2,000,000 of the purchase price was converted into an interest free loan. On September 21,
2016, the Company reached an agreement with Blue Dot SA to pay the $2,000,000 due in four quarterly
installments of $500,000 each, starting on November 21, 2016. The initial quarterly payment has been
made so as of December 31, 2016, the outstanding balance was
$1,500,000.
Executive Offices
We maintain our offices at Seestrasse 97, Oberrieden Switzerland CH-8942 on a leasehold basis with an
annual rental expense of $130,000 per annum through December 31, 2017.
The
Company
recognized
lease
expenses
of
$130,000
and
$130,000
for
the
years
ended
December
31,
2016
and
2015,
respectively,
for
the
use
of
these
executive
offices.
We
believe
that
we
have
sufficient
office space for the foreseeable future in order to pursue the completion of the project described herein.
ITEM 3.
LEGAL
PROCEEDINGS
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 OTCQB, a service maintained by OTC Link under the
symbol “SVSA.” Trading in the common stock over-the-counter market has been limited and sporadic
and the quotations set forth below are not necessarily indicative of actual market conditions. These prices
reflect inter-dealer prices without retail mark-up, mark-down, or commission, and may not necessarily
reflect actual transactions. The high and low bid prices for the common stock for each quarter of the years
ended December 31, 2016 and 2015 are as follows:
Year
Quarter Ended
High
Low
2016
December 31
$0.14
$0.14
September 30
$0.15
$0.15
June 30
$0.32
$0.32
March 31
$0.35
$0.35
2015
December 31
$0.25
$0.15
September 30
$0.25
$0.24
June 30
$0.25
$0.14
March 31
$0.16
$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, 2016, there were 91 shareholders of record holding 101,841,603 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, 2016, 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, 2016, there were 20,000,000 outstanding stock options outstanding, pursuant to the
2013 SunVesta Stock Option Plan, to purchase shares of our common stock at an exercise price of $0.05
per share, none of which have vested as of year-end. The Company had 32,000,000 stock options
outstanding as of December 31, 2015, of which 12,000,000 expired in the current period.
14
Warrants
As of December 31, 2016, we have no outstanding warrants to purchase shares of our common stock.
Dividends
We have not declared any cash dividends since inception and do not anticipate paying any dividends
in the near future. The payment of dividends on our common stock is within the discretion of the
Board of Directors subject to earnings, capital requirements, financial condition, and other relevant
factors including those contractual restrictions related to certain debt obligations and those limitations
generally imposed by applicable state law.
Transfer Agent and Registrar
Our transfer agent and registrar is Standard Register & Company, Inc., located at 12528 South 1840
East, Draper, Utah 84020 and their phone number is (801) 571-8844.
Purchases of Equity Securities made by the Issuer and Affiliated Purchasers
None.
Recent Sales of Unregistered Securities
On November 8, 2016, the Company authorized the issuance of 5,900,000 shares of restricted common
stock valued at $0.15 a share to certain individuals, earned in connection with either employment
agreements or service to the board of directors, in reliance upon the exemptions from registration
provided by Section 4(2) and Regulation S of the Securities Act of 1933, as amended (“Securities Act)
as follows:
Name
Shares
Consideration
Value
Exemption
Josef Mettler (deceased)
3,000,000
Services
$0.15
Section 4 (2)/Reg S
Hans Rigendinger
2,500,000
Services
$0.15
Section 4 (2)/Reg S
José Maria Figueres
200,000
Services
$0.15
Section 4 (2)/Reg S
Howard Glicken
200,000
Services
$0.15
Section 4 (2)
The Company complied with the exemption requirements of Section 4(2) of the Securities Act based on
the following factors: (1) the issuances were isolated private transactions based on service agreements
which did not involve a public offering; (2) the offerees had access to the kind of information which
registration would disclose; (3) the offerees was financially sophisticated; and (4) all of the offerees
serve the Company as either officers or directors or both.
The Company complied with the exemption requirements of Regulation S by having directed no offering
efforts in the United States, by offering securities only to offerees who were outside the United States at
the time of the offering, and ensuring that the offerees to whom the securities were offered and authorized
were non-U.S. offerees with an addresses in a foreign country.
ITEM 6.
SELECTED
FINANCIAL
DATA
Not required.
15
ITEM 7.
MANAGEMENT’S
DISCUSSION AND ANALYSIS
OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS
This
Management’s Discussion and Analysis of Financial Condition and Results of Operations
and other
parts of this current report contain forward-looking statements that involve risks and uncertainties.
Forward-looking statements can also be identified by words such as “anticipates,” “expects,” “believes,”
“plans,” “predicts,” and similar terms. Forward-looking statements are not guarantees of future
performance and our actual results may differ significantly from the results discussed in the forward-
looking statements. Factors that might cause such differences include but are not limited to those
discussed in the subsection entitled
Forward-Looking Statements and Factors That May Affect Future
Results and Financial Condition
below. The following discussion should be read in conjunction with our
financial statements and notes thereto included in this current report. Our fiscal year end is December 31.
Discussion and Analysis
Our plan of operation through December of 2018 is to develop the Paradisus Papagayo Bay Resort &
Luxury Villas project, the completion of which will require a total net investment of approximately $192
million (excluding non-recuperated overhead expenses and the anticipated $25 million in net proceeds for
the sale of private villas). We aim to secure a minimum of $140 million in new funding over the next
twelve months, though our actual financing requirements may be adjusted to suit that amount realized.
New funding over the next twelve months is expected to be raised from debt financing through bonds,
shareholder loans and the guaranty agreement if necessary.
Results of Operations
During the year ended December 31, 2016, our operations focused on (i) completing earthwork; (ii)
pursuing additional debt financing; (iii) obtaining government approval to extend the term of the
concessions; and (iv) securing government approval to include beachfront property adjacent to the
project.
The Company has been funded since inception from debt or equity placements and by shareholders or
partners in the form of loans. Capital raised to date has been used to develop the Costa Rican property
including for the purchase of the land concessions, earthwork, and general and administrative costs.
16
Comprehensive Losses
The variance in losses over the comparative annual period is reconciled below:
Comprehensive Loss 2015
(19,218,851)
Variances 2016 from 2015
Decrease in general and administrative
906,873 Increase due to higher consulting
expenses
expenses, project-related expenses and
expenses related to considering a public
listing in Switzerland. This increase was
overcompensated by
negative personnel
costs due to a reversal of share-based
payments for the late Josef Mettler
Increase in impairment expenses
(2,642,556) Impairment attributed to expenses
related to the purchase of additional
concessions in Costa Rica
Increase in interest income
22,850 Increase in deposits
Decrease in interest expenses
692,764 Higher debt and interest,
over compensated by a decrease in
amortization of deferred financing cost.
Decrease in loss on extinguishment of debt
6,512,812 Less impact from debt extinguishment
in 2016.
Change in fair values of conversion features
2,113,826 Primarily
decrease in time value of
conversion feature
Increase in unrealized exchange gains
1,316,508 Currency
fluctuations
Increase in other income / (expenses)
(153,346) Increase in expenses
Income Taxes
1,151 No income taxes in 2016
Decrease in foreign currency
translation losses
666,078 Currency
fluctuations
Decrease in actuarial gains / losses
39,151 Changes to actuarial assumptions
Total variances
9,476,111
Comprehensive Loss 2016
(9,742,739)
We did not generate revenue during this period and we expect to continue to incur losses through the
year ended December 31, 2017.
Income Tax Expense (Benefit)
The Company has a prospective income tax benefit resulting from a net operating loss carry-forward
and startup costs that will offset future operating profits.
Capital Expenditures
The Company expended a significant amount on capital expenditures for the period from inception to
December 31, 2016 and expects to incur future cash outflows on capital expenditure as discussed in
the "Liquidity and Capital Resources" and the "Going Concern" paragraphs below.
17
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, 2016 and 2015, the following were the working capital items:
December 31,
December 31,
2016
2015
Current assets
Cash and cash equivalents
806,440
111,830
Receivable from related parties
49,292
19,945
Other assets
456,099
158,574
Total current assets
1,311,830
290,349
Current liabilities
Bank liabilities
-
179,313
Accounts payable
3,311,512
8,048,608
Accrued expenses
3,160,723
7,831,247
Notes payable
1,500,000
2,736,912
Notes payable to related parties
307,088
1,130,978
Other liabilities
120
-
Bonds
6,687,384
8,347,717
Total current liability
14,966,826
28,274,775
Net working capital
(13,654,996)
(27,984,426)
As of December 31, 2016 and 2015 the following were the items making up the total stockholders’
deficit:
December 31,
December 31,
2016
2015
Assets
Current assets
1,311,830
290,349
Non-current assets
68,354,502
67,007,090
Total assets
69,666,332
67,297,439
Liabilities
Current liabilities
14,966,825
28,274,775
Non-current liabilities
105,872,146
80,287,652
Total liabilities
120,838,971
108,562,427
Total stockholders’ deficit
(51,172,639)
(41,264,988)
The negative working capital of $13,605,935 is of immediate concern. However, based on the guaranty
signed by certain principals, the Company is convinced that it can address liquidity problems.Net cash
flow used in operating activities for the twelve months ended December 31, 2016, was $11,478,901, as
compared to $6,024,873 for the twelve-month period ended December 31, 2015.
The Company expects to use net cash flow in operating activities until the Company completes the
Paradisus Papagayo Bay Resort & Luxury Villas project, which completion is projected for the fourth
quarter of 2018.
Net cash used in investing activities for the twelve months ended December 31, 2016, was $1,737,927 as
compared to $9,178,106 for the twelve-month period ended December 31, 2015. Net cash used in
18
investing activities in the current twelve-month period is comprised of receivables from related parties,
purchase of property and equipment, advance payments to subcontractors, and down payments for
property and equipment, offset by deposits related to construction activities and restricted cash. Net cash
used in investing activities in the prior comparable twelve-month period was comprised of receivables
from related parties, purchase of property and equipment, deposits related to construction and restricted
cash.
We expect to continue to use net cash flow in investing activities while in the process of developing the
Paradisus Papagayo Bay Resort & Luxury Villas.
Net cash provided by financing activities for the twelve-month period ended December 31, 2016, was
$13,994,449 as compared to $15,326,185 for the twelve-month period ended December 31, 2015. Net
cash provided by financing activities in the current twelve-month period is comprised of proceeds from
notes payable to related parties, and proceeds from bond issuances net of commissions, offset by the
repayment of notes payable to related parties, the repayment of bank liabilities, the repayment of
outstanding bonds, and the repayment of notes payable and other debt. Net cash provided by financing
activities in the prior comparable twelve-month period was comprised of bank liabilities, notes payable to
related parties, notes payable, and proceeds from bond issuances net of commissions, offset by the
repayment of bonds.
We expect net cash flow provided by financing activities to continue due to the unrealized financing
necessary to complete the development of the Paradisus Papagayo Bay Resort & Luxury Villas.
Management believes that cash on hand, related party loans and the assurance of the Guaranty Agreement
as described in the going concern paragraph below are sufficient for us to conduct operations over the
next twelve months.
We had no formal lines of credit or other bank financing arrangements as of December 31, 2016.
We have commitments that include an award letter issued in favor of certain general contractors together
with purchase orders and related agreements for $130 million as of December 31, 2016, in connection
with the development of the Paradisus Papagayo Bay Resort & Luxury Villas, which commitments are
included in the required estimated net financing of $192 million to complete the project.
We maintain a defined benefit plan that covers all of our Swiss employees as of December 31, 2016.
We have no current plans for significant purchases or sales of plant or equipment as of December 31,
2016, except in connection with the planned construction of the Paradisus Papagayo Bay Resort &
Luxury Villas,
We have no current plans to make any changes in the number of our employees as of December 31, 2016.
Future Financings
The Company is in the process of fulfilling CHF Bond offerings of up to CHF 50,000,000 during the
second quarter of 2017.
The Company will continue to rely on the terms of the Guaranty Agreement as necessary to meet
shortfalls in development financing.
19
Off-Balance Sheet Arrangements
As of December 31, 2016, 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 $212 million (including overhead
expenses).
The project is expected to open in the fourth quarter of 2018. Until the completion of the project,
the following expenditures are estimated to be incurred:
a. Gross project cost
$
217,000,000
b. Less: Proceeds from sale of villas
(25,000,000)
c. Net project cost
192,000,000
d. Overhead expenses
20,000,000
f
Total, excluding other potential projects
$
212,000,000
Seventy percent of the “Net project cost” is intended to be financed through the issuance of secured
bonds, for which negotiations have been initiated. The remaining thirty percent of the “Net project cost”,
as well as “non-recuperated overhead expenses” and the cost of potential “other projects” are intended to
be financed by the main shareholders or lenders of the project in the absence of alternative financing
commitments, i.e. Zypam Ltd., shareholder and related entity to the late Mr. Josef Mettler, Mr. Hans
Rigendinger, shareholder, Chief Executive Officer and Company Board Member and Dr. Max Rössler,
Company Board Member and controlling shareholder of Aires.
On July 16, 2012, certain principal shareholders of the Company or principal lenders to the project
entered into a guaranty agreement in favor of SunVesta AG. The purpose of the guaranty is to ensure that
until such time as financing is secured for the entire project that they will act as a guarantor to creditors to
the extent of the project’s ongoing capital requirements.
On September 22, 2015, the signatories to the guaranty formally agreed to maintain the guaranty, as
necessary, until December 31, 2018, after which date the guaranty will expire. The guaranty agreement
requires that within 30 days of receiving a demand notice, the requested funds are made available by the
guarantors to the Company.
On September 12, 2016, the signatories to the guaranty formally agreed to maintain the guaranty, as
necessary, until completion of the construction of Paradisus Papagayo Bay Resort & Luxury Villas, after
which date the guaranty will expire. The guaranty agreement requires that within 30 days of receiving a
demand notice, the requested funds are made available by the guarantors to the Company.
Based
on
this
Guaranty
Agreement,
management
believes
that
available
funds
are
sufficient
to
finance
cash
flows
for
the
twelve
months
subsequent
to
December
31,
2016,
and
the
filing
date,
though
future
cash outflows for investing activities will continue to depend on the availability of financing.
20
Forward-Looking Statements and Factors That May Affect Future Results and Financial Condition
The statements contained in the section titled
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
and elsewhere in this current report, with the exception of historical
facts, are forward-looking statements. We are ineligible to rely on the safe-harbor provision of the
Private Litigation Reform Act of 1995 for forward looking statements made in this current report.
Forward-looking statements reflect our current expectations and beliefs regarding our future results of
operations, performance, and achievements. These statements are subject to risks and uncertainties and
are based upon assumptions and beliefs that may or may not materialize. These statements include, but
are not limited to, statements concerning:
— our anticipated financial performance and business plan
— the sufficiency of existing capital resources
— our ability to raise additional capital to fund cash requirements for future operations
— uncertainties related to our future business prospects
— our ability to generate revenues to fund future operations
— the volatility of the stock market
— general economic conditions
We wish to caution readers that our operating results are subject to various risks and uncertainties that
could cause our actual results to differ materially from those discussed or anticipated elsewhere in this
report. We also wish to advise readers not to place any undue reliance on the forward-looking statements
contained in this report, which reflect our beliefs and expectations only as of the date of this report. We
assume no obligation to update or revise these forward-looking statements to reflect new events or
circumstances or any changes in our beliefs or expectations, other than as required by law.
Recent Accounting Pronouncements
Please see Note 2 to the accompanying consolidated financial statements for recent accounting
pronouncements.
ITEM 7A.
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, 2016
and 2015
are
attached hereto
as
F- 1 through F-50.
Due to rounding, the sum of individual positions may be higher or lower than 100%.
21
SUNVESTA, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
Page
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Balance Sheets
F-3
Consolidated Statements of
Comprehensive Loss
F-4
Consolidated Statements of
Stockholders’ Deficit
F-5
Consolidated Statements of
Cash Flows
F-6
Notes to Consolidated
Financial Statements
F-8
F-1
Tel. +41 44 444 35 55
BDO AG
Fax +41 44 444 37 66
Fabrikstrasse 50
8031 Zürich
![[F10K2016001.JPG]](http://content.edgar-online.com/edgar_conv_img/2017/03/17/0001211524-17-000022_F10K2016001.JPG)
Switzerland
Report of Independent Registered Public Accounting Firm
Board of Directors and
Shareholders SunVesta, Inc.,
Oberrieden, Switzerland
We
have
audited
the
accompanying
consolidated
balance
sheets
of
SunVesta,
Inc.
as
of
December
31, 2016 and
2015
and
the
related
consolidated
statements
of
comprehensive
loss,
stockholders’
deficit,
and
cash
flows
for
each
of
the
two
years
in
the
period
ended
December
31,
2016.
These
financial
statements
are
the
responsibility
of
the
Company’s
management.
Our
responsibility
is
to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable
assurance
about
whether
the
financial
statements
are
free
of
material
misstatement.
The
Company
is
not
required
to
have,
nor
were
we
engaged
to
perform,
an
audit
of
its
internal
control
over financial reporting. Our audits included consideration of internal control over financial reporting
as
a
basis
for
designing
audit
procedures
that
are
appropriate
in
the
circumstances,
but
not
for
the
purpose of expressing an opinion on the effectiveness
of the Company’s internal control
over
financial reporting. Accordingly,
we express no such opinion. An audit also includes examining, on a
test
basis,
evidence
supporting
the
amounts
and
disclosures
in
the
financial
statements,
assessing
the
accounting
principles
used
and
significant
estimates
made
by management,
as
well
as
evaluating
the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our
opinion.
