NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017
1.
Corporate Information
On
August 27, 2007, SunVesta Inc. (“Company”) acquired SunVesta Holding AG (“SunVesta AG”). SunVesta AG has
three wholly-owned subsidiaries: SunVesta Projects and Management AG, a Swiss company; SunVesta Costa Rica SA, a Costa Rican company
and SunVesta Holding España SL, a Spanish company.
The
Company is focused on the development of a holiday resort 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 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
New
accounting standards – not adopted
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 has concluded that (ASU) 2016-01 will not have an impact on its consolidated
results of operations, financial condition, cash flows, and financial statement disclosures.
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.
SUNVESTA,
INC.
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017
2.
SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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.
In
March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Updates ASU 2017-07, requiring certain
changes to the presentation of the expenses related to postretirement benefits accounted for under Topic 715. 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 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.
New
accounting standard updates - 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 has assessed that ASU 2014-15 has no effect on its financial statements, as a note with
respect to the going concern assumption is already presented.
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 has assessed the impact that adoption of this standard has on its consolidated results of operations, financial
condition, cash flows, and financial statement disclosures. ASU 2016-9 is part of the FASB's simplification initiative and offers
certain accounting policy choices and simplifications. Based on the current stock option plans, there is no effect from ASU 2016-9
on the Company's consolidated results of operations, financial condition, cash flows, and financial statement disclosures.
SUNVESTA,
INC.
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017
3.
GOING CONCERN
The
Company is currently working on building a holiday resort in the Papagayo Gulf Tourism Project area of Guanacaste, Costa Rica.
The project is not expected to open before the end of 2018. Until the completion of the project, the following expenditures are
estimated to be incurred:
a.
|
Gross
project cost
|
|
$
|
242,000,000
|
|
b.
|
Less:
Proceeds from sale of villas
|
|
|
(25,000,000
|
)
|
c.
|
Net
project cost
|
|
|
217,000,000
|
|
d.
|
Overhead
expenses
|
|
|
20,000,000
|
|
e.
|
Total,
excluding other potential projects
|
|
$
|
237,000,000
|
|
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 Mr. Hans Rigendinger, shareholder, Company Director and
Chief Executive Officer, and Dr. Max Rӧssler, controlling shareholder of Aires International Investment Inc. and Global
Care AG as well as Company Director.
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 of SunVesta Holding AG 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.
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 June 30, 2017 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 equivalents
|
|
USD
|
|
CHF
|
|
Other
|
|
Total
|
|
Total
|
|
|
|
|
|
|
|
|
June
30,
2017
|
|
December
31,
2016
|
original
currency
|
|
|
1,367,829
|
|
|
|
1,345,857
|
|
|
|
12,586
|
|
|
|
|
|
|
|
|
|
in
$
|
|
|
1,367,829
|
|
|
|
1,404,859
|
|
|
|
12,938
|
|
|
|
2,785,627
|
|
|
|
806,440
|
|
USD ($)
|
=
|
US Dollar
|
EURO
|
=
|
Euro
|
CHF
|
=
|
Swiss Francs
|
Other
|
=
|
Australian Dollar and Costa Rican Colón
|
SUNVESTA, INC.
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017
5.
RESTRICTED CASH
As
of June 30, 2017, the Company has the following restricted cash positions:
Restricted Cash
|
|
|
|
|
|
|
June
30,
2017
|
|
December
31, 2016
|
|
|
$
|
|
$
|
Credit
Suisse in favor of BVK pension fund
|
|
|
133,320
|
|
|
|
125,400
|
|
Banco
Lafise in favor of the Costa Rican Tourism Board
|
|
|
933,350
|
|
|
|
933,350
|
|
Banco
Lafise in favor Costa Rican Environmental Agency – SETENA
|
|
|
605,753
|
|
|
|
608,302
|
|
Gross
|
|
|
1,672,423
|
|
|
|
1,667,052
|
|
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. Therefore, this restricted cash position is also classified
as long term.
6.