In
our
opinion,
the
consolidated
financial
statements
referred
to
above
present
fairly,
in
all
material
respects, the financial position of SunVesta, Inc. at December 31, 2016 and 2015, and the results of its
operations
and
its
cash
flows
for
each
of
the
two
years
in
the
period
ended
December
31,
2016
,
in
conformity
with
accounting principles generally accepted in the United States of
America.
Zürich, March 17, 2017
BDO AG
// Andreas Wyss
// Julian Snow
Andreas Wyss
Julian Snow
F-2
SUNVESTA, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2016
December 31, 2015
Assets
Current assets
Cash and cash equivalents
806,440
111,830
Receivable from related parties
49,292
19,945
Other assets
456,099
158,574
Total current assets
$
1,311,830
290,349
Non-current assets
Property and equipment - net
66,216,658
61,271,424
Deposits related to construction work
190,549
798,874
Notes receivable
280,242
280,242
Down payment for property and equipment
0
2,972,083
Restricted cash
1,667,052
1,684,467
Total non-current assets
$
68,354,502
67,007,090
Total assets
$
69,666,332
67,297,439
Liabilities and stockholders' deficit
Current liabilities
Bank liabilities
-
179,313
Accounts payable
3,311,512
8,048,608
Accrued expenses
3,160,723
7,831,247
Note payable
1,500,000
2,736,912
Notes payable to related parties
307,088
1,130,978
Other liabilities
120
-
Convertible CHF-Bond
6,202,921
0
EUR-Bond
484,463
8,347,717
Total current liabilities
$
14,966,826
28,274,775
Non-current liabilities
Convertible CHF-Bond
31,892,613
25,866,148
CHF-Bond
16,384,893
-
Liability related to conversion feature
5,936,378
6,976,322
Notes payable to related parties
51,473,793
47,198,362
Other long-term debts
-
36,140
Pension liabilities
184,469
210,680
Total non-current liabilities
$
105,872,146
80,287,652
Total liabilities
$
120,838,972
108,562,427
Stockholders' equity
Preferred stock, $0.01 par value; 50,000,000 shares
authorized, no shares issued and outstanding
Common stock, $0.01 par value; 200,000,000 shares authorized;
959,416
959,416
101,841,603 shares issued and outstanding
Additional paid-in capital
23,238,526
23,403,438
Accumulated other comprehensive income / (loss)
2,997,562
1,778,961
Accumulated deficit
(78,368,143)
(67,406,803)
Total stockholders' deficit
$
(51,172,639)
(41,264,988)
Total liabilities and stockholders' deficit
$
69,666,332
67,297,439
The accompanying notes are an integral part of these consolidated financial statements.
F-3
SUNVESTA, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Years Ended December 31, 2016 and 2015
2016
2015
Revenues
Revenues, net
-
-
Cost of revenues
-
-
Gross profit
$
-
-
Operating Expenses
General and administrative expenses
(5,079,198)
(5,986,071)
Impairment expenses
(2,642,556)
-
Total operating expenses
$
(7,721,754)
(5,986,071)
Income / (loss) from operations
$
(7,721,754)
(5,986,071)
Other income / (expenses)
Interest income
67,808
44,957
Interest expense
(6,883,332)
(7,576,096)
Change in Fair Value of Conversion Feature
2,500,486
386,660
Loss on extinguishment of debt
(1,165,268)
(7,678,080)
Exchange differences
2,502,188
1,185,680
Other income / (expenses)
(261,468)
(108,122)
Total other expenses
$
(3,239,586)
(13,745,000)
Profit/ (loss) before income taxes
(10,961,340)
(19,731,072)
Income Taxes
-
(1,151)
Net income / (loss)
$
(10,961,340)
(19,732,222)
Comprehensive income / (loss)
Foreign currency translation
1,178,721
513,372
Actuarial gains / (losses)
39,880
-
Comprehensive income / (loss)
$
(9,742,739)
(19,218,851)
Earnings / (loss) per common share
Basic and diluted
$
(0.11)
(0.21)
Weighted average common shares
Basic and diluted
100,245,439
94,338,589
The accompanying notes are an integral part of these consolidated financial statements.
F-4
SUNVESTA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
Years Ended December 31, 2016 and 2015
Common
Additional
Accumulated
Total
Stock
Paid-in
Other
Accumulated
Treasury
Stockholders’
Capital
Comprehensive
deficit
Stock
Equity
Income (Loss)
(Deficit)
December 31, 2014
$
835,416
$
22,942,486
$
1,265,590
$
(47,674,581)
$
-
$
(22,631,089)
Translation adjustments
-
-
513,372
0
-
513,372
Net loss
-
-
-
(19,732,222)
-
(19,732,222)
Stock based compensation expense
124,000
460,952
-
-
-
584,952
Actuarial gains & losses
-
-
-
-
-
-
December 31, 2015
$
959,416
$
23,403,438
$
1,778,961
$
(67,406,803)
$
-
$
(41,264,988)
Translation adjustments
-
-
1,178,721
(0)
-
1,178,721
Net loss
-
-
-
(10,961,340)
-
(10,961,340)
Stock based compensation expense
-
(164,912)
-
-
-
(164,912)
Actuarial gains & losses
-
-
39,880
-
-
39,880
December 31, 2016
$
959,416
$
23,238,526
$
2,997,562
$
(78,368,143)
$
-
$
(51,172,639)
The accompanying notes are an integral part of these consolidated financial statements.
F-5
SUNVESTA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2016 and 2015
2016
2015
Cash flows from operating activities
Net loss
$
(10,961,340)
(19,732,223)
Adjustments to reconcile net loss to net cash
Depreciation and amortization
61,771
67,163
Impairment on Down Payment
2,642,555
-
Amortization of debt issuance costs and commissions
2,588,290
3,428,099
Accrued interest on debt
3,713,440
-
Extinguishment of Debt
1,165,268
7,678,080
Unrealized
exchange differences
(3,004,224)
(1,925,603)
Stock compensation expense
(164,912)
584,952
Increase in pension fund commitments
18,791
74,833
Expenses (+) / Income (-) related to conversion feature
(2,051,203)
(386,660)
- Cash flow impact of increase / decrease in:
Other current assets
846,413
130,582
Accounts payable
(4,335,084)
1,910,735
Accrued expenses
(1,998,668)
2,145,169
Net cash used in operating activities
$
(11,478,901)
(6,024,873)
Cash flow from investing activities
Notes receivable
-
(280,242)
Receivables from
related parties
-
(1,507,128)
Payments to acquire property, plant and equipment
(1,455,760)
(6,801,793)
Proceeds from sale of property, plant and equipment
36,578
-
Deposits related to construction
(641,818)
21,811
Payments for down payments for property and equipment
-
(610,810)
Proceeds from down payments for property and equipment
309,023
-
Restricted cash
14,050
56
Loan receivable and participations
1
(31,424)
Net cash used in investing activities
$
(1,737,927)
(9,178,106)
Cash flows from financing activities
Proceeds from bank liabilities
42,047
25,938
Repayments of bank liabilities
(220,100)
-
Proceeds from notes payable related parties
18,456,316
16,359,360
Repayment of notes payable related parties
(3,286,465)
-
Proceeds from (Repayments of) Notes Payable
-
485,665
Proceeds from bond issuance, net of commissions and debt
issuance costs
7,433,328
8,392,693
Repayment of bonds
(7,786,584)
(9,837,471)
Repayments of note payable and other debt
(644,091)
-
Net cash provided by financing activities
$
13,994,449
15,326,185
Effect of exchange rate changes
(83,009)
(25,723)
Net increase / - decrease in cash
694,612
97,483
Cash and cash equivalents, beginning of period
111,830
14,347
Cash and cash equivalents, end of period
$
806,442
111,830
F-6
SUNVESTA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2016 and 2015
Additional information
2016
2015
Capitalized interest and debt issuance costs for construction (non-cash)
3,694,061
3,335,000
Reversal of capitalized payment obligation for construction (non-cash)
451,816
-
Assumption of payables due from AIRES by Global Care AG (non-cash)
7,621,345
-
Conversion of Loans payable to Global Care AG to CHF convertible bonds
4,635,352
-
Assumption of payables due from Global Care AG by
Sportiva (non-cash)
1,533,150
-
Conversion of Loan from third party
to CHF-Convertible Bond
599,700
-
Assumption of loan due from Global Care AG by
Dr. Max Rössler
1,442,253
-
Conversion of Loan from Dr. Max Rössler to CHF-Bond
15,406,139
-
Transfer from EUR-Bond to CHF-Bond
953,683
-
Repayment of Specogna Holding AG loan by
Aires
-
707,428
Interest paid
-
2,395,000
Assumption of receivables from Josef Mettler by
AIRES (non-cash)
-
1,507,128
Assumption of loans Dr. Max Rössler by
AIRES (non-cash)
-
1,551,669
The accompanying notes are an integral part of these consolidated financial statements
F-7
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
1.
CORPORATE INFORMATION
On
August
27,
2007,
SunVesta
Inc.
(“SunVesta”)
acquired
SunVesta
Holding
AG
(“SunVesta
AG”). Until
recently, SunVesta AG held five wholly-owned subsidiaries: SunVesta Projects
and
Management
AG,
a
Swiss
company;
Rich
Land
Investments
Limitada,
a
Costa
Rican
company
(“Rich
Land”);
SunVesta
Costa
Rica
Limitada,
a
Costa
Rican
company
(“SVCR”),
Altos
del
Risco
SA,
a
Costa
Rican
company
(“AdR”)
and
SunVesta
Holding
España
SL
(“España”),
a
Spanish company. Effective May
21, 2016 the three Costa Rican companies were merged,
whereby
Altos
del
Risco SA absorbed its
two affiliated companies and
subsequently changed
its
name
to
SunVesta Costa Rica SA.
In
January 2005,
the
Company changed
its
business
focus
to
the
development
of
holiday resorts
and
investments
in
the
hospitality
and
related
industry.
The
Company
has
one
major
project
in
Costa
Rica.
Planning
for
this
project
has
been
fully
completed,
all
consents
have
been
granted,
and
excavation work began
in
March
2013. The Company is
still
in process
of
securing
financing
for
the
project
and
has
not
realized
revenue
to
date.
Since
the
financing
of
the
project
is not complete, the Company’s activities are subject to significant risks and
uncertainties.
These
consolidated
financial
statements
are
prepared
in
US
Dollars
on
the
basis
of
generally
accepted accounting principles in the United States of America (“US GAAP”).
2.
SIGNIFICANT ACCOUNTING
POLICIES
Principles of Consolidation
The
consolidated
financial
statements
include
those
of
the
Company
and
its
subsidiaries.
One
hundred
percent
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
end
of
the
respective
periods
are
also
eliminated.
Certain
previously
reported amounts have been reclassified to conform to the current presentation.
Fiscal year
The fiscal year of the Company and all its subsidiaries correspond with the calendar year.
Use of estimates
These
consolidated
financial
statements
are
prepared
in
conformity
with
accounting
principles
generally
accepted
in
the
United
States
of
America
(“US
GAAP”)
and
require
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.
These
considerations
also
impact
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
believes
that
the
valuation
of
property
and
equipment
includes
substantial
estimates.
F-8
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
2.
SIGNIFICANT ACCOUNTING POLICIES -
CONTINUED
Cash and cash equivalents
Cash
and
cash
equivalents
include
petty
cash,
post
and
bank
accounts
as
well
as
time
deposits
with maturities of less than three
months.
Allowance for Doubtful Accounts
Management
makes
ongoing
estimates
relating
to
the
collectability
of
receivable
balances
and
maintains
a
reserve
for
estimated
losses
resulting
from
the
inability
of
counterparties
to
meet
their
financial
obligation
to
us.
As
of
December
31,
2016
and
2015
the
Company does
not
have
any
amounts
reserved
in
the
consolidated
balance
sheet
nor
bad
debt
expense
recorded
in
the
statement of comprehensive loss.
Other assets
Other
assets
include
items,
such
as
value
added
tax,
withholding
tax
or
similar
credits
with
maturities less than one year.
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 (concessions)
not depreciated
— IT
equipment
3 years
— Other equipment and furniture
5 years
— Leasehold improvements
5 years
— Vehicles
5 years
— Project in process
not depreciated until project finished
The
cost
and
the
related
accumulated
depreciation
are
removed
from
the
balance
sheet
at
the
time of disposal.
Project in process relates to costs incurred directly
related to the planning and construction of the
hotel
in
the
Papagayo
Gulf
Tourism
Project
of
Costa
Rica
and
are
reasonably
recoverable
from
future hotel and rental operations or the sale of certain apartments. Once the project in process is
finished the Company will reclassify the capitalized costs to corresponding categories and
determine the depreciation method and depreciation period.
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
.
F-9
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
2.
SIGNIFICANT ACCOUNTING POLICIES -
CONTINUED
With respect to the construction in
progress,
the Company has capitalized a cumulative
amount
of
$13,059,061
and
$9,365,000 of interest
expense
and
debt
issuance
costs as
of
December 31,
2016
and
December 31, 2015, respectively to property and
equipment.
Deposits related to construction work
The Company prepays
deposits
for
construction
work,
which
costs
are
capitalized initially and
will be amortized once construction has
begun.
Debt issuance cost
The
Company
reclassified
debt
issuance
cost
to
be
presented
net
with
the
issued
debt
as
per
ASU 2015-3. This ASU was applied retrospectively for all periods presented
Down payment for property and equipment
Down payments for property
and
equipment are recorded
at
cost. Once
the corresponding
property and equipment item has been completely purchased, it will be reclassified to a
corresponding
subcategory
within
property and
equipment
and
amortized.
The
Company
assesses regularly if the down payments are recoverable in accordance with ASC 360
Property,
Plant,
and
Equipment.
Should any down
payments due to specific circumstances
not
be
assessed
as recoverable, they
will be impaired.
Restricted Cash
Restricted cash includes cash that is not disposable for the Company without third party
permission
such
as
rental
deposits
or
deposits
related
to
the
project
in
process.
Based
on
the
nature of the Company’s underlying business it will be determined whether a deposit is
recorded as a current
or non-current asset.
Impairment of 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.
An
impairment
loss
is
recognized
to
the
extent
that
the
carrying
value
of
the
asset
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.
Income taxes
The Company has not incurred material current taxes on income as it
has not generated taxable
income in any of the jurisdictions in which it operates.
F-10
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
2.
SIGNIFICANT ACCOUNTING POLICIES -
CONTINUED
Deferred
taxes
are
calculated
on
the
temporary differences
that
arise
between
the
tax
base
of
an
asset
or
liability
and
its
carrying
value
on
the
balance
sheet
of
the
Company
prepared
for
consolidation
purposes,
with
the
exception
of
temporary
differences
arising
on
investments
in
foreign
subsidiaries
where
the
Company
has
plans
to
permanently
reinvest
profits
into
the
foreign subsidiaries.
Deferred
tax
assets
on
tax
loss
carry-forwards
are
only
recognized
to
the
extent
that
it
is
more
likely than not, that future profits will be available and the tax loss carry-forward can be
utilized.
Changes
to
tax
laws
or
tax
rates
enacted
at
the
balance
sheet
date
are
taken
into
account
in
the
determination
of
the
applicable
tax
rate
provided
that
they
are
likely
to
be
applicable
in
the
period when the deferred tax assets or tax liabilities are realized.
The
Company
is
subject
to
income
taxes
in
the
United
States
of
America,
Switzerland,
Spain
and
Costa
Rica.
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 or measurement of
its
uncertain
tax
position.
Interest
and
penalties
related
to
uncertain
tax
positions
are
recognized
as income tax expense.
Concentration of risks
Financial
instruments
that
potentially
subject
the
Company
to
concentrations
of
credit
risk
are
primarily
cash
and
cash
equivalents.
Cash
and
cash
equivalents
are
maintained
with
several
financial institutions. Deposits held with banks may exceed the amount of insurance provided on
such
deposits.
Generally,
these
deposits
may be
redeemed
upon
demand.
Cash
and
cash
equivalents are subject to currency exchange rate
fluctuations.
Foreign Currency Translation and Transactions
The
consolidated
financial
statements
of
the
Company
are
presented
in
US
Dollars
(“$”)
which
is also
the
functional
currency
of
the
parent
company. The
financial
position
and
results
of
operations
of
our
foreign
subsidiaries
are
determined
using
the
currency
of
the
environment
in
which
an
entity
primarily
generates
and
expends
cash
as
the
functional
currency.
Assets
and
liabilities
of
these
subsidiaries
are
translated
at
the
exchange
rate
in
effect
at
each
year-end.
Statement
of
comprehensive
loss
accounts
are
translated
at
the
average
rate
of
exchange
prevailing
during
the
year.
Translation
adjustments
arising
from
the
use
of
differing
exchange
rates
from
period
to
period are
included
in
accumulated
other
comprehensive
income (loss)
in
stockholders’ deficit.
F-11
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
2.
SIGNIFICANT ACCOUNTING POLICIES -
CONTINUED
Gains
and
losses
resulting
from
foreign
currency
transactions
are
included
in
other
income
and
expenses (exchange differences), except intercompany foreign currency
transactions that are of a
long-term-investment
nature
which
are included
in accumulated
other
comprehensive
income
in
stockholders’ equity.
Bonds, net of debt issuance costs
Bonds
comprise
of
bonds
payable
in
Euros
(“EUR”)
and
Swiss
Francs
(“CHF”),
which
bear
fixed
interest
rates.
Bonds
are
carried
at
notional
value.
If
a
bond
becomes
repayable
within
the
next
12
months
from
the
balance
sheet
date
on,
such
bond
or
the
corresponding
portion
of
this
bond will be categorized
as
current.
Commissions paid
to bondholders
themselves
are
reflected
as
debt discounts
and amortized over the term
of the bond, based on the “effective interest method”.
The
amortization expense is reflected in amortization of debt issuance
cost.
Bonds are presented net
of debt issuance costs, that arise as
a result of issuing debt, i.e. the EUR
bonds,
CHF
bonds,
CHF
convertible
bonds
and
the
loan
with
Aires
International
Investments
Inc.
These
costs
are
amortized
over
the
life
of
the
debt
using
the
effective
interest
method.
The
costs
comprise
of
finder's
fees
of
generally
between
three
and
12
percent
of
the
amount
issued
and
costs
incurred
in
connection
with
issuing
the
bonds,
such
as
legal
and
accounting
fees,
and
stamp
duty
taxes.
The
accumulated
amortization
of
debt
issuance
costs
was
$1,242,172
and
$797,857 as of December 31, 2016 and December 31, 2015,
respectively.
Pension Plan
The Company maintains a pension plan covering all employees in Switzerland; it is considered a
defined
benefit
plan
and
accounted
for in
accordance with
ASC
715 C
ompensation
-
Retirement
Benefits
.
This
model
allocates
pension
costs
over
the
service
period
of
employees
in
the
plan.
The
underlying
principle
is
that
employees
render
services
ratably
over
this
period,
and
therefore, the statement of comprehensive loss effects of pensions should follow a similar
pattern. ASC 715 requires recognition of
the
funded status, or difference
between
the fair value
of
plan
assets
and
the
projected
benefit
obligations
of
the
pension
plan
on
the
balance
sheet,
by
recording a corresponding
expense in the net
loss. If the projected benefit obligation exceeds the
fair
value
of
plan
assets,
then that difference or unfunded status represents the pension
liability.
The
Company
records
a
net
periodic
pension
cost
in
the
statement
of
comprehensive
loss.
The
liabilities
and
annual
income
or
expense
of
the
pension
plan
is
determined
using
methodologies
that
involve
several
actuarial
assumptions,
the
most
significant
of
which
are
the
discount
rate
and
the
long-term
rate
of
asset
return
(based
on
the
market-related
value
of
assets).
The
fair
values of plan assets are determined based on prevailing market prices.
Related parties
Parties
are
considered
related
if
one
party
directly
or
indirectly
controls,
is
controlled
by,
or
is
under
common
control of
the
other
party, if
it
has
an
interest
in
the
other
party
that
gives
significant
influence,
if
it
has
joint
control
over
the
party, or
if
it
is
an
associate
or
a
joint
venture. Senior management or close family members are also deemed to be related parties.
F-12
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
2.
SIGNIFICANT ACCOUNTING POLICIES -
CONTINUED
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.
Additionally,
the
Company's
two
convertible
CHF-Bonds
were
issued
in
October
2015.
These
convertible
CHF
bonds
convert
into
shares
of
Sunvesta
Holding
AG,
the
Company's
wholly
owned subsidiary. The resulting common shares assumed to be converted as of the issuance date
are included in
the denominator
for diluted EPS under the if-converted
method
to the extent
that
their effect is considered
dilutive.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, restricted cash,
receivables from related parties, bank liabilities, accounts payable to third or related parties, note
payables
to
third
or
related
parties,
bonds
as
well
as
the
conversion
feature
of
the
convertible
bonds.
The
fair
value
of
these
financial
instruments
approximate
their
carrying
value
due
to
the
short maturities of these instruments, unless otherwise explicitly
noted.
ASC
820
Fair
Value
Measurements
establishes
a
three-tier
fair
value
hierarchy,
which
prioritizes
the
inputs
used
in
measuring
fair
value.
These
tiers
include:
Level
1, defined
as
observable
inputs
such
as
quoted
prices
in
active
markets;
Level
2,
defined
as
inputs
other
than
quoted
prices
in
active markets
that
are
either
directly
or
indirectly
observable;
and
Level
3,
defined
as
unobservable
inputs in
which
little
or
no
market
data
exists,
therefore
requiring
an
entity
to
develop
its
own
assumptions.
Stock-based compensation
Stock-based
compensation
costs
are
recognized
in
earnings
using
the
fair
value
based
method
for
all
awards
granted.
Compensation
costs
for
unvested
stock
options
and
awards
are
recognized
in
earnings
over
the
requisite
service
period
based
on
the
fair
value
of
those
options
and
awards.
For
employees, fair value is estimated at the grant date and for non-employees’ fair
value
is re-measured
at
each
reporting date
as
required
by ASC
718
Compensation-Stock
Compensation
, and ASC 505- 50
Equity-Based
Payments
to
Non-Employees
.
Fair
values
of
awards granted under the share option
plans
are
estimated
using
a
Black-Scholes
option
pricing
model.
The
model’s
input
assumptions
are
determined
based
on
available
internal
and
external
data
sources. The
risk-free
rate
used
in
the
model
is
based
on
the
US
treasury
rate
for
the
expected
contractual
term.
Expected
volatility
is
based
on
historical
volatilities
of
a
peer
group
of similar companies in the same
industry.
F-13
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
2.
SIGNIFICANT ACCOUNTING POLICIES -
CONTINUED
Derivative Financial Instruments
Derivative
financial
instruments
are
initially
measured
at
fair
value
at
the
contract
date
and
are
subsequently
measured
to
fair
value
at
each
reporting
date.
The
Company's
derivative
financial
instrument
relates
to
the
conversion
feature
bifurcated
from
the
Company's
convertible
CHF
Bond
(Note
12),
is
accounted
for
under
ASC
815
and
recorded
as
Liability
related
to
conversion
feature in the consolidated balance sheets. Changes in the fair value each period (gains or losses)
are
reflected
in
the
statement
of
comprehensive
loss
as
Change
in
Fair
Value
of
Conversion
Feature.
New accounting standards – not adopted
In
August
2014,
the
Financial
Accounting
Standards
Board
(FASB)
issued
Accounting
Standards
Updates
(ASU)
2014-15
requiring
an
entity’s
management
to
evaluate
whether
there
are
conditions
or
events, considered
in
aggregate, that
raise
substantial doubt
about
entity’s
ability to continue as
a going concern within one
year after
the date
that the
financial statements
are issued (or
within one year after
the date
that
the financial statements are available
to be
issued
when applicable). The
amendments to (ASU) 2014-15 are effective for the annual period ending
after December 15, 2016,
and for annual periods and interim periods thereafter. Early
application
is
permitted.
The
Company
is
in
the
process
of
evaluating
the
prospective
impact
that
(ASU)
2014-15 will have on its balance sheet.
In
January
2016,
the
Financial
Accounting
Standards
Board
(FASB)
issued
Accounting
Standards Update 2016-01,
Financial Instruments—Overall (Subtopic 825-10): Recognition and
Measurement
of Financial Assets and Financial
Liabilities.
The update requires several
changes
with
respect
to
recognition
and
measurement
as
well
as
disclosure
requirements
with
respect
to
financial
instruments).
The
amendments
to
(ASU)
2016-01
are
effective
for
the
annual
period
ending
after
December
15,
2017,
and
for
annual
periods
and
interim
periods
thereafter.
Early
application
is
permitted.
The
Company
is
in
the
process
of
evaluating
the
prospective
impact
that (ASU) 2016-01 will have on its balance sheet.
In
February
2016,
the
Financial
Accounting
Standards
Board
(FASB)
issued
Accounting
Standards
Update
2016-02,
Leases
(Topic
842).
The
standard
requires
the
recognition
of
lease
assets and lease
liabilities by
lessees for those leases classified as operating
leases. Leases will
be
classified
as
either finance or operating, with classification affecting the pattern of expense
recognition. The standard requires lessors to classify leases as either sales-type, finance or
operating. A
sales-type
lease
occurs if the lessor transfers
all of the risks
and rewards,
as well
as
control
of
the
underlying
asset,
to
the
lessee.
If
risks
and
rewards
are
conveyed
without
the
transfer
of
control,
the
lease
is
treated
as
a
financing
lease.
If
the
lessor
does
not
convey
risks
and
rewards
or
control,
an
operating
lease
results.
The
standard
will
become
effective
for
the
Company
beginning
January
1,
2019.
The
Company
is
currently
assessing
the
impact
adoption
of
this
standard
will
have
on
its
consolidated
results
of
operations,
financial
condition,
cash
flows, and financial statement
disclosures.
F-14
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
2.
SIGNIFICANT ACCOUNTING POLICIES -
CONTINUED
In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Updates
ASU
2016-9,
Compensation—Stock
Compensation
(Topic
718):
Improvements
to
Employee
Share-Based
Payment
Accounting
,
requiring
certain
changes
to
recognition
and
measurement
as
well
as
disclosure
of
Share-Based
Payments.
The
standard
will
become
effective
for
the
Company
beginning
January
1,
2017.
The
Company
is
currently
assessing
the
impact
adoption
of
this
standard
will
have
on
its
consolidated
results
of
operations,
financial
condition, cash flows, and financial statement disclosures.
In
June
2016,
the
Financial
Accounting
Standards
Board
(FASB)
issued
Accounting
Standards
Updates ASU 2016-13,
Financial Instruments—Credit Losses (Topic 326): Measurement of
Credit
Losses
on
Financial
Instruments
,
requiring
certain
changes
to
the
recognition
and
measurement
as
well
as
disclosure
of
incurred
and
expected
credit
losses.
The
standard
will
become effective for the Company beginning January 1, 2020. The Company is currently
assessing the impact adoption of this standard will have on its consolidated results of operations,
financial condition, cash flows, and financial statement
disclosures.
In
November
2016, the
Financial Accounting Standards Board (FASB) issued Accounting
Standards
Updates
ASU
2016-18,
requiring
that
restricted
cash
and
restricted
cash
equivalents
be
included
with
cash
and
cash
equivalents
when
reconciling
the
beginning-of-period
and
end-
of-
period
total
cash
amounts
shown
on
the
statement
of
cash
flows.
Consequently,
transfers
between
cash
and
restricted
cash
will
not
be
presented
as
a
separate
line
item
in
the
operating,
investing
or
financing
sections
of
the
cash
flow
statement.
The
amendments
are
effective
for
public
business
entities
for
fiscal
years
beginning after
December
15,
2017,
and
interim periods
within
those
fiscal
years.
The
Company considers
that
ASU
2016-18
will
have
a
limited
impact
on
the presentation
of the statement of cash
flows.
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
2018.
Until the completion of the project, the following expenditures are estimated to be incurred:
a. Gross project cost
$
217,000,000
b.
Less: Proceeds from
sale of villas
(25,000,000)
c. Net project cost
192,000,000
d.
Overhead expenses
20,000,000
e. Total, excluding other potential projects
$
212,000,000
Seventy
percent of
the
Net project cost is intended
to
be financed
through the
issuance of
secured
bonds,
for
which
negotiations
have
been
initiated.
The
remaining
thirty
percent
of
the
net project cost, as well as non-recuperated overhead expenses are intended to be financed by
the
main
shareholders or lenders of the project, i.e. Zypam Ltd., shareholder and related entity to
the
late
Mr.
Josef
Mettler,
Mr.
Hans
Rigendinger,
shareholder,
Company
Director
and
Chief
Executive
Officer,
Dr.
Max
R
ӧ
ssler,
controlling
shareholder
of
Aires
International
Investment,
Inc. and Company Director.
F-15
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
3.
GOING CONCERN -
CONTINUED
On
July
16,
2012,
certain
principal
shareholders
of
the
Company
or
principal
lenders
to
the
project entered into a Guaranty Agreement in favor of the Company. The purpose of the
guaranty
is
to
ensure
that
until
financing
is
secured
for
the
entire
project
that
they
will
act
as
guarantors to creditors to the extent of the project’s ongoing capital requirements. On September
22,
2015,
the
signatories
to the
guaranty formally agreed
to
maintain the
guaranty,
as
necessary,
until December 31, 2018, after which date the guaranty will expire.
On
October
28,
2016,
Hans
Rigendinger
and
Dr.
Max
Rössler
formally
agreed
to
maintain
the
guaranty,
as
necessary,
until
completion
of
the
construction
of
Paradisus
Papagayo
Bay
Resort
& Luxury Villas, after which date the guaranty will expire.
The
Guaranty
Agreement
requires
that
within
30
days
of
receiving
a
demand
notice,
requested
funds
are
made
available
by
the
guarantors
to
the
Company.
Based
on
this
guaranty,
management
believes
that
available
funds
are
sufficient
to
finance
cash
flows
for
the
twelve
months
subsequent
to
December
31,
2015
and
the
filing
date,
though
future
anticipated
cash
outflows for investing activities continue to depend on the availability of financing.
4.
CASH AND CASH
EQUIVALENTS
Cash
and
cash
equivalents are
available
to
the
Company without
any restriction
or
limitation
on
withdrawal and/or use of these funds. The Company’s cash equivalents are placed with financial
institutions
that
maintain
high
credit
ratings.
The
carrying
amounts
of
these
assets
approximate
their fair value.
Cash and cash
USD
CHF
Other
Total
Total
equivalents
December 31, 2016
December 31, 2015
original currency
31,670
778,040
14,260
in $
31,670
763,428
11,342
806,440
111,830
USD ($)
=
US Dollar
EURO =
Euro
CHF
=
Swiss
Francs
CRC
=
Costa Rican Colón
F-16
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
5.
RESTRICTED
CASH
As of December 31, 2016, the Company has the following restricted cash positions:
Restricted Cash
December 31, 2016
December 31, 2015
$
$
Credit Suisse in favor of BVK pension fund
125,400
128,805
HSBC in favor of Costa Rican Tourism Board
-
370,000
Banco National de Costa Rica in favor of the Costa
Rican Tourism Board
-
563,350
Banco Lafise in favor Costa Rican Tourism Board
933,350
Banco Lafise in favor Costa Rican Environmental
Agency – SETENA
608,302
Banco Nacional de Costa Rica in favor of the Costa
Rican Environmental Agency – SETENA
-
622,311
Gross
1,667,052
1,684,466
Restricted cash positions in favor of Costa Rican Tourism Board and Costa Rican Environmental
Agency
–
SETANA
are
related
to
the
hotel
project
in
Costa
Rica
and
therefore
their
release
is
not
expected
before
finalization
of
the
corresponding
project.
Due
to
this
fact
these
restricted
cash positions have been classified as long term.
The
restricted
cash
position
in
favor
of
BVK
pension
fund
is
a
rental
deposit
related
to
a
long
term
lease contract for office space. Due to this fact this restricted cash position is also classified
as
long term.
6.
NOTES
RECEIVABLE
On
June
15, 2015, the
Company
granted
REP
Caribbean
Development
Corporation, a
third
party,
a
short
term
advance
in
the
amount
of
$250,000.
The
repayment
was
due
on
November
30, 2015, with a fixed interest payment of $5,000.
The advance is secured by
a non-related Swiss
individual.
On
December
10,
2015,
the
advance
was
increased
by
$25,000.
Including
accrued
interest, the overdue amount at December 31, 2016 was approximately
$280,000.
As this commitment has not been executed, REP Caribbean Development Corporation still owes
these funds to the Company.
F-17
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
7.
PROPERTY &
EQUIPMENT
December 31, 2016
December 31, 2015
Land
$
19,700,000
19,700,000
IT Equipment
221,060
185,846
Other equipment and furniture
219,734
278,000
Leasehold improvements
74,004
66,617
Vehicles
74,000
139,000
Construction in-process
46,457,172
41,412,351
Gross
66,745,970
61,781,814
Less accumulated depreciation
(529,312)
(510,390)
Net
$
66,216,658
61,271,424
Depreciation expenses for the period ended December 31,
2016 and 2015
61,771
16,802
Property and equipment is comprised primarily of land held in Costa Rica that is currently being
developed for hotels and capitalized project costs in connection with the Papagayo Gulf Tourism
project.
The
land
amounts
to
$19.7
million
comprised
of
$7
million
related
to
the
concession
formerly
held
by
Rich
Land
(~84,000
m2)
and
$12.7
million
formerly
held
by
AdR
(~120,000
m2).
The
$7
million
concession
is
a
right
to
use
the
property
for
a
specific
period
of
time
of
initially
20
years
from
the
date
of
grant, which
thereafter
can
be
renewed
at
no
further
cost, if
the
landholder
is
up
to
date
with
its
obligations
and
if
there
is
no
significant
change
in
government
policies. The current concession was initially set to expire in June 2022.
The
$12.7
million
concession
is
also
a
right
to
use
the
property
for
a
specific
period
of
time
of
initially 30
years from the date of grant, which thereafter can be renewed at no further cost, if the
landholder
is
up
to
date
with
its
obligations
and
if
there
is
no
significant
change
in
government
policies. The current concession was initially set to expire in November 2036.
On
July
14,
2015
the
Consejo
del
Polo
de
DesarrolloTuristico
Papagayo
at
ICT
(Council
of
Papagayo Tourism Development Project), has unanimously
approved the extension of both
concessions until 2052.
The
construction
in
process through
December
31,
2016
and
December
31,
2015,
is
represented
primarily by architectural work related to the hotel and apartments as well as construction work.
Deposit related to construction work
For
the
year
ended
December
31,
2016,
the
Company
had
made
deposits
with
several
contractors
to
initiate
earth
moving
groundwork.
These
deposits
will
be
offset
against
invoices
for
such
groundwork
as
completed.
As
of
December
31, 2016
and
2015,
the
Company
has
deposits of $190,549 and $798,874 respectively, which have not been set off.
F-18
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
8.