NOTE RECEIVABLE
On
June 15, 2015, the Company loaned REP Caribbean Development Corporation (“REP Caribbean”), a third party, $250,000
secured by a non-related Swiss individual. The loan was due on November 30, 2015, in addition to a fixed interest payment of $5,000.
On September 15, 2015, the Company entered into an agreement with REP Caribbean and 4f Capital, a related party, netting receivables
due to the respective parties that resulted in the satisfaction of the full loan amount due from REP Caribbean to the Company
and a receivable against 4f Capital in the amount of approximately $250,000 as of December 31, 2016 and $250,000 as of December
31, 2015. On December 10, 2015, the Company loaned an additional unsecured amount of $25,000 to REP Caribbean. The Company erroneously
reported as of December 31, 2016 and December 31, 2015, that the amount due from REP Caribbean was approximately $280,000. Since
4f Capital is in liquidation, and the likelihood that REP Caribbean will repay the unsecured $25,000 due is in doubt, the receivable
erroneously reported as approximately $280, was fully impaired as of March 31, 2017.
7.
PROPERTY & EQUIPMENT
|
|
June
30,
2017
|
|
December
31, 2016
|
Concession
Land
|
|
$
|
19,700,000
|
|
|
|
19,700,000
|
|
IT
Equipment
|
|
|
235,168
|
|
|
|
221,060
|
|
Other
equipment and furniture
|
|
|
233,758
|
|
|
|
219,734
|
|
Leasehold
improvements
|
|
|
78,726
|
|
|
|
74,004
|
|
Vehicles
|
|
|
—
|
|
|
|
74,000
|
|
Construction
in-process
|
|
|
50,347,092
|
|
|
|
46,457,172
|
|
Gross
|
|
|
70,594,743
|
|
|
|
66,745,970
|
|
Less
accumulated depreciation
|
|
|
(527,819
|
)
|
|
|
(529,312
|
)
|
Net
|
|
$
|
70,066,924
|
|
|
|
66,216,658
|
|
Depreciation expenses
for the period ended June 30, 2017 and December 2016
|
|
|
19,625
|
|
|
|
61,771
|
|
SUNVESTA,
INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2017
7.
PROPERTY & EQUIPMENT – CONTINUED
Concession
Properties
Property
and equipment is comprised primarily of concession land held in Costa Rica that is currently being developed for hotels, planning
expenses, earth works and capitalized project costs in connection with the Papagayo Gulf Tourism project. The concession land
amounts to $19.7 million related to the concessions held by SunVesta Costa Rica SA. $7 million (~94,000 m2) and $12.7 million
(~133,000 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 initially expired 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 initially expired in November 2036.
On
July 14, 2015 the Consejo del Polo de DesarrolloTuristico Papagayo at ICT (Council of Papagayo Tourism Development Project), unanimously
has approved the extension of both concessions until 2052.
Additional
Properties
On
April 24, 2013, the Company entered into certain new agreements for the purchase of two additional concession properties located
in Polo Papagayo, Guanacaste for a total of $17,500,000 payable to the seller and a third party against a refundable deposit of
$1,369,816 payable over terms minus $300,000 with a liqudated damages penalty of 5% in the event the purchase did not close. The
Company failed to perform according to the terms of the purchase agreement and the transaction was terminated initially with by
the third party and finally by the Company.
The
Company has initiated legal proceedings against the seller for the recovery of that portion of the refundable deposit paid to
the seller to which it is entitled. As of June 30, 2017, no gain has been recognized with respect to the claim against the seller
of the additional concession properties. Furthermore, the Company has withdrawn legal proceedings against the third party for
the refund of amounts paid against the purchase.
All
expenses related to the agreements with the seller and the agreement with the third party seller, were impaired as of December
31, 2016.
Deposit
related to construction work
During
the quarter ended June 30, 2017, the Company made deposits with several contractors for earth moving groundwork and infrastructure
works. These deposits will be offset against invoices as such works will be completed. As of June 30, 2017 and December 31, 2016,
the Company has deposits of $582 and $190,549 respectively, which have not yet been set off.
SUNVESTA,
INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2017
8.
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 June 30, 2017 and December 31, 2016, 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.
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:
SUNVESTA,
INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2017
8.
FAIR VALUE MEASUREMENT – CONTINUED
—
|
Cash
and cash equivalents – carrying amount approximated fair value.
|
—
|
Restricted
cash – carrying amount approximated fair value.
|
—
|
Receivables
from related parties (current) – carrying amount approximated fair value due to the short term nature of the receivables.
|
—
|
Accounts
Payable – carrying amount approximated fair value.
|
—
|
Note
payable – carrying amount approximated fair value due to the short term nature of the note payable.
|
—
|
Notes
receivable - carrying amount approximated fair value.
|
—
|
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% or 6.5% respectively
for CHF bonds, which represented the current market rate based on the creditworthiness of the Company at issuance. 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.
|
SUNVESTA,
INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2017
8.
FAIR VALUE MEASUREMENT – CONTINUED
The
fair value of our financial instruments is presented in the table below:
|
|
June
30, 2017
|
|
December
31, 2016
|
|
|
|
|
|
|
Carrying
Amount
$
|
|
Fair
Value $
|
|
Carrying
Amount
$
|
|
Fair
Value $
|
|
Fair
Value Levels
|
|
Reference
|
Cash
and cash equivalents
|
|
|
2,785,627
|
|
|
|
2,785,627
|
|
|
|
806,440
|
|
|
|
806,440
|
|
|
|
1
|
|
|
|
Note
4
|
|
Restricted
cash
|
|
|
1,672,423
|
|
|
|
1,672,423
|
|
|
|
1,667,052
|
|
|
|
1,667,052
|
|
|
|
1
|
|
|
|
Note
5
|
|
Receivables
from related parties – other (current)
|
|
|
—
|
|
|
|
—
|
|
|
|
49,292
|
|
|
|
49,292
|
|
|
|
3
|
|
|
|
Note
9
|
|
Accounts
Payable
|
|
|
1,929,850
|
|
|
|
1,929,850
|
|
|
|
3,311,512
|
|
|
|
3,311,512
|
|
|
|
1
|
|
|
|
—
|
|
Note
payable
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
1,500,000
|
|
|
|
1,500,000
|
|
|
|
1
|
|
|
|
Note
15
|
|
Notes
payable to related parties – other (current)
|
|
|
—
|
|
|
|
—
|
|
|
|
307,088
|
|
|
|
307,088
|
|
|
|
3
|
|
|
|
Note
9
|
|
Notes
receivable
|
|
|
—
|
|
|
|
—
|
|
|
|
280,242
|
|
|
|
280,242
|
|
|
|
3
|
|
|
|
Note
6
|
|
EUR-bonds
|
|
|
—
|
|
|
|
—
|
|
|
|
484,463
|
|
|
|
484,463
|
|
|
|
3
|
|
|
|
Note
10
|
|
Convertible
CHF-bonds
|
|
|
12,622,975
|
|
|
|
12,622,975
|
|
|
|
38,095,533
|
|
|
|
38,095,533
|
|
|
|
3
|
|
|
|
Note
10
|
|
CHF-bonds
|
|
|
45,023,694
|
|
|
|
45,023,694
|
|
|
|
16,384,893
|
|
|
|
16,384,893
|
|
|
|
3
|
|
|
|
Note
10
|
|
Notes
payable to related parties (non-current)
|
|
|
71,048,787
|
|
|
|
71,048,787
|
|
|
|
51,473,793
|
|
|
|
51,473,793
|
|
|
|
3
|
|
|
|
Note
9
|
|
Liability
related to conversion feature
|
|
|
1,670,144
|
|
|
|
1,670,144
|
|
|
|
5,936,378
|
|
|
|
5,936,378
|
|
|
|
3
|
|
|
|
Note
10
|
|
The
Company's financial liabilities measured at fair value on a recurring basis consisted of the liability related to conversion feature
as of the following date:
Balance
at December 31, 2016
|
|
|
5,936,378
|
|
Additions
/ (Decrease)
|
|
|
(40,158
|
)
|
Change
in Fair Value of Conversion Feature
|
|
|
(985,540
|
)
|
Gain
/ loss on extinguishment of debt
|
|
|
(3,466,897
|
)
|
FX
Revaluation
|
|
|
226,361
|
|
Balance
at June 30, 2017
|
|
|
1,670,144
|
|
Total
income (+) or expense (-) related to the conversion feature in the six months up to June 30, 2017, amounts to $4,492,595. The
Company used a Black-Scholes model to value the liability related to conversion feature as of June 30, 2017 and December 31, 2016.