DOWN PAYMENTS FOR PROPERTY &
EQUIPMENT
December 31, 2016
December 31, 2015
La Punta (neighbouring piece of land)
2,669,816
2,669,816
Hotel Engadina
-
302,267
Gross
$
2,669,816
2,972,083
Value adjustment on Down Payment La Punta
(2,669,815)
-
Total (net)
$
0
2,972,083
Agreement to purchase neighboring pieces of land
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
$22,895,806,
whereof
fifty
percent
was
to
be
paid
in
cash
and
the
other
fifty percent
through
a
combination
of
a
10
percent
equity share
in
La
Punta
(the
concession
properties
in
Polo
Papagayo)
and
five
percent
in
equity
of
Paradisus
Papagayo
Bay
Resort
&
Luxury
Villas
(currently
under
development).
Both
of
these
are
located
in
Costa
Rica.
On
November
13,
2012,
the
above
agreement
was
amended
to
decrease
the
total
purchase
price
to
$17,200,200
with
no
equity payments.
The
terms
and
conditions
of the
cash
payment
were
to
be
defined.
Furthermore,
all
payments
by
the
Company
to
date
and
in
the
future
were
to
be
refundable in the event the purchase did not
close.
During
the
second
quarter
of
2013,
the
Company
entered
into
a
new,
revised
agreement
for
the
purchase
of
the
said
properties.
The
original
agreement
(including
amendments)
as
described
above was cancelled and replaced by a new agreement, which included the following
clauses:
-
The
total
purchase
price
is
$
17,500,000
of
which
$
1,369,816
has
been
paid
as
of
date
of the
new revised agreement and therefore $16,130,184 was outstanding as per
the date
of the new, revised
agreement.
-
Since the
original
seller owes
a third party $8,000,000, the Company was
to pay
$8,000,000
of
the
purchase
price
directly
to
this
third
party
instead
of
to
the
original
seller.
The
remaining
$8,130,184
on
the
new
agreement
was
to
be
paid
directly
to
the
original seller. Payment schedules were defined.
F-19
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
8.
DOWN PAYMENTS FOR PROPERTY & EQUIPMENT -
CONTINUED
As of this balance sheet date, the following is the situation:
(USD)
(USD)
Total
Description
USD
USD
USD
Total commitment
9,500,000
8,000,000
17,500,000
Payments till 31 December, 2016
1,669,816
1,000,000
2,669,816
Thereof
refundable:
-1,669,816
-700,000
-2,369,816
thereof
non-refundable
0
300,000
300,000
Total outstanding
at 31
December,
7,830,184
7,000,000
14,830,184
Thereof
overdue
-7,830,184
-7,000,000
-14,830,184
Thereof
not
overdue
0
0
0
The
Company
has
not
fulfilled
the
terms
of
either
the
agreement
with
the
original
seller
or
the
agreement with the third party seller. Notice of termination of the agreement with the third party
was
received
on
January
4,
2014.
Despite
attempts
to
renegotiate
a
new
agreement
to
purchase
the
additional
concession
properties,
the
Company
noticed
cancellation
of
the
agreement
with
the original seller on February 24, 2017.
The
agreement
with
the
original
seller
entitled
the
Company
to
reimbursement
for
all
amounts
paid as deposits against the purchase of the concessions less a liquidated damages penalty of 5%
in
the
event
that
the
purchase
did
not
close
on
providing
notice
of
cancellation
to
the
original
seller.
The agreements with the third party seller entitled the Company to reimbursement for all
amounts paid as deposits minus a non-refundable payment of $300,000 and a liquidated damages
penalty
of 5% in the event that the purchase did not close on receiving notice of
termination.
All
expenses
related
to
the
agreements
with
the
original
seller
and
the
agreement
with
the
third
party seller, were impaired as of December 31, 2016.
Hotel Engadina
This amount of 0 and $ 302,267 as per December 31, 2016 and December 31, 2015 respectively,
related
to a purchase option that
was bought
by QuadEquity Holdings,
a related party during the
year ended December 31, 2016.
F-20
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
9.
FAIR VALUE
MEASUREMENT
The
guidance
on
fair
value
measurements
defines
fair
value
as
the
exchange
price
that
would
be
received
for
an
asset
or
paid
to
transfer
a
liability
(an
exit
price)
in
the
principal
or
most
advantageous market
for the
asset
or liability in an
orderly transaction between
market
participants.
This
guidance
also
specifies
a
fair
value
hierarchy
based
upon
the
observability
of
inputs
used
in
valuation
techniques.
Observable
inputs
(highest
level)
reflect
market
data
obtained from independent
sources,
while
unobservable
inputs
(lowest
level) reflect
internally
developed market assumptions. In accordance with this guidance, fair value measurements are
classified under the following
hierarchy:
Level 1
Quoted prices for identical instruments in active markets.
Level 2
Quoted process for similar instruments in active markets, quoted prices for identical or similar
instruments
in
markets
that
are
not
active;
and
model-derived
valuations
in
which
significant
inputs or significant value drivers are observable in active markets.
Level 3
Model derived valuations in which one or more significant inputs or significant value-drivers are
unobservable.
When available, the Company uses quoted market prices to determine fair value, and classifies
such
measurements
within
Level
1.
In
some
cases,
where
market
prices
are
not
available,
the
Company
makes
use
of
observable
market
based
inputs
to
calculate
fair
value,
in
which
case
the
measurements
are
classified
within
Level
2.
If
quoted
or
observable
market
prices
are
not
available,
fair value
is
based
upon
internally
developed
models
that
use, where
possible, current
market-based
parameters
such
as
interest
rates,
yield
curves
and
currency
rates.
These
measurements are classified within Level 3.
Fair
value
measurements
are
classified according to
the
lowest level
input
or
value-driver
that
is
significant to the valuation. A measurement
may therefore be classified within Level
3 even
though there may be significant inputs that are readily
observable.
Fair
value
measurement
includes
the
consideration
of
nonperformance
risk.
Nonperformance
risk
refers
to
the
risk
that
an
obligation
(either
by
counterparty
or
the
Company)
will
not
be
fulfilled.
For
financial
assets
traded
in
an
active
market
(Level
1),
the
nonperformance
risk is
included in the
market
price.
For
certain
other
financial
assets
and
liabilities
(Level
2
and
3),
the Company’s fair value calculations have been adjusted
accordingly.
As
of
December
31,
2016
and
December
31,
2015,
respectively,
there
are
no
financial
assets
or
liabilities
measured
on
a
recurring
basis
at
fair
value
with
the
exception
of
the
liability
related to the conversion feature.
F-21
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
9.
FAIR VALUE MEASUREMENT - CONTINUED
In
addition
to
the
methods
and
assumptions
to
record
the
fair
value
of
financial
instruments as discussed above, the Company
used the following methods and
assumptions to estimate the fair value of our financial instruments:
—
Cash and cash equivalents – carrying amount approximated fair value.
—
Restricted cash – carrying amount approximated fair value.
—
Receivables from related parties (current) – carrying amount approximated fair value
due to the short term nature of
the receivables.
—
Accounts Payable – carrying amount approximated fair value.
—
Note payable – carrying amount approximated fair value due to the short term nature of the note payable.
—
Bank liabilities - carrying amount approximated fair value due to the short term nature of bank liabilities.
—
Notes receivable - carrying amount approximated fair value.
—
Notes
payable
to
related
parties
-
Dr.
M.
R
ӧ
ssler
(current)
–The fair
value
was
calculated
based
on
the underlying publically
traded
shares.
However,
the
Company
records
the
loan
at
nominal
value.
The
Company
does
not
have
sufficient cash to repurchase the shares as of balance sheet date and hence repay the loans in shares.
—
Notes payable to related parties –
(current) – carrying amount approximated fair value
due to the short term nature
of the notes payable.
—
EUR– bond (old) – carrying amount approximated fair value due to its short term nature
—
EUR- bonds – The
fair values of the bonds payable are classified as level 3 fair values. The fair values of the bonds
have
been determined by discounting cash flow projections discounted at the respective interest rates of 7.25% for
EUR bonds, which represents the current market rate based on the creditworthiness of the Company. Hence, the
carrying values approximate fair value.
—
CHF-bonds – The fair values
of the bonds payable are classified as level 3 fair values. The fair values of the bonds
have been determined
by discounting cash flow projections discounted at the respective interest rates of 7.25%
and
6.5%
respectively
for
CHF
bonds,
which
represented
the
current
market
rate
based
on
the
creditworthiness
of
the
Company at the date of issue. Hence, the carrying values approximate fair value.
—
Notes
payable
to
related
parties
–
Aires
(non-current)
–
The
fair
values
of
the notes
payable
to
Aires
International
Investments
Inc.
are
classified
as
level
3.
The
fair
values
of
the
notes
were
determined
by
discounting
cash
flow
projections
discounted
at
the
respective
interest
rates
of
7.25%,
which
represents
the
current
market
rate
based
on
the creditworthiness of the Company. Hence, the carrying value approximates fair value.
—
Convertible CHF-bonds –
The fair values
of the convertible bonds payable are classified as
level 3
fair values. The
fair
values
of
the
convertible
bonds
have
been
determined
by
discounting
cash
flow
projections
discounted
at
the
respective interest rates of 6.00% for convertible CHF bonds, which
represents the current
market rate based on
the
creditworthiness of the Company. Hence, the carrying values approximate fair value.
—
Liability
related
to
conversion
feature
-
The
fair
value
of
the
liability
related
to
conversion
feature
is
classified
as
level
3
in
the
fair
value
hierarchy.
The
fair
value
of
the
liability
is
determined
using
a
Black
Scholes
model
to
calculate
the
option
value
at
each
reporting
date
and
multiplied
by
the
number
of
potentially
convertible
shares.
Hence
the
carrying value of the obligation approximates the fair
value
F-22
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
9.
FAIR VALUE MEASUREMENT - CONTINUED
The fair value of our financial instruments is presented in the table below:
December 31, 2016
December 31, 2015
Carrying
Fair Value $
Carrying
Fair Value $
Fair Value
Ref-
Amount $
Amount $
Levels
erence
Cash and cash equivalents
806,440
806,440
111,830
111,830
1
Note 4
Restricted cash
1,667,052
1,667,052
1,684,467
1,684,467
1
Note 5
Receivables from related parties –
other (current)
49,292
49,292
19,945
19,945
3
Note 10
Accounts Payable
3,311,512
3,311,512
8,048,608
8,048,608
1
-
Bank liabilities
-
-
179,313
179,313
1
Note 11
Note payable
1,500,000
1,500,000
2,736,912
2,736,912
1
Note 17
Notes payable to related parties –
Dr. M. R
ӧ
ssler (current)
-
-
-
-
3
Note 10
Notes payable to related parties –
Rigendinger (current)
-
-
1,973
1,973
3
Note 10
Notes payable to related parties –
other (current)
307,088
307,088
1,129,005
1,129,005
3
Note 10
Notes receivable
280,242
280,242
280,242
280,242
3
EUR-bonds
484,463
484,463
8,488,631
8,488,631
3
Note 12
Convertible CHF-bonds
38,095,533
38,095,533
28,720,443
28,720,443
3
Note 12
CHF-bonds
16,384,893
16,384,893
28,720,443
28,720,443
3
Note 12
Notes payable to related parties –
Aires (non-current)
51,473,793
51,473,793
47,198,362
47,198,362
3
Note 10
Liability related to conversion
feature
5,936,378
5,936,378
6,976,322
6,976,322
3
Note 12
The Company's financial liabilities measured at fair value on a recurring basis consisted of the
liability relates to conversion feature as of the following date:
Balance at December 31, 2015
6,976,322
Additions
449,283
Change in Fair Value of Conversion Feature
(2'500'486)
Extinguishment of debt
1,165,268
FX Revaluation
(154,010)
Balance at December 31, 2016
5,936,378
F-23
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
9.
FAIR VALUE MEASUREMENT -
CONTINUED
The Company used a Black-Scholes model to value the Liability related to conversion feature as
of December 31, 2016 and December 31, 2015.
The assumptions as of December 31, 2016 are as follows:
Stock Price:
CHF 5.08
Annualized Risk Free Rate: .0001% Exercise Price: CHF 8
Annualized Volatility:
80%
Time to Maturity: 1.75 years
The assumptions as of December 31, 2015 were as follows:
Stock Price:
CHF 5.08
Annualized Risk Free Rate:
.72% Exercise Price: CHF 8
Annualized Volatility:
80% Time to Maturity: 2.75
years
The annualized risk free rate was changed from a US treasury
rate to a Swiss treasury rate, as the
underlying basis value are shares in a Swiss company denominated in Swiss Francs.
F-24
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
10.
RELATED PARTY
TRANSACTIONS
The advances from (to) related parties are composed as follows:
Receivables
Payables
December 31,
December
December 31,
December 31,
2016
31, 2015
2016
2015
Hans Rigendinger
-
-
-
1,973
Aires International
-
-
51,473,793
47,198,362
Akyinyi Interior and Exterior
-
-
Decoration
290,000
290,000
Global Care AG
-
-
-
240,210
Geoffrey Long
-
19,945
-
-
Sportiva participations ag
-
-
-
528,660
Late Josef Mettler
-
-
17,088
70,135
QuadEquity Holdings
-
-
-
-
4f capital ag
-
-
-
-
Dr. Max Rössler
-
-
-
-
Turan Tokay
49,292
-
-
-
Total excluding interest
49,292
19,945
51,780,881
48,329,340
Accrued interest
-
-
-
6,370,579
Total
49,292
19,945
51,780,881
54,699,919
of which non-current
-
-
51,473,793
47,198,362
Related party
Capacity
Interest Repayment Security
Rate
Terms
1 Hans Rigendinger
Shareholder, CEO and Company board member
3%
none
none
2 Aires International
Company owned by Dr. Max Rössler, a board
member
Akyinyi Interior
3 and Exterior
Company owned by the widow of the late Josef
Decoration
Mettler
none
none
none
4 Global Care AG
Company owned by Dr. Max Rössler, a board
member
none
none
none
5 Geoffrey Long
Head of Accounting “The Americas”
none
none
none
6 Sportiva
Participations AG
Company formerly owned by the late Josef Mettler
3%
none
none
7 Late Josef Mettler
Former shareholder, CEO, CFO and Company board
member
3%
none
none
8 Turan Tokay
Shareholder
3%
none
none
F-25
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
10.
RELATED PARTY TRANSACTIONS -
CONTINUED
Loan agreement Aires International Investment Inc.
As of December 31, 2016, the Company owes Aires International Inc. the following:
Borrower
Debt instrument
Amount in CHF
Amount in Annual
Repayment date *
denominated in
USD
interest
CHF
rate
SunVesta Inc.
Promissory note
10,044,371
9,855,731
7.25 %
After Dec 31, 2020
SunVesta Inc.
Promissory note
10,000,000
9,812,195
7.25 %
After Dec 31, 2020
SunVesta Inc.
Promissory note
10,000,000
9,812,195
7.25 %
After Dec 31, 2020
SunVesta Inc.
Loan agreement
9,675,972
9,605,602
7.25 %
After Dec 31, 2020
SunVesta Holding
Loan agreement
12,625,177
12,388,070
7.25 %
After Dec 31, 2020
Total
51,473,793
*
The notes may be repaid in whole or in
part.
Loan due to Global Care AG
In
April
2016,
Global
Care
AG
(a
related
party
controlled
by
Dr.
Max
Rössler,
himself
board
member
and
related
party)
assumed
a
liability
of
CHF
4.5
million
from
Aires
International
Investment
Inc.,
(also a related
party controlled by Dr. Max Rössler). This CHF 4.5
million was
subsequently
subscribed
into
bonds
of
the
CHF-Convertible
Bond
issue.
As
this
conversion
includes
a
significant
conversion
option,
the
exchange
is
treated
as
an
extinguishment
of
debt
and an amount of $1,071,317 has been reclassified
in
the statement of profit or loss from
revaluation of conversion feature to extinguishment of debt. In June 2016, there were the
following changes to the debt structure:
-
A
liability
of
CHF
2,656,083
was
transferred
from
Dr.
Max
Rössler
to
Global
Care
AG
-
A liability of CHF 1.5 million was transferred from Sportiva to Global Care
-
A liability of CHF 1.4 million was transferred from Global Care to Dr. Max Rössler.
In
December
2016,
Dr.
Max
Rössler
subscribed
a
loan
in
the
amount
of
CHF
15.2
million
into
bonds of the new CHF-Bond issue 2016-2020. As this conversion did not represent a significant
change of the conditions between the old debt and the new debt, the exchange was not treated as
an extinguishment of debt.
Receivable from and loans to Josef Mettler
During 2016, the payable to Mr. Mettler in the amount of $70,135 was repaid.
During the third quarter
2016 Josef Mettler
passed away and companies formerly owned by him
are no longer related parties to the Company.
During the third quarter 2016, $17,775 was advanced to the late Josef Mettler for private
expenses.
F-26
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
10.
RELATED PARTY TRANSACTIONS -
CONTINUED
Current account Sportiva Participations AG
During
the
period
ended
December
31,
2016
there
were
the
following
movements
on
the
current
account
of
Sportiva
Participations
AG
until
the
death
of
the
late
Josef
Mettler.
At
that
point,
Sportiva Participations AG was no longer a related party.
CHF
USD
Balance December 31, 2015
524,695
528,660
Cash paid to SunVesta
870,000
875,780
Cash received from SunVesta
(2,812,911)
(2,867,777)
Transfers from/(to) other related parties
1,502,026
1,545,020
Interest credited to the account
4,801
4,852
Changes in forreign currency
-
1,976
Transfer to third party upon death of the late Josef Mettler
(88,611)
(88,511)
Balance September 12, 2016
-
-
Commissions paid or payable to related parties
During the periods ended December 31, 2016, and December 31, 2015, the Company
paid
commissions
to
4f Capital AG
in
the
amount
of
$0
(up
to
the
death
of
the
late
Josef
Mettler)
and
$253,945, respectively, for services related to financing of the Company. These costs were
capitalized
as
debt
issuance
costs.