Decrease of the conversion feature due to a decrease of bond volume are accounted for within interest expense. In the consolidated
statement of comprehensive loss, an amount of $3,466,897 has been reclassed from impact of the conversion feature to gain on extinguishment
of debt, due to a reclass from the CHF convertible bonds to non-convertible CHF-bonds.
The
assumptions as of June 30, 2017 are as follows:
Stock Price : CHF 5.08
|
|
Annualized Risk Free Rate:
0.001%
|
Exercise Price: CHF 8
|
|
Annualized Volatility: 80%
|
Time to Maturity: 1.25 years
|
|
|
The
assumptions as of December 31, 2016 are as follows:
Stock Price: CHF 5.08
|
|
Annualized Risk Free Rate:
0.001%
|
Exercise Price: CHF 8
|
|
Annualized Volatility: 80%
|
Time to Maturity: 1.75 years
|
|
|
SUNVESTA,
INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2017
9.
RELATED PARTY TRANSACTIONS
The
advances from (to) related parties are composed as follows:
|
|
|
|
Receivables
|
|
Payables
|
|
|
|
|
June
30, 2017
|
|
December
31, 2016
|
|
June
30, 2017
|
|
December
31, 2016
|
|
1
|
|
|
Aires
International
|
|
|
—
|
|
|
|
—
|
|
|
|
56,636,814
|
|
|
|
51,473,793
|
|
|
2
|
|
|
Global
Care AG
|
|
|
—
|
|
|
|
—
|
|
|
|
14,411,973
|
|
|
|
—
|
|
|
3
|
|
|
Turan
Tokay
|
|
|
—
|
|
|
|
49,292
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
Total
|
|
|
—
|
|
|
|
49,292
|
|
|
|
71,048,787
|
|
|
|
51,473,793
|
|
|
|
|
|
of which non-current
|
|
|
—
|
|
|
|
—
|
|
|
|
71,048,787
|
|
|
|
51,473,793
|
|
As
of December 31, 2016, a payable of $290,000 was presented as a liability to the related party Akyinyi interior and exterior decoration
and $17,088 to the late Josef Mettler, who were at that time no longer related parties.
|
|
Related
party
|
|
Capacity
|
|
Interest
Rate
|
|
Repayment
Terms
|
|
Security
|
|
1
|
|
|
Aires
International
|
|
Company
owned by Dr. Rössler, a board member
|
|
|
7.25
|
%
|
|
See
below
|
|
|
none
|
|
|
2
|
|
|
Global
Care AG
|
|
Company
owned by Dr. Rössler, a board member
|
|
|
7.25
|
%
|
|
See
below
|
|
|
none
|
|
|
3
|
|
|
Turan
Tokay
|
|
Shareholder
|
|
|
3
|
%
|
|
none
|
|
|
none
|
|
Loan
agreement Aires International Investment Inc.