4f
Capital
AG
was
a
company owned
and
directed
by the
late
Josef Mettler that received a commission of 1.5% for new funds that the Company receives based
on consulting services rendered by 4f Capital AG.
Service fees paid or payable to Akyinyi Interior and Exterior Decoration
During
the
year
ended
December
31,
2016
there
were no
payments to
Akyinyi Interior
and
Exterior
Decoration
and
during
the
year
ended
December
31,
2015,
$120,000
fees
for
decoration
services
were paid. These costs have been capitalized to property and
equipment.
11.
BANK LIABLITIES
The
bank
liabilities
due
at
December
31,
2016
and
2015
in
the
amounts
of
$0
and
$153,375
respectively, represented temporary, secured overdraft facilities, bearing an interest rate of 8.9%.
F-27
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
12.
BONDS
Description
EUR (
€
) bond new I
EUR (
€
) bond new II
Issuer:
SunVesta Holding AG
SunVesta Holding AG
Type of securities:
Bond in accordance with Swiss
Bond in accordance with
Approval by
SunVesta AG
October 31, 2013
May 19, 2014
Volume:
Up to EUR15,000,000
Up to EUR 15,000,000
Units:
EUR10,000
EUR 10,000
Offering period:
11/07/2013 – 03/31/2014
05/01/14 – 06/30/14
Due date:
December 2, 2016
December 02, 2016
Issuance price:
100%
100 %
Issuance day:
December 2, 2013
December 02, 2013
Interest rate:
7.25% p.a.
7.25 % p.a.
Interest due dates:
December 2, 2013
December 02
Applicable law:
Swiss
Swiss
EURO (
€
) Bond new I
EURO
EURO
Bond
Bond
(New)
(New)
2016
2015
$
$
Balances January 1
6,871,630
7,355,572
Cash inflows
-
281'754
Cash outflows
(6,736,255)
-
Foreign currency
adjustments
(103,834)
(765'696)
Sub-total
31,541
6,871,630
Discounts (commissions paid to bondholders) and
debt issuance costs
(588,613)
(588,613)
Accumulated amortization of discounts and
debt issuance costs
563,636
432,128
Total accumulated unamortized discounts and
debt issuance costs
(24,977)
(156,485)
Balances December 31 (Carrying value)
6,564
6,715,145
As per date of this report the Company has realized a cumulative amount of EUR 0 related to the
EURO
Bond
I.
This
due
to
the
fact,
that
certain
bondholders
have
not
redeemed
their
principal
amounts up to the date of this report.
F-28
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
12.
BONDS - CONTINUED
EURO (
€
) Bond new II
EUR Bond
EUR Bond
new II
new II
2016
2015
$
$
Balances January 1
1,658,300
1,761,258
Cash inflows
-
-
Cash outflows
(159,950)
-
Reclassification from / to Bond
(953,683)
-
Foreign currency adjustments
(32,862)
(102,958)
Sub-total
511,805
1'658,300
Discounts (commissions paid to bondholders) and
debt issuance costs
(174,660)
(174,660)
Accumulated amortization of discounts and
debt issuance costs
140,754
148,932
Total accumulated unamortized discounts and
debt issuance costs
(33,906)
(25,728)
Balances December 31 (Carrying value)
477,899
1,632,572
During
the
year
ended
December
31,
2016,
an
amount
of
$953,683
was
reclassified
to
the
new
parallel
CHF-Bond
III.
Since
the
new
debt
was
not
significantly different
from
the
old
debt,
the
exchange was not treated as an extinguishment of debt.
As per date of this report the Company has realized a cumulative amount of EUR 0 related to the
EURO
Bond
new
II.
This
due
to
the
fact,
that
certain
bondholders
have
not
redeemed
their
principal amounts up to the date of this
report.
F-29
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
12.
BONDS - CONTINUED
On September 30, 2015, the Company approved the issuance of two new convertible CHF-
bonds. The major terms and conditions are the following:
Description
Convertible CHF Bond I
Convertible CHF Bond II
Issuer:
SunVesta Holding AG
SunVesta Holding AG
Type of securities:
Senior convertible bonds,
Senior convertible bonds,
convertible into shares of
convertible into shares of
the issuer, in accordance
the issuer, in accordance
with Swiss law
with Swiss law
Approval by
SunVesta AG BOD:
September 30, 2015
September 30, 2015
Volume:
Up to CHF 45,000,000
Up to CHF 15,000,000
Denomination:
CHF 5,000
CHF 5,000
Offering period:
October 01, 2015
October 01, 2015
Maturity date:
September 30, 2018
September 30, 2018
Issue price:
100 %
100 %
Redemption price:
100 %
100 %
Issuance date:
October 01, 2015
October 01, 2015
Coupon:
6.00 % p.a.
6.00 % p.a.
Interest due dates:
September 30 of each year,
September 30 of each year,
the first time September 30,
the first time September 30,
2016
2016
Reference price:
CHF 6.50
CHF 6.50
Initial conversion price:
CHF 8.00
CHF 8.00
Applicable law:
Swiss
Swiss
In
October
2015,
Sunvesta
Holding
AG,
a
wholly
owned
subsidiary
of
the
Company
settled
approximately
$27,300,000
worth
of
old
CHF-Bonds
which
had
matured
on
August
31,
2015
and
were
extended
through
September
30,
2015
(i.e.
unpaid).
These
CHF-Bonds
were
rolled
forward/
and
exchanged
for
two
substantially
different
convertible
bonds
of
Sunvesta
Holding
AG.
One
is
a
$45,000,000
Convertible
Bond
and
the
other
a
$15,000,000
Convertible
Bond
as
presented
in
tables above. These new
Convertible
bonds
are
substantially
different than the
previous
CHF
bonds
that
matured
in
the
third
quarter
of
2015
and
this
financing
is
therefore
accounted
for
as
an
extinguishment. The
Company has
recorded
a
loss
on
extinguishment
equal
to
the
fair
value
of
the
conversion
feature.
Third
party
issuance
costs
totaling
$3,100,000
at
inception have been
capitalized
and
amortized
over
the
life
of
the
bonds
under
the
effective
interest
rate
method.
Finally,
the
change
of
the
fair
value
of
the
liability
related
to
conversion
feature was
expensed
in
the
period.
F-30
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
12.
BONDS - CONTINUED
The nominal and carrying amounts have changed as follows:
CHF Bond
CHF Bond
CHF BOND I
2016
2015
$
$
Balances January
1
-
10,999,192
Cash inflows
-
-
Cash
outflows
-
(5,913,796)
Foreign currency
adjustments
-
159,884
Reclassifications to CHF Bond II
-
-
Reclassifications to Convertible CHF Bond I
-
(2,005,548)
Reclassifications to Convertible CHF Bond II
-
(3,239,732)
Sub-total
-
-
Discounts (commissions paid to
bondholders)
-
(670,764)
Accumulated amortization of discounts
-
670,764
Unamortized
discounts
-
-
Balances September 30 and December 31
(Carrying value)
-
-
From
the
CHF
Bond
I issue
in
this
roll-forward,
$2,005,548
was
reclassified
to
the
Convertible
CHF
Bond
I
in
the
fourth
quarter
of
2015.
Additionally,
$3,239,732
was
reclassified
to
the
Company's CHF Convertible Bond II.
CHF
CHF Bond II
CHF BOND II
Bond
II
2016
2015
$
$
Balances January
1
-
15,304,228
Cash inflows
-
10,819,209
Cash
outflows
-
(3,923,675)
Foreign currency
adjustments
-
(51,779)
Reclassifications from CHF Bond I
-
-
Reclassifications to Convertible CHF Bond I
-
(185,127)
Reclassifications to Convertible CHF Bond II
-
(21,962,856)
Sub-total
-
-
Discounts (commissions paid to
bondholders)
-
(1,578,825)
Accumulated amortization of
discounts
-
1,578,825
Unamortized
discounts
-
-
Balances September 30 and December 31 (Carrying
-
-
value)
From
the
CHF
Bond
II
issue
in
this
roll
forward,
$185,127
was
reclassified
to
the
Convertible
CHF
Bond
I
in
the
fourth
quarter
of
2015.
Additionally,
$21,962,856
was
reclassified
to
the
Company's CHF Convertible Bond II.
F-31
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
12.
BONDS - CONTINUED
Convertible CHF BOND I
Convertible
Convertible
CHF Bond I
CHF Bond I
2016
2015
$
$
Balances January 1
2,250,048
-
Cash inflows
1,640,887
100'990
Cash outflows
(103,008)
-
Foreign currency adjustments
(105,058)
(41,617)
Reclassifications to / from Bond (net)
(34,486)
2,190,675
Sub-total
3,648,383
2,250,048
Discounts (commissions paid to bondholders) and debt issuance costs
(136,722)
(136,219)
Accumulated Amortization of discounts and debt issuance costs
117,652
57,896
Reclassification to CHF Bonds
(104,038)
-
Total Accumulated Unamortized discounts and debt issuance costs
(123,108)
(78,323)
Balances December 31 (Carrying value)
3,525,275
2,171,725
Since the new debt was not significantly different
from
the
old
debt,
the
exchange was
not
treated
as an extinguishment
of debt.
Furthermore,
$599,700 (CHF 600,000) was converted from a loan.
Since
the new
debt was significantly
different
from the old debt, the exchange was treated as
an
extinguishment
of
debt
and
an
amount
of
$93,950.87
was
accounted
for
as
a
loss
on
extinguishment of debt.
As per date of this report, the Company has realized a cumulative amount of CHF 3.6 million
($3.5 million) related to the Convertible Bond I.
During
the
year
ended
December
31,
2016,
the
Company
reclassified
$634,186
(CHF
630,000)
from convertible CHF Bond I to convertible CHF Bond II, together with a corresponding
amount of $104,038 of capitalized debt issuance costs.
F-32
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
12.
BONDS - CONTINUED
Convertible CHF BOND II
Convertible
Convertible
CHF Bond
CHF
Bond
II 2016
II 2015
$
$
Balances January 1
26,470,395
-
Cash inflows
7,142,850
1,747,122
Cash outflows
(787,371)
-
Foreign currency adjustments
(1,187,441)
(479,315)
Reclassifications to CHF Bonds
5,131,937
25,202,588
Sub-total
36,770,369
26,470,395
Discounts (commissions paid to bondholders) and debt issuance costs
(4,890,690)
(2,977,065)
Accumulated Amortization of discounts and debt issuance costs
2,586,541
201,093
Reclassification to CHF Bonds
104,038
-
Total Accumulated Unamortized discounts and debt issuance costs
(2,200,111)
(2,775,972)
Balances December 31 (Carrying value)
34,570,259
23,694,423
As
per
date
of
this
report
the
Company has
realized
a
cumulative
amount
of
CHF
33.20
million
($32.7 million) related to the Convertible Bond II.
During
the
year
ended
December
31,
2016,
the
Company
reclassified
$634,186
(CHF
630,000)
from convertible CHF Bond I to convertible CHF Bond II, together with a corresponding
amount of $104,038 of capitalized debt issuance costs.
In
April
2016,
Global
Care
AG
(a
related
party
controlled
by
Dr.
Max
Rössler,
a
Company
board member and related party) assumed a liability
of CHF 4.5 million from Aires International
Investment
Inc.,
(also
a
related
party
controlled
by
Dr.
Rössler).
This
CHF
4.5
million
was
subsequently
subscribed
into bonds of
the
CHF
Convertible
Bond
issue. As
the conversion
inclues a
significant
conversion option, the exchange is
treated
as
an extinguishment
of debt
and
an amount
of $1,071,317 has
been reclassified
in the statement of profit
or
loss from revaluation
of conversion feature to extinguishment of debt.
Included
in
this
amount
is
approximately
$6.20
million
(CHF
6.32
million),
which,
by
agreement
between
the
Company
and
the
bondholders
and
as
a
deviation
from
the
standard
terms,
was
repayable as of
February
28, 2017.
As these amounts were due
within
12 months from
the
reporting date, these funds are classified within current liabilities on the consolidated balance
sheet.
As per date of this report, approximately $1.1 million have been repaid, the remaining amount
was extended under unchanged conditions and are planned to be converted into a new bond issue
during May 2017.
The
Company
initiated
a
new
offering
of
senior
unsecured
CHF
bonds
on
September
21,
2016,
of
up
to
CHF
20,000,000
in
units
of
CHF
5,000
that
bear
interest
at
6.50%
per
annum
payable
each August 15, over a four-year term that matures on August 15, 2020.
F-33
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
12.
BONDS - CONTINUED
Description
Convertible CHF Bond III
Issuer:
SunVesta Holding AG
Type of securities:
Senior bonds
Approval by
SunVesta AG BOD:
July 7, 2016
Volume:
Up to CHF 20,000,000
Denomination:
CHF 5,000
Offering period:
November 30, 2016
Maturity date:
August 15, 2020
Issue price:
100 %
Redemption price:
100 %
Issuance date:
September 21, 2016
Coupon:
6.50 % p.a.
Interest due dates:
August 15 of each year, the
first time August 15, 2017
Applicable law:
Swiss
We
had
realized
$15,547,647
as
of
the
year
ended
December
31,
2016.
Included
in
this
amount
is
$15,192,404 (CHF 15.2 million)
that
was converted from loans
from related parties.
Since the
new
debt
was
not
significantly
different
from
the
old
debt
and
did
not
include
a
conversion
feature deemed substantive, the exchange was not treated as an extinguishment of
debt.
CHF BOND III
CHF
CHF
original
Bond III
Bond III
2016
2015
$
$
Balances January 1
-
Cash inflows
699,650
Cash outflows
-
Foreign currency adjustments
(290,665)
Reclassifications to / from Bonds
15,192,404
Sub-total
15,601,389
Discounts (commissions paid to bondholders) and debt issuance costs
(106,618)
Accumulated Amortization of discounts and debt issuance costs
3,814
Total Accumulated Unamortized discounts and debt issuance costs
(102,804)
Balances December 31 (Carrying value)
15,498,586
As
per
date
of
this
report
the
Company
has
realized
a
cumulative
amount
of
CHF
16.7
million
($16.5
million)
related
to
the
CHF
Bond
III
original.
Within
the
abovementioned
facility,
the
Company initiated a new parallel offering of senior unsecured CHF
bonds on
September 21,
2016. An
amount
of $979,510 was reclassified from
EUR Bond
II.
F-34
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
12.
BONDS - CONTINUED
Since
the new
debt
was not
significantly
different
from
the
old
debt,
the
exchange was not treated as
an extinguishment of debt. We had realized a cumulative amount of $886,307 as of the year ended
December 31, 2016.
CHF BOND III
CHF
Bond III
CHF Bond III
parallel
2016
2015
$
$
Balances January 1
-
Cash inflows
-
Cash outflows
-
Foreign currency
adjustments
(17,915)
Reclassifications to / from Bonds
979,510
Sub-total
961,595
Discounts (commissions paid to bondholders) and debt issuance costs
(79,289)
Accumulated Amortization of discounts and debt issuance costs
4,001
Total Accumulated Unamortized discounts and debt issuance costs
(75,288)
Balances December 31 (Carrying value)
886,307
As per date of this report the Company has realized a cumulative amount of CHF 0.9 million ($0.9
million) related to the CHF Bond III parallel.
F-35
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
13.
INCOME TAXES
The components of loss before income taxes are as follows:
December 31, 2016
December 31, 2015
Domestic
(1,411,971)
(3,863,810)
Foreign
(9,549,369)
(15,867,262)
Loss before income tax
(10,961,340)
(19,731,072)
Income taxes relating to the Company’s operations are as follows:
December 31, 2016
December 31, 2015
Current income taxes
US Federal, state and local
-
-
Foreign
-
(1,151)
Deferred income taxes
-
-
US Federal, state and local
-
-
Foreign
-
-
Income tax expense/recovery
-
(1,151)
Income taxes at the United States federal statutory rate compared to the Company’s income tax
expenses as reported are as follows:
December 31, 2016
December 31, 2015
Net loss before income tax
(10,961,340)
(19,731,072)
Statutory rate
35%
35%
Expected income tax recovery
(3,836,469)
(6,905,875)
Impact on income tax expense/recovery from
Change in valuation allowance
3,518,283
4,979,054
Different tax rates in foreign jurisdictions
921,953
697,632
Expiration of unused tax loss carry forwards
502,483
-
Permanent differences
(645,752)
1,803,538
Difference due to tax review / previous year
(317,710)
(633,957)
adjustments
Others
(142,789)
58,457
Income tax expense
0
(1,151)
F-36
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
13.
INCOME TAXES - CONTINUED
The Company’s deferred tax assets and liabilities consist of the following:
December 31,
2016
December 31,
2015
Deferred tax assets
Tax loss carry forward
20,370,022
17,321,345
Valuation allowance
(20,370,022)
(17,321,345)
Deferred tax assets/liabilities
-
-
As
of
December
31,
2016
and
2015,
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.
Pursuant
to
ASC
740-10-25-3
Income
Taxes
,
an
income
tax
provision
has
not
been
made
for
U.S.
or
additional
foreign
taxes
since
none
of
the
subsidiaries
of
the
Company
are
generating
income
nor
are
expected
to
in
the
foreseeable
future.
The
company expects
that
future
earnings
will
be reinvested,
but could
become
subject to additional tax
if they were
remitted
as dividends
or
were
loaned
to
the
Company,
or
if
the
Company
should
sell
or
dispose
of
its
stock
in
the
foreign
subsidiaries.
It
is
not
practical
to
determine
the
deferred
tax
liability,
if
any,
that
might
be
payable
on
foreign
earnings
because
if
the
Company
were
to
repatriate
these
earnings,
the
Company
believes
there
would
be
various
methods
available
to
it,
each
with
different
U.S.
tax
consequences.
The
Company’s
operating
loss
carry
forward
of
all
jurisdictions
expire
according
to
the
following schedule:
Domestic
Foreign
2017
-
5,129,934
2018
-
9,083,582
2019
-
6,215,044
2020
-
2,610,044
2021
-
7,707,090
2022
-
7,458,249
2023
392,931
14,899,080
Beyond 2023
21,177,817
-
Total operating loss carry forwards
$
21,570,748
53,103,23
F-37
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
13.
INCOME TAXES - CONTINUED
The following tax years remain subject to examination:
United States of America
Switzerland
Costa Rica*
2008
YES
NO
N/A
2009
YES
NO
N/A
2010
YES
NO
N/A
2011
YES
NO
N/A
2012
YES
NO
N/A
2013
YES
NO
NO
2014
YES
NO
NO
2015
YES
YES
NO
2016
YES
YES
YES
* The Costa Rican companies are taxable since 2013.
F-38
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
14.
PENSION PLAN
The Company maintains a pension plan covering all employees in Switzerland. The plan is
considered a defined benefit plan and accounted for in accordance with ASC 715
Compensation
-
Retirement Benefits
. This model allocates pension costs over the service period of employees in
the plan. The underlying principle is that employees render services ratably over this period, and
therefore,
the
income
statement
effects
of
pensions
should
follow
a
similar
pattern.
ASC
715
requires
recognition
of
the
funded
status,
or
difference
between the
fair
value
of
plan
assets
and
the
projected
benefit
obligations
of
the
pension
plan
on
the
balance
sheet,
with
a
corresponding
adjustment
recorded
in
the
net
loss.
If
the
projected
benefit
obligation
exceeds
the
fair
value
of
plan assets, then that difference or unfunded status represents the pension
liability.
The
Company
records
a
net
periodic
pension
cost
in
the
statement
of
comprehensive
loss.
The
liabilities
and
annual
income
or
expense
of
the
pension
plan
is
determined
using
methodologies
that
involve
several
actuarial
assumptions,
the
most
significant
of
which
are
the
discount
rate
and
the
long-term
rate
of
asset
return
(based
on
the
market-related
value
of
assets).
The
fair
values of plan assets are determined based on prevailing market prices.
The projected benefit obligation and the fair value of plan assets have changed as follows:
2016
2015
Projected Benefit Obligations beginning of year
$
463,576
352,704
Service cost - current
60,070
56,927
Interest expense
3,698
5,239
Benefit payments and transfers
(102,949)
(12,091)
Actuarial gains/losses
(42,879)
61,864
Currency translation losses
(10,616)
(1,067)
Projected Benefit Obligations end of year
$
370,901
463,576
Fair Asset Values beginning of year
$
252,896
216,271
Expected returns
7,496
6,448
Contributions paid
39,980
46,348
Benefits paid and transfers
(102,949)
(12,091)
Actuarial gains/losses
(5,497)
(3,426)
Currency translation losses
(5,494)
(654)
Fair Asset Value of assets end of year
$
186,432
252,896
Net liabilities
$
(184,469)
(210,680)
F-39
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
14.
PENSION PLAN - CONTINUED
The following were the primary assumptions:
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.
December 31, 2016
December 31, 2015
Assumptions at year
end
Discount rate
0.60%
0.80%
Expected rate of return on plan assets
3.00%
3.00%
Future salary increases
1.50%
1.50%
Future pension increases
0.00%
0.00%
Net periodic pension costs have been included in the Company’s results as follows:
December 31, 2016
December 31, 2015
Current service cost
60,070
56,927
Net actuarial (gain) loss recorded
2,499
-
Interest cost
3,698
5,239
Expected return on assets
(7,496)
(6,448)
For
the
years
ended
December
31,
2016
and
December
31,
2015
the
Company
made
cash
contributions of $88,312 and $23,000, respectively, to its defined benefit pension plan.
All
of the
assets are
held under
the collective
contract by the plan’s re-insurance 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 contribution
to the pension plan for the year ending December 31, 2017 are $20,000.
F-40
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
15.
STOCK COMPENSATION
The
Company
has
included
share
based
compensation
under
the
SunVesta
Inc.
Stock
Option
Plan
2013
(“the
Plan”)
as
part
of
the
total
remuneration
in
certain
employment
and
Board
of
Director’s
contracts.
The
Company
is
authorized
to
grant
up
to
50,000,000
shares
under
the
Plan.
The
purpose
of
the
Plan
is
to
advance
the
interests
of
the
Company by
encouraging
its
employees
to
remain
associated
with
the
Company
and
assist
the
Company
in
building
value.
Such share based
remuneration
includes
either
shares
or
options
to
acquire
shares
of
the
Company’s
common
stock.
For
all
employees,
fair
value
is
estimated
at
the
grant
date.
Compensation
costs
for
unvested
shares
are
expensed
over
the
requisite
service
period
on
a
straight-line
basis.
Share Grants – Mr. Hans Rigendinger
On
January
1, 2013, the
Company
granted
to
Hans
Rigendinger
3,500,000
common
shares,
valued at $0.08 an amount equal to
the share price
and fair value of the shares on the grant
date.
These
shares
were
granted
as
a
signing
bonus
with
the
Company.
Additionally,
the
Company
granted
2,500,000
common
shares
as
a
retention
award
due
on
each
anniversary
of
his
signing
with
the
Company.
The
employment
contract
was
initially
for
three
years
with
an
additional
bilateral
option
for
an
additional
two
years.
Therefore,
the
Company
could
be
required
to
issue
up to 12,500,000 common shares through January 1, 2018.
Share Grants – Dr. Max Rössler
On July 3, 2013, the Company granted to Dr. Max Rössler 3,000,000 common shares, valued at
$0.07
an
amount
equal
to
the
share
price
and
fair
value
of
the
shares
on
the
grant
date.
These
were
issued
in
connection
with
his
appointment
to
the
Board
of
Directors.
These
shares
were
officially issued on October 15, 2013.
Share Grants – Mr. Josef Mettler
On
July
4,
2013,
the
Company
granted
5,000,000
common
shares
to
Josef
Mettler,
valued
at
$0.07, an
amount
equal
to
the
share
price
and
fair
value
of
the
shares
on
the
grant
date,
in
connection
with
his
employment
agreement.
These
shares
were
officially issued
on
October
15,
2013.
Additionally,
the
Company
granted
3,000,000
common
shares
as
a
retention
award
for
each
completed year of employment (e.g. first time
as per July
4, 2014). The employment
contract
is
for
an
initial
term
of
three
years
with
an
additional
bilateral
option
for
another
two,
two-year
periods,
but a maximum of December
31, 2020. Therefore, in total the Company could
be requested to issue up to 21,000,000 common shares through December 31, 2020 related to the
retention
bonus.
Since
Josef
Mettler
passed
away
during
the
third
quarter
2016,
3,000,000
common
shares
were
issued to his estate as earned compensation as of July
4, 2016. From after this date, the necessary
accrual up until his passing away has been reversed as of December 31, 2016.
F-41
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
15.
STOCK COMPENSATION - CONTINUED
Share Grants – Mr. José María Figueres
On
March
10,
2014,
the
Company
authorized
the
issuance
of
500,000
common
shares,
valued
at
$0.10,
an
amount
equal
to
the
share
price
and
therefore
the
fair
value
on
grant
date,
and
a
retention
award
of
200,000
common
shares
for
each
fully
completed
year
of
service
to
José
María Figueres in connection with his appointment to the Board of
Directors.
Share Grants – Mr. Howard M. Glicken
On
March
10,
2014,
the
Company
authorized
the
issuance
of
500,000
common
shares,
valued
at
$0.10,
an
amount
equal
to
the
share
price
and
therefore
the
fair
value
on
grant
date,
and
a
retention
award
of
200,000
common
shares
for
each
fully completed
year
of
service
to
Howard
Glicken in connection with his appointment to the Board of
Directors.
Based
on
these
contracts
the
Company has
included
the
following
stock-based
compensation
in
the Company’s results:
Stock-based compensation (shares)
December 31, 2016
December 31, 2015
Shares granted
46,800,000 shares
46,800,000 shares
Fair Value respectively market price on grant date
$0.0746
$0.0744
Total maximal expenses (2013-2020)
$3,490,000
$3,450,000
Shares vested
29,800,000 shares
23,900,000 shares
Shares forfeited
12,000,000 shares
23,900,000 shares
Unvested shares
5,000,000 shares
22,900,000 shares
As
of
December
31,
2016,
the
Company expects
to
record
compensation
expense
in
the
future
up to $200,000 as follows:
Stock-based
Year ending December 31,
compensation
2017
2018
2019
2020
2021
(shares)
$
$
$
$
$
Unrecognized
compensation
200,000
0
0
0
0
expense
F-42
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
15.
STOCK COMPENSATION - CONTINUED
Stock Options – Mr. Hans Rigendinger
The Company granted to Hans
Rigendinger, in
connection
with his
employment
contract,
10,000,000
stock
options
on
January
1,
2013.
Each
option
entitles
Mr.
Rigendinger
to
buy
one
Company share
at
a strike
price
of
$0.05. These options
will
be
vested
in two identical
installments (installment A and B) of 5,000,000
options.
Installment
A
is
contingent
on
obtaining
a
financing
arrangement
with
a
specific
counterparty.
As of the grant date, the fair value was $300,000. As of July 4, 2013, the Company assessed that
this
financing
arrangement
with
the
specific
counterparty
will
not
be
completed.
Therefore,
the
Company assessed the
probability of
completion to
be
zero
and
recognized
no
expense.
On July
4, 2013,
the
Company
authorized
a
revised
stock
option
agreement.
This
removed
the
requirement
for
financing
with
a
specific
counterparty
and
updated
for
any
counterparty.
As
of
date
of
the
revised
stock
option
agreement,
the
fair
value
was
$246,000.
Installment
A
was
modified
on
July
4, 2013, since the initial performance condition was improbable to be met. Since the
modification
changed
the
expectation
that
the
options
will
ultimately
vest
and
no
expense
had
been
recognized
for
the
original
award,
the
fair
value
of
the
modified
award
has been
expensed
on a
straight
line basis over the expected vesting
period.
For installment B, it is required that Meliá Hotels International (“Melía”) assumes management
responsibilities for Paradisus Papagayo Bay Resort & Luxury Villas. As of grant date, the fair
value was $340,000 and the Company estimated that Meliá would assume responsibility as of
July 1, 2015. As of March 6, 2014, the Company still assessed the probability that this
performance condition would be met at 100%, but the date by which the performance condition
would have to be achieved was postponed to the fourth quarter 2015, as the opening date was
postponed. As of the date of this report, the estimated opening date was postponed to the fourth
quarter 2018, as was the required date of the performance condition. The Company still assessed
the probability that this performance condition will be met at 100%. Hence, the remaining fair
value of the award will be expensed on a straight-line basis over the recalculated expected
remaining vesting period.
F-43
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
15.
STOCK COMPENSATION - CONTINUED
Stock Options
–
Dr. Max R
ӧ
ssler
The
Company
granted
to
Dr.
Max
R
ӧ
ssler,
in
connection
with
his
appointment
to
the
Board
of
Directors,
10,000,000 stock options on July 3,
2013.
Each option entitles Dr.
R
ӧ
ssler to buy one
Company share
at
a strike
price
of
$0.05.
These
options
will
be
vested
in two identical
installments (installment A and B) of 5,000,000
options.
For
installment A (5,000,000 options), it is required to complete a financing arrangement
for
the
Project.
As
of
grant
date,
the
fair
value
was
$249,835.
The
Company
expensed
the
total
fair
value on a straight-line basis over the expected vesting period.
For installment B (5,000,000 options), it is required that Meliá assumes management
responsibilities
for
Paradisus
Papagayo
Bay
Resort
&
Luxury
Villas.
As
of
grant
date
the
fair
value
was
$258,210
and
the
Company
estimated
that
Meliá
would
assume
responsibility
as
of
July 1,
2015.
As
of
March
6,
2014
the
Company
still
assesses
the
probability
that
this
performance
condition
would
be
met
at
100%,
but
the
date
by which
the
performance
condition
would
have
to
be
achieved
was
postponed
to
the
fourth
quarter
2015,
as
the
opening
date
was
postponed.
As
of
the
date
of
this
report,
the
estimated opening date
was
postponed
to
the
fourth
quarter 2018,
as was
the required date of the performance condition. The Company still assessed
the
probability that
this
performance
condition
will
be
met
at
100%.
Hence,
the
remaining
fair
value
of
the
award
will
be
expensed
on
a
straight-line
basis
over
the
recalculated
expected
remaining vesting
period.
Stock Options – Mr. Josef Mettler
The
Company
granted
to
the
late
Josef
Mettler,
in
connection
with
his
employment
contract,
12,000,000
stock
options
on
July
4,
2013.
Each
option
entitled
the
late
Mr.
Mettler
to
buy
one
share
at
a
strike
price
of
$0.05.
These
options
had
three
different
performance
conditions.
For
installment A
(3,000,000
options),
it
was required
to
complete
a
bridge
financing
arrangement.
As
of
grant
date
the
fair
value
was
$149,000.
The
Company
expensed
the
total
fair
value
on
a
straight- line
basis
over
the
expected
vesting
period. For installment
B
(4,000,000
options),
it
was
required to complete
a
financing
arrangement
(main
financing
arrangement
for
Paradisus
Papagayo
Bay
Resort
&
Luxury
Villas).
As
of
grant
date
the
fair
value
was
$200,000.
The
Company
has
expensed
the
total
fair
value
on
a
straight-line
basis
over
the
expected
vesting
period.
For
installment
C
(5,000,000
options),
it
was
required
that
Meliá
assumes
management
responsibilities
for
Paradisus
Papagayo
Bay
Resort
&
Luxury
Villas.
As
of
grant
date,
the
fair
value
was
$258,000
and
the
Company estimated
that
Meliá
assumes
responsibility as
of
July
1,
2015.
As
of
March
6,
2014
the
Company
still
assessed
the
probability
that
this
performance
condition
would
be
met
at
100%,
but
the
date,
up
to
which
the
performance
condition
would
have to be achieved was postponed to the fourth quarter
2015,
as
the
opening
date
was
postponed.
As
of
the
date
of
this
report,
the
estimated
opening date was postponed to the fourth quarter 2018,
as
was
the
required
date
of
the
performance
condition.
Due
to
his
passing
away
during the
third
quarter
2016,
the
probability
that
any
of
the
above
performance
condition
will
be
met
is
0%.
Therefore,
all
previously
recognized
expenses
in
the
amount
of
$561,064
–
corresponding
to
options
that
have
not
yet
vested
for
all
installments
above–have
been
reversed
as
of
December
31, 2016.
F-44
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
15.
STOCK COMPENSATION - CONTINUED
Summary
A summary of stock options outstanding as per December 31, 2016 is as follows:
Options outstanding
Number of Options
Weighted average
Weighted average
exercise price
remaining
contractual life
Outstanding
January 1, 2016
32,000,000
$ 0.05
7.42 years
Granted
0
Exercised
0
Forfeited or expired
(12,000,000)
Outstanding December 31, 2016
20,000,000
$ 0.05
6.38 years
Exercisable December 31, 2016
0
The
following
table
depicts
the
Company’s
non-vested
options
as
of
December
31,
2016
and
changes during the period:
Non-vested options
Shares under
Weighted average
Options
grant date fair
value
Non-vested at January 1, 2016
32,000,000
$ 0.053
Non-vested-granted
-
-
Vested
-
-
Non-vested, forfeited or cancelled
(12,000,000)
-
Non-vested at December 31, 2016
20,000,000
$ 0.075
Under the provisions
of ASC
718
Compensation
–
Stock Compensation,
the Company is
required
to
measure
and
recognize
compensation
expense
related
to
any
outstanding
and
unvested
stock options
previously granted,
and thereafter
recognize,
in its
consolidated
financial
statements, compensation expense related to any
new stock options granted after implementation
using
a
calculated
fair
value
based
option-pricing
model.
The
Company
uses
the
Black-Scholes
option- pricing model to calculate the fair value of all of its stock options and its assumptions are
based
on
historical
and
available
market
information.
The
following
assumptions
were
used
to
calculate the compensation expense and the calculated fair value of stock options
granted:
Assumption
December 31, 2016
December 31, 2015
Dividend yield
Risk-free interest rate used (average)
Expected
market price
volatility
Average expected life of stock options
n.a.
n.a.
The computation
of the expected volatility assumption used in the Black-Scholes calculation for
new
grants
is
based
on
historical
volatilities
of
a
peer
group
of
similar
companies
in
the
same
industry. The expected life assumptions are based on underlying contracts.
F-45
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
15.
STOCK COMPENSATION - CONTINUED
As
of
December
31,
2016,
the
Company
had
unrecognized
compensation
expenses
related
to
stock
options
currently
outstanding,
to
be
recognized
in
future
quarters
respectively
years
as
follows:
Stock-based compensation (options)
Through to December
Through to December
31, 2017
31, 2018
$
$
Unrecognized compensation expense
40,964
30,723
16.
SUMMARY OF STOCK AND OPTION COMPENSATION
EXPENSE
The
Company
recorded
the
following
amounts
related
to
stock
based
compensation
expense
during the periods ended December 31, 2016 and December 31,
2015:
Summary of share and option based compensation expense
December
31,
December 31, 2015
2016
$
$
Expense related to option grants
(509,912)
134,952
Expense related to share grants
345,000
450,000
Total (recorded under general & administrative expense)
(164,912)
584,952
17.
FUTURE LEASE
COMMITMENTS
On
December
1,
2012,
the
Company
entered
into
a
lease
agreement
for
the
premises
for
its
Swiss office with an
unrelated entity. The annual rental expense
amounts to
approximately
$130,000 on a fixed
term expiring on December
31, 2017. The company has
been
invited by the
landlord to discuss
a
continuation
or
termination
of the
rental
agreement.
The
objective is
to
come
to
decisions before the middle of the calendar year 2017.
December 31,
December 31,
Future lease commitments
2016
2015
$
$
2016
0
130,000
2017
130,000
130,000
F-46
SUNVESTA, INC
.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
18.
NOTES
PAYABLE
December 31, 2016
December 31, 2015
$
$
Promissory note
1,500,000
2,000,000
Specogna Holding AG
-
60,'743
R. Weimar (private investor)
-
131,169
Total
1,500,000
2,736,912
Promissory Note
As
part
of
the
completion
of
the
purchase
of
SunVesta
Costa
Rica
SA
(former
Altos
del
Risco)
on
March
9,
2013,
the
parties
agreed
that
$2,000,000
of
the
purchase
price
would
be
converted
into a non-interest bearing and uncollateralized loan payable which was originally due for
payment
on
March
8,
2014,
then
extended
to March
8, 2015.
On March
16,
2015,
the Company
agreed with
the counterparty to extend the due date through March 16,
2016.
On April 21,
2016, the Company signed a new agreement,
which stipulated new payment
terms.
The
total
amount
of
$2,000,000
was
then
repayable
in
four
quarterly
installments
of
$500,000
each, starting on August 21,
2016.
On
September
19,
2016,
the
Company
signed
a
new
agreement,
which
stipulated
that
the
first
quarterly
repayment
of
$500,000
was
due
on
November
21,
2016,
only
and
not
on
August
21,
2016.
Loans Specogna Holding AG
On December 31, 2015, the Company
entered into a short term loan agreement for
approximately
$607,000
with
Specogna
Holding
AG
repayable
on
February
29,
2016,
with
an
interest
payment
of
8
%
per
annum.
The
loan
was
secured
personally
and
jointly
by
Dr.
Max
Rössler, the late Mr. Josef Mettler and Mr. Hans Rigendinger.
During
the
year
ended
December
31,
2016,
this
loan
has
been
converted
into
convertible
bonds.
Since the
new debt
was
significantly different
from
the
old
debt,
the
exchange
was
treated
as
an
extinguishment
of
debt
and
an
amount
of
$93,950.87
was
accounted
for
as
a
loss
on
extinguishment of debt.
Loan R. Weimar (private investor)
On May 23, 2014, the Company entered into a short term loan agreement for
approximately $376,800 with Roland Weimar. The loan was repayable in five installments, (four
payments
of
$84,700,
one
payment
of
$38,000),
with
the
initial
payment
due
on
June
2,
2014
and
the
latest
one
due
on
June
1,
2015.
The
interest
rate
is
2
%
per
annum.
The
Company
has
repaid
$22,683
during
the
first
quarter
2016,
$34,015
was
transferred
to
another
liability in
the
second
quarter
and
$66,946
was
repaid
in
the
third
quarter
of
2016.
The
agreement
does
not
stipulate any
repercussions
for late payments.
On October 4, 2016 the entire amount - including interest - was repaid.
F-47
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
19.
OPENING DATE “Paradisus Papagayo Bay Resort & Luxury
Villas”
On
June
2,
2014,
the
Company
amended
its
agreement
with
Meliá
(“Sixth
addendum
to
the
management agreement of March 8, 2011”) to postpone the opening date as follows:
-
The construction of the “Paradisus” will be completed by November 15,
2015
-
Should
the
“Paradisus”
not
be
completed
by November
15,
2015,
(subject
to
force
majeure) and
should
an
extension date not be
agreed,
subsequent
to November 15, 2015, the
Company will be obligated to pay Meliá a daily amount of $2,000 as liquidated
damages.
-
Should
the
Company be
unable
to
complete
the
construction
of
the
“Paradisus”
by
February
15,
2016,
Meliá,
can
terminate
the
management
agreement
obligating
the
Company
to
compensate
Meliá
in
the
amount
of
$5,000,000
unless
the
respective
parties
agree to extend such date.
Dated April 27,
2016 a
seventh addendum was signed between the Company and Melía with the
following major conditions:
a.
New completion date: September 15, 2018 (subject to force
majeure)
b.
Should
the
completion
not occur by September
15, 2018
and should the
parties not
have
agreed
in
writing
an
extension
to
such
date,
after
September
15,
2018,
the
Company
shall pay Melía a daily amount of $2,000 as liquidated
damages.
c.
Should
the
completion not occur by
November 15, 2018, Melía
shall
be
entitled
to
terminate the agreement unless the parties agree in writing to extend the completion date
and the Company shall be obliged to pay Melía $5,000,000 as liquidated damages
solely
to compensate the
Manager.
20.
SEGMENT INFORMATION
The chief
operating decision
maker
(“CODM”)
is
the Company’s
CEO.
Neither
the
CODM
nor
the Company’s 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, 2016
December 31, 2015
Location of tangible assets
Switzerland
$
37,286
76,573
Costa Rica
66,179,372
61,194,851
Total
$
66,216,658
61,271,424
F-48
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
21.
EARNINGS PER SHARE
Basic earnings per share are the result of dividing the Company’s net income (or net loss) by the
weighted
average
number
of
shares
outstanding
for
the
contemplated
period.
Diluted
earnings
per
share are
calculated applying the
treasury stock method. When there is
a net income
dilutive
effect all stock-based compensation awards or participating financial instruments are considered.
When the Company
posts a loss, basic loss per share equals diluted loss per share. The following
table depicts how the denominator for the calculation of basic and diluted earnings per share was
determined under the treasury stock
method.
Earnings per share
Year Ended
Year Ended
December 31, 2016
December 31, 2015
Company posted
Net loss
Net loss
Basic weighted average shares outstanding
100,245,439
94,338,589
Dilutive effect of common stock equivalents
None
None
Dilutive weighted average shares outstanding
100,245,439
94,338,589
The
following
table
shows
the number of
stock
equivalents
that
were
excluded
from
the
computation
of
diluted
earnings
per
share
for
the
respective
period
because
the
effect
would
have been anti-dilutive.
Earnings per share
Year Ended
Year Ended
December 31, 2016
December 31, 2015
Options to Hans Rigendinger
10,000,000
10,000,000
Options to Dr. M. Rössler
10,000,000
10,000,000
Options to Josef Mettler
0
12,000,000
Total Options
20,000,000
32,000,000
Shares to Hans Rigendinger
5,000,000
7,500,000
(retention bonus – non vested)
Shares to Josef Mettler
0
15,000,000
(retention award – non vested)
Shares to Howard Glicken and José Maria Figueres
400,000
400,000
(retention award – non vested)
Shares associated with Convertible CHF Bonds
4,358,840
3,558,068
Total Shares
9,758,840
26,458,068
Total Options and Shares
29,758,840
58,458,068
Options related to Convertible CHF bonds: Each bond in the principal amount of CHF 5,000 can
be
converted
on
any
business
day
during
the
conversion
period
into
625
common
shares
of
SunVesta Holding AG at a conversion price equal to CHF 8.
F-49
SUNVESTA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
22.
GENERAL AND ADMINISTRATIVE
EXPENSES
General and administrative expenses according consolidated statement of comprehensive loss
include:
Twelve-month
Twelve-month
period ended
period ended
December 31,
December 31,
2016
2015
$
$
Rental & related expenses
188,094
194,982
Audit
291,218
267'087
Consulting
2,519,305
1,379,976
Marketing, Investor & public relations
92,362
127,458
Travel expenses
332,781
561,803
Personnel costs including social security costs
and share based remuneration
1,017,705
2,636,788
Expense for penalty on management agreement
-
-
Various other operating expenditures
637,731
817,977
Total according statement of
comprehensive loss
$
5,079,198
5,986,072
23.
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:
-
Since period end an amount of approximately $6.20
million (CHF 6.32 million) relating to
the
Convertible
CHF
Bonds
was
repayable
as
of
February
28,
2017.
As
per
date
of
this
report,
approximately
$1.1
million
has
been
repaid;
the
remaining
amount
was
extended
under
unchanged
conditions
and
is
expected
to
be
converted
into
a
new
bond
issue
during
May 2017.
-
Since
period
end
the
Company
has
noticed
cancellation
of
the
Meridian
Agreement
in
connection with the intended purchase of the additional concession properties and is
seeking reimbursement for certain amounts paid as deposits.
-
Based on the terms of the Settlement Agreement with Concreta S.R.L., the previous interior design firm engaged for the Paradisus Papagayo Bay Resort & Luxury Villas, the Company will pay $600,000 to Concreta S.R.L. on March 20
th
, 2017, in full and final settlement of outstanding issues.
F-50
ITEM 9.
CHANGES
IN AND DISAGREEMENTS WITH
ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
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
are 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
—
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, 2016, based on criteria established in
Internal Control –
Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations (COSO) 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 over the Company’s consolidated financial reporting and procedures for internal
control, which oversight might include challenging management’s accounting for and reporting of
transactions. Accordingly, we determined that this control deficiency as of December 31, 2016,
constituted a material weakness.
Failure to Segregate Duties.
The Board of Directors has not maintained any segregation of duties within
the Company’s management, instead relying on a single individual to fill the role of chief executive
officer, chief financial officer and principal accounting officer, responsible for a broad range of duties
that cannot be properly reconciled with a singular management resource. Accordingly, we determined
that this control deficiency as of December 31, 2016, constituted a material
weakness.
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, 2016, that the Company’s internal
control over financial reporting was not effective based on the criteria in
Internal Control – Integrated
Framework
(2013)
issued by the COSO. The Company intends to remedy its material weaknesses by:
—
Appointing an independent director to complete the composition of the audit committee to
—
ceonmgapgriinsge aonnliyndniovnid-muaalntaogeseriravledaisrecchtoierfs
ftionaonvceirasleeofmficaenragaenmd
epnritncipal accounting officer to
segregate the duties of chief executive officer and chief financial officer
Management has initiated a search for an individual that would serve as an independent member of the
board of directors. The intention being that once appointed, the new independent director would also
serve on the Company’s audit committee to remedy concerns over the apparent lack of appropriate
oversight over financial reporting and procedures for internal control.
The Company also expects to segregate the duties of chief executive officer and chief financial officer
by appointing an additional individual to management that would serve as chief financial officer and
principal accounting officer alongside our chief executive officer to bolster internal controls.
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.
23
Changes in Internal Controls over Financial Reporting
During the quarter ended December 31, 2016, 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.
9B.
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
Hans Rigendinger
71
2013
CEO, CFO, COO and Director
Dr. Max R
ӧ
ssler
77
2013
Director
José Maria
Figueres
63
2014
Director
Howard Glicken
74
2014
Director
Hans Rigendinger
was first appointed as Chief Operating Officer and as a director on January 1, 2013.
He assumed the responsibilities of Chief Executive Officer, Chief Financial Officer and Principal
Accounting Officer on an interim basis at the bequest of the Company’s Board of Directors on August
18, 2016, on the death of its former chief executive officer. Mr. Rigendinger was further confirmed by
the Board of Directors as Chief Executive Officer, Chief Financial Officer and Principal Accounting
Officer on December 6, 2016.
Mr. Rigendinger also serves as an officer and director of SunVesta AG.
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.
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 Master’s 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.
Dr. Max R
ӧ
ssler
was appointed as a director of the Company on July 3,
25
2013. Dr. R
ӧ
ssler also serves as a director of SunVesta AG.
Business Experience
Dr. R
ӧ
ssler has lectured and been involved in research as a professor at ETH in the fields of applied
mathematics and operations research. During his tenure with ETH, Dr. R
ӧ
ssler began to apply
mathematical methods to problems related to financial investments. Dr. R
ӧ
ssler joined Credit Suisse in
1978 as head analyst of the department for fixed income products. Since 1997, Dr. R
ӧ
ssler has worked
with SUVA (Swiss National Accident Insurance Fund) as a manager of a portion of their fixed-income
investments and currently holds advisory board mandates for two Swiss private banks.
Officer and Director Responsibilities and Qualifications
Dr. Rössler’s knowledge
, and experience with fixed income investments is extremely valuable to the
Company’s Board of Directors as it moves forward with financing its business model.
Dr. Rössler studied mathematics at the Swiss Federal Institute of Technology Zurich (ETH) and earned
his doctorate at Harvard University.
Other Public Company Directorships in the Last Five Years
None.
José Maria Figueres
was appointed as a director of the Company on March 10, 2014.
Business Experience
Following his graduate studies at Harvard, Mr. Figueres was elected as the President of Costa Rica in
1994, a position in which he served for four years. When his service as President came to an end, Mr.
Figueres was appointed to the Board of Directors of Terremark Worldwide, Inc., a global IT company
that provided industry managed services such as cloud computing, collocation and web hosting
solutions for enterprise IT infrastructures. A year after joining Terremark, Mr. Figueres joined the
World Economic Forum in Davos, Switzerland. Five
years later, Mr. Figueres undertook a one year
assignment as managing director of the Talal Abu-Ghazaleh Organization, a global consulting group
headquartered in Amman, Jordon. Between 2006 and 2009, Mr. Figueres served on the International
Advisory Board of Abraaj Capital, a private equity firm with over $6 billion in assets under
management. He then went on to join the Advisory Board of Grupo Arcano, a financial services firm
based in Madrid, Spain, a leading boutique for investment banking and asset management services. Mr.
Figueres joined IJ Partners in Geneva, Switzerland, as a managing partner in 2010. Since 2010, Mr.
Figueres has served as the Chairman of the Carbon War Room, an independent non-profit organization
focused on the global transition to a low carbon economy. Mr. Figueres was appointed President of the
Carbon War Room in 2012.
Officer and Director Responsibilities and Qualifications
Mr. Figueres’s knowledge, experience and business acumen on a global level in addition to his direct
connection to Costa Rica is extremely valuable to the Company’s Board of Directors as it moves
forward with its hotel development in Costa Rica.
26
Mr. Figueres completed his undergraduate studies at the United States Military Academy (West Point)
and completed his Master’s Degree in Public Administration at the John F. Kennedy School of
Government at Harvard University.
Other Public Company Directorships in the Last Five Years
None.
Howard H. Glicken
was appointed as a director of the Company on March 10, 2014.
Business Experience
Between 1972 and 1981 Mr. Glicken served as the Chief Executive Officer and Chairman of the Board
of MGI Industries, which company controlled the design and manufacture of extrusion tools for the
metals industry in Latin America. Mr. Glicken joined Jillian’s Entertainment Corporation in 1983 to
serve as its Chairman and Chief Executive Officer until 1992. Over this period Jillian’s became one of
the largest United States purchasers of Latin American gold ore. Following his tenure at Jillian’s, Mr.
Glicken was appointed Chairman of the Commonwealth Group, a Washington, D.C. public policy and
consulting firm with extensive business activities in Latin America. Mr. Glicken worked with the
Commonwealth Group until 1996 before forming the America’s Group. He currently serves as Chairman
and Chief Executive Officer of the America’s Group, a Miami based consulting/merchant banking firm
focused solely on Latin America, Mexico and the Caribbean.
Officer and Director Responsibilities and Qualifications
Mr. Glicken years of business and political experience in Latin America is extremely valuable to the
Company’s Board of Directors as it seeks to garner the attention of those in the region that might assist
in the development of its hotel project in Costa Rica.
Mr. Glicken attended the University of Florida, the American Banking Institute and the Harvard
University Advanced Institute on Negotiation.
Other Public Company Directorships in the Last Five Years
None.
Family Relationships
There are no family relationships between or among the directors or executive officers.
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.
27
Our officers were appointed by our Board of Directors and will hold office until the expiration of their
employment contracts or removal 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 unaware of any persons who, during the
period ended December 31, 2016, failed to file reports required by Section 16(a) of the Exchange Act.
Code of Ethics
We have adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-K of the
Securities Exchange Act of 1934 that applies to directors and senior officers, such as the principal
executive officer, principal financial officer, controller, and persons performing similar functions. The
Company has incorporated a copy of its Code of Ethics as
Exhibit 14
to this Form 10-K. Further, our
Code of Ethics is available in print, at no charge, to any security holder who requests such information
by contacting us.
Board of Directors Committees
The Board of Directors has formed an audit committee and adopted an audit charter. The audit
committee is comprised of two independent directors and is presently seeking to identify a third
independent director to complete its composition in order to fulfill its mandate.
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 paid to the independent auditors, and internal
accounting and financial control policies and procedures.
The Board of Directors has not established a compensation committee, nominating committee or
compliance and ethics committee.
Director Compensation
Directors are reimbursed for out-of-pocket costs incurred in attending meetings and compensated for
services as directors of the Company in the form of stock options or stock awards. Cash compensation is
also paid in certain instances to directors of the Company’s subsidiary companies, including to our Chief
Executive Officer who also serves as a director of SunVesta AG.
The Company has compensated directors in the past and may adopt additional provisions for
compensating directors for their services in the future.
28
ITEM 11.
EXECUTIVE
COMPENSATION
Compensation Discussion and Analysis
Chief Executive officer, Chief Financial Officer and Principal Accounting Officer – Hans Rigendinger
Our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer has an
employment agreement dated December 31, 2012, with the Company and an employment agreement
dated January 17, 2013, with SunVesta AG, pursuant to which he receives a base salary and is entitled to
receive a bonus for his service to the Company in addition to certain benefits including per diem
allowances, car allowances, housing allowances, and representation allowances. The employment
agreement with the Company also provides for a signing bonus payable in Company stock, stock options
and an annual retention award. The initial term of the employment agreement expired on December 31,
2015, and has been renewed for two successive one year terms. The compensation package is deemed
appropriate and was approved by the Company’s Board of
Directors.
For the year ended December 31, 2016, $296,000 was paid to or accrued for our Chief Executive Officer,
of which $240,000 was salary, $36,000 was a car allowance and $20,000 was board of directors’ fees for
services provided to both SunVesta AG and SunVesta Projects & Management AG.
For
the
year
ended
December
31,
2015,
$296,000
was
paid
to
or
accrued
for
our
Chief
Executive
Officer, of which $240,000 was salary, $36,000 was a car allowance and $20,000 was board of
directors’ fees for service to both SunVesta AG and SunVesta Projects & Management AG.
Former Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer Josef Mettler
Our former chief executive officer had an employment agreement dated July 4, 2013, that included an
addendum dated March 6, 2015, with the Company and an employment agreement dated January 5, 2011,
with SunVesta AG. His employment agreements entitled him to base salaries, bonuses for his service in
addition to certain benefits including per diem allowances, car allowances, housing allowances, and
representation allowances. The employment agreement with the Company also provided for a signing
bonus payable in cash and Company stock, stock options and an annual retention award payable in stock.
The Company employment agreement expired on the death of Mr. Mettler.
For the year ended December 31, 2016, $491,625 was paid or accrued to our former chief executive
officer of which $399,000 was salary and $92,625 was other compensation of which $14,250 was out of
pocket expenses, $38,000 was car allowances, $28,500 was a living away allowance, $0 and $11,875 was
board of directors fees for services provided to both SunVesta AG and SunVesta Projects & Management
AG.
For the year ended December 31, 2015, $1,697,445 was paid or accrued to our chief executive officer of
which $504,000 was salary, $822,500 was a bonus, and $370,945 was other compensation of
which$18,000 was out of pocket expenses, $48,000 was car allowances, $36,000 was a living away
allowance, $253,945 were commissions and $15,000 was board of directors fees for services provided to
both SunVesta AG and SunVesta Projects & Management AG.
Summary
The following table provides summary information for the years ended December 31, 2015 and 2014
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 $100,000:
29
Executive Summary Compensation Table
Name
and
Year
Salary
Bonus
Stock
Option
Non-Equity
Change in
All Other
Total
Principal
($)
($)
Awards
Awards
Incentive Plan
Pension Value
Compensation
($)
Position
($)
($)
(1)
Compensation
and
($)
($)
Nonqualified
Deferred
Compensation
($)
Josef
Mettler
Former
2016
399,000
-
-
-
-
-
92,625
491,625
CEO, CFO,
2015
504,000
822,500
-
-
-
-
370,945 1,697,445
PAO
Hans
Rigendinger
2016
240,000
-
-
-
-
-
56,000
296,000
CEO, CFO,
2015
240,000
-
-
-
-
-
56,000
296,000
COO
(1)
See Note 14
to the audited financial statements included in this Form 10-K for the year
ended December 31, 2016, for
further information
concerning the Company’s reliance on the Black Sholes option-pricing model to calculate the fair
value of stock options
Outstanding Equity Awards
The following table provides summary information for the period ended December 31, 2016, concerning
unexercised options, stock that has not vested, and equity incentive plan awards by the Company to or on
behalf of (i) the chief executive officer and chief financial officer and (ii) the three most highly
compensated individuals whose total compensation exceeds $100,000:
Outstanding Equity Awards at Fiscal Year-End
Option awards
Stock awards
Equity
incentive
plan
Equity
awards:
incentive
Number
Equity
market or
plan
of
incentive plan
payout
awards:
shares
Market
awards:
value of
Number of
number of
or units
value of
number of
unearned
securities
Number of
securities
of stock shares or
unearned
shares,
underlying
securities
underlying
that
units of
shares, units or units or
unexercised underlying
unexercised Option
have
stock that
other rights
other rights
options
unexercised
unearned
exercise Option
not
have not
that have not
that have
(#)
options
options
price
expiration vested
vested
(3)
vested
not vested
Name
exercisable (#) exercisable
(#)
($)
date
(#)
($)
(#)
($)
Hans
Rigendinger
0 10,000,000
(1)
-
0.05
December
31, 2022
-
0.14 10,000,000
(2)
-
(1)
Mr. Rigendinger’s stock options vest on the completion of certain business development milestones as follows:
5,000,000 stock options on that date on which the
Company or related entity completes a financing sufficient to complete
the Papagayo Bay Resort & Luxury Villas; and 5,000,000 stock options on that date on which Meliá assumes
management responsibility for the Papagayo Bay Resort & Luxury Villas.
(2)
Mr. Rigendinger’s equity incentive shares are characterized as a retention award of which 2,500,000 shares are earned
on each anniversary of his term of employment over an initial term of three years that will automatically renew for two
successive one year terms to a maximum of 12,500,000 shares subject to earlier termination.
(3)
The per share value at December 31, 2016, was $0.14.
30
2013 SunVesta Stock Option Plan
The Board of Directors adopted the 2013 SunVesta Stock Option Plan (“Plan”) on January 1, 2013, which
provides for the granting and issuance of up to 50,000,000 million shares of the Company’s common
stock. The Company granted 32,000,000 stock options from the Plan at a $0.05 exercise price per share
for ten years of which stock options had expired as of December 31, 2016, subsequent to the death of the
Company’s former chief executive officer. The Stock Option Plan has therefore 30,000,000 options
available for future grant.
Our Board of Directors administers the Plan, however, it may delegate this authority to a committee
formed to perform the administrative function of the Plan. The Board of Directors or a committee of the
Board has the authority to construe and interpret provisions of the Plan as well as to determine the terms
of an award. Our Board of Directors may amend or modify the Plan at any time. However, no
amendment
or modification shall adversely affect the rights and obligations with respect to outstanding awards unless
the holders consent to any amendment or
modification.
We have no agreement that provides for payments to our Chief Executive Officer at, following, or in
connection with his resignation or retirement except any accrued obligations and the continuation of
health insurance or pension benefits. However, our Chief Executive Officer’s employment agreements do
provide for a severance payment in the event of a change of control, or a change in our officer’s
responsibilities within the Company, either before or after a change in control, and his resignation for
what is defined in his employment agreement as “good reason”
We do maintain a pension plan covering all employees in Switzerland. Our model allocates pension costs
over the service period of employees eligible for the plan.
The following table provides summary information for the year ended December 31, 2016, concerning
cash and non-cash compensation paid or accrued by the Company to or on behalf of its non-executive
directors.
Director Summary Compensation Table
Name
Fees
Stock
Option
Non-equity
Nonqualified
All other
Total
earned or
awards
Awards
incentive plan
deferred
compensation
($)
paid in
($)
($)
compensation
compensation
($)
cash
($)
($)
($)
Dr. Max R
ӧ
ssler
-
-
-
-
-
-
-
Jose Maria Figueres
- 20,000
-
-
-
-
20,000
Howard H. Glicken
- 20,000
-
-
-
-
20,000
31
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
101,841,603 shares of common stock issued and outstanding as of March 17, 2017 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 Shares
Note
Percent of Class
Hans Rigendinger
CEO, CFO, PAO and Director
97 Seestrasse, CH-8942
Common
35,078,860
1
34.44%
Oberrieden, Switzerland
Dr. Max Rössler
Director
97 Seestrasse, CH-8942
Common
11,000,000
2
10.80%
Oberrieden, Switzerland
José Maria Figueres
Director
Apartado Postal 1957-1000
Common
900,000
3
0.88%
San Jose, Costa Rica
Howard M. Glicken
Director
441 Palermo Avenue
Common
900,000
4
0.88%
Carol Gables, Florida 33134
Officer and directors (4) as a group
Common
47,878,860
47.01%
Josef Mettler (deceased)
Muhlebachstrasse 20
Common
31,770,446
5
31.20%
6341 Baar, Switzerland
(1)
Mr. Rigendinger also holds 10,000,000 unvested stock options granted pursuant to the 2013 SunVesta Stock Option Plan, to
purchase additional shares of the Company’s common stock at an exercise price of $0.05, subject to vesting
based on the
achievement of certain milestones tied to the development of the Paradisus Papagayo Bay Resort & Luxury Villas and the right
to earn up to an additional 5,000,000 shares as a retention award of 2,500,000 shares issued on
each anniversary of his
employment subject to earlier termination.
(2)
Dr. R
ӧ
ssler also holds 10,000,000 unvested stock options granted pursuant to the 2013 SunVesta Stock Option Plan, to
purchase additional shares of the Company’s common stock at an exercise price of $0.05, subject to vesting
based on the
achievement of certain milestones tied to the development of the Paradisus Papagayo Bay Resort & Luxury Villas.
(3)
José Maria Figueres can earn an additional 200,000 shares on each anniversary of service as a director.
(4)
Howard M. Glicken can earn an additional 200,000 shares on each anniversary of service as a director.
(5)
Common stock attributed to Mr. Mettler’s estate includes 16,264,334 shares held by Zypam Ltd., 175,000 shares held by
Viridium
Business Ltd, 405,000 shares held by Kirga Real Estate & Finance
(Int.) Ltd,, 77,778 shares held by
HTVAktiengesllschaft, and 75,000 shares held by Chocura Real Estate Inc., all of which are relatedcompanies.
32
ITEM 13.
CERTAIN
RELATIONSHIPS AND RELATED
TRANSACTIONS
AND DIRECTOR
INDEPENDENCE
Neither our directors or executive officers, nor any proposed nominee for election as a director, nor any
person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights
attached to all of our outstanding shares, nor any members of the immediate family (including spouse,
parents, children, siblings, and in
−
laws) of any of the foregoing persons has any material interest, direct
or indirect, in any transaction since the beginning of our last fiscal year or in any presently proposed
transaction which, in either case, has or will materially affect us except as follows:
Aires International Investments, Inc.
Over the last fiscal year, the Company increased its loan obligation to Aires International Investments,
Inc., a company owned by Dr. R
ӧ
ssler (a director of the Company), to $51,473,793 from $47,198,362 as
of December 31, 2015.
Dr. Max Rössler
Dr. Max Rössler provided financing of approximately $16,700,000 for a total loan balance of
approximately $17.1 million, of which approximately $15.2 million were subscribed into convertible
CHF Bonds during the year ended December 31, 2016.
Global Care AG
During 2016, Global Care AG, a company owned by Dr. Rössler, assumed a liability in the amount of
$4,635,352 (CHF 4,500,000) from Aires that was subsequently converted into convertible CHF Bonds in
a modification of the debt.
Sportiva participations ag
During
the
period
ended
December
31,
2016
there
were
the
following
movements
on
the
current
account
of Sportiva
participations ag until the
death
of
Josef Mettler.
At
that point, Sportiva participations
ag
was
no longer a related
party.
CHF
USD
Balance December 31, 2015
524,695
528,660
Cash paid to SunVesta
870,000
875,780
Cash received from SunVesta
(2,812,911) (2,867,777)
Transfers from/(to) other related parties
1,502,026
1,545,020
Interest credited to the account
4,801
4,852
Changes in forreign currency
-
1,976
Transfer to third party upon death of Josef Mettler
(88,611)
(88,511)
Balance September 12, 2016
-
-
Director Independence
The Company is quoted on the Over the Counter 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) which 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, as of December 31, 2016, we consider two of our directors independent, neither of whom is
employed by the Company.
33
ITEM 14.
PRINCIPAL
ACCOUNTANT FEES AND
SERVICES
Fees and Services
BDO AG (“BDO”) has provided audits of our annual financial statements and a review of our quarterly
financial statements for the periods ended December 31, 2016 and December 31, 2015 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
2016
Audit fees
$
288,210
1)
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
$
288,210
BDO Fees and Services
2015
Audit fees
$
255,114
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
$
255,114
1) This amount includes the audit fees for the standalone consolidated financial statements of the
SunVesta Holding AG subgroup and the audit of the standalone Costa Rica subgroup.
Audit Committee Pre-Approval
We do have a standing audit committee, however all services provided to us by BDO, as detailed above,
were pre-approved by our Board of Directors. BDO performed all work with their permanent full-time
employees.
34
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-50, and are included as part of this Form 10-K:
Financial Statements of the Company for the years ended December 31, 2016 and 2015:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated
Statements
of
Comprehensive
Loss
Consolidated Statements of Stockholders’ 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 37 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.
ITEM 16.
FORM
10-K SUMMARY
None.
35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SUNVESTA, INC.
Date
/s/ Hans Rigendinger
March 17, 2017
Hans Rigendinger
Chief Executive Officer, Chief Financial Officer
and Principal Accounting 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/ Hans Rigendinger
Director
March 17, 2017
Hans
Rigendinger
/s/ Dr. Max Rössler
Director
March 17, 2017
Dr. Max Rössler
/s/ Howard H. Glicken
Director
March 17, 2017
Howard H.
Glicken
37
INDEX
TO EXHIBITS
Exhibit
Description
3.1.1
*
Articles of Incorporation (incorporated by reference from the Form 10-SB filed with theCommission on
December 31,
1999).
3.1.2
*
Amended Articles of Incorporation (incorporated by reference from the Form 10-KSB filedwith 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 withthe
Commission on September 27, 2007).
3.2.1*
Bylaws (incorporated by reference from the Form 10-SB filed with the Commission on December31, 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 theCompany 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 InvestmentsLimitada.
10.3
*
Debt Settlement Agreement dated March 1, 2010, between the Companyand Zypam, Ltd. (incorporated by
reference from the Form 8-K filed with the Commission on March 10,
2010).
10.4
*
Debt Settlement Agreement dated March 1, 2010, between the Company and Hans
Rigendinger
(incorporated by reference from the Form 8-K filed with the Commission on March 10,
2010).
10.5
*
Guaranty Agreement dated July 16, 2012, between SunVesta, Mr. Mettler, Mr. Rigendinger and
Dr.R
ӧ
ssler.
10.6*
Employment Agreement dated January 1, 2013 between the Company and Hans Rigendinger(incorporated
by reference to the Form 8-K filed with the Commission on February 4, 2013.
10.7
*
Employment Agreement dated July 4, 2013 between the Company and Josef Mettler(incorporated by
reference to the Form 10-Q filed with the Commission on October 10,
2013).
10.8
*
Assignment of Debt Agreement dated December 31, 2012,
between the
Company, SunVesta AG
and Aires
International Investments, Inc. (incorporated by reference to the
Form 10-Q filed with the Commission on
December 13,
2013).
10.9
*
Debt Settlement Agreement dated December 31, 2012, between the Company andHans Rigendinger
(incorporated by reference to the Form
10-Q filed with the Commission on December 13,2013).
10.10
*
Loan Agreement dated October 31, 2013, between SunVesta AG and Aires InternationalInvestments, Inc.
(incorporated by reference to the Form
10-Q filed with the Commission on December 13,2013).
10.11
*
Assignment of Debt Agreement dated December 31, 2013,
between the
Company, SunVesta AG
and Aires
(incorporated by reference to the Form
10-Q filed with the Commission on May 20,2014).
10.12
*
Assignment of Debt Agreement dated December 31, 2014,
between the
Company, SunVesta AG
and Aires
International Investments, Inc. (incorporated by reference to the
Form 10-Q filed with the Commission on
August 19, 2015).
10.13
*
Addendum
to Employment Agreement dated March 6, 2015, between the Company andJosef Mettler
(incorporated by reference to the Form
10-Q filed with the Commission on May 5,
2015).
14*
Code of Business Conduct and Ethics adopted on July 16, 2015 (incorporated by reference to theForm
10-Q
filed with the Commission on August 19,
2015).
21
Subsidiaries of the
Company
31
Certification of the
Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14 of the
Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
32
Certification of the
Chief
Executive
Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
99*
SunVesta, Inc. 2013 Stock Option Plan (incorporated by reference to the
Form
10-Qfiled with the
Commission on October 10,
2013).
101. INS
XBRL Instance
Document
†
101.
PRE
XBRL Taxonomy Extension Presentation
Linkbase
†
101.
LAB
XBRL Taxonomy Extension Label
Linkbase
†
101. DEF
XBRL Taxonomy Extension Label
Linkbase
†
101. CAL
XBRL Taxonomy Extension Label
Linkbase
†
101. SCH
XBRL Taxonomy Extension
Schema
†
*
Incorporated by reference to previous filings of the
Company.
†
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed “furnished” andnot “filed”
or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of
1933, or deemed “furnished” and not “filed” for purposes of Section 18 of the Securities and Exchange Act
of 1934, and otherwise is not subject to liability under these
sections.
38
Exhibit 21
SUBSIDIARIES OF SUNVESTA, INC.
SunVesta
Inc.
USA
SunVesta
Holding AG
Switzerland
SunVesta
SunVesta
Projects & Management AG
Holding España
SL
Switzerland
Spain
SunVesta
Costa Rica SA
Costa Rica
1
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, Hans Rigendinger, 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: March 17, 2017
/s/ Hans Rigendinger
Hans Rigendinger
Chief Executive Officer and Chief Financial Officer
1
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,
2016, as filed with the Securities and Exchange Commission on the date hereof, I, Hans Rigendinger, 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: March 17, 2017
/s/ Hans Rigendinger
Hans Rigendinger
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.
1