As of June 30, 2017,
the Company owes Aires International Inc. the following:
Borrower
|
|
Debt
instrument denominated in CHF
|
|
Amount
in CHF
|
|
Amount
in USD
|
|
Annual
interest rate
|
|
Repayment
date *
|
SunVesta
Inc.
|
|
Promissory
note
|
|
|
10,044,371
|
|
|
|
10,484,716
|
|
|
|
7.25
|
%
|
|
After
Dec 31, 2020
|
SunVesta
Inc.
|
|
Promissory
note
|
|
|
10,000,000
|
|
|
|
10,438,400
|
|
|
|
7.25
|
%
|
|
After
Dec 31, 2020
|
SunVesta
Inc.
|
|
Promissory
note
|
|
|
10,000,000
|
|
|
|
10,438,400
|
|
|
|
7.25
|
%
|
|
After
Dec 31, 2020
|
SunVesta
Inc.
|
|
Loan
agreement
|
|
|
11,110,810
|
|
|
|
11,614,577
|
|
|
|
7.25
|
%
|
|
After
Dec 31, 2020
|
SunVesta
Holding
|
|
Loan
agreement
|
|
|
13,086,987
|
|
|
|
13,660,721
|
|
|
|
7.25
|
%
|
|
After
Dec 31, 2020
|
Total
|
|
|
|
|
|
|
|
|
56,636,814
USD
|
|
|
|
|
|
|
|
* The
notes may be repaid in whole or in part.
Loan
due to Global Care AG
During the first quarter
of 2017, Global Care AG, a company owned by Dr. Rӧssler (a director of the Company), provided $7,048,257 to the Company
at 7.25% interest, repayable not before December 31, 2020. During the second quarter of 2017, the loan was increased by $7,363,715
(thereof 1,564,444 with a transfer of convertible bonds to the loan) to $14,411,973.
SUNVESTA,
INC.
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017
10.
BONDS
Description
|
|
EUR (€)
bond new I
(repaid)
|
|
EUR (€)
bond new II (parallel)
(repaid)
|
Issuer:
|
|
SunVesta
Holding AG
|
|
SunVesta
Holding AG
|
Type
of securities:
|
|
Bond
in accordance with Swiss law
|
|
Bond
in accordance with Swiss law
|
Approval
by SunVesta AG BOD:
|
|
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
(retroactive)
|
Interest
rate:
|
|
7.25% p.a.
|
|
7.25 % p.a.
|
Interest
due dates:
|
|
December 02
|
|
December 02
|
Applicable
law:
|
|
Swiss
|
|
Swiss
|
EURO (€) Bond
new I
|
|
EURO
Bond (New) 2017
|
|
EURO
Bond (New) 2016
|
|
|
$
|
|
$
|
Balances
January 1
|
|
|
31,541
|
|
|
|
6,871,630
|
|
Cash
inflows
|
|
|
—
|
|
|
|
—
|
|
Cash
outflows
|
|
|
—
|
|
|
|
(6,736,255
|
)
|
Reclassification
from / to Bond (net)
|
|
|
(32,271
|
)
|
|
|
—
|
|
Foreign
currency adjustments
|
|
|
730
|
|
|
|
(103,834
|
)
|
Sub-total
|
|
|
—
|
|
|
|
31,541
|
|
Discounts
(commissions paid to bondholders) and
debt
issuance costs
|
|
|
(588,613
|
)
|
|
|
(588,613
|
)
|
Accumulated
amortization of discounts and
debt
issuance costs
|
|
|
588,613
|
|
|
|
563,636
|
|
Total
accumulated unamortized discounts and
debt
issuance costs
|
|
|
—
|
|
|
|
(24,977
|
)
|
Balances
June 30 and December 31 (Carrying value)
|
|
|
—
|
|
|
|
6,564
|
|
SUNVESTA,
INC.
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017
10.
BONDS – CONTINUED
EURO (€) Bond
new II
|
|
EUR
Bond
new II
2017
|
|
EUR
Bond
new II
2016
|
|
|
$
|
|
$
|
Balances
January 1
|
|
|
511,805
|
|
|
|
1,658,300
|
|
Cash
inflows
|
|
|
—
|
|
|
|
—
|
|
Cash
outflows
|
|
|
(510,120
|
)
|
|
|
(159,950
|
)
|
Reclassification
from / to Bond (net)
|
|
|
(9,761
|
)
|
|
|
(953,683
|
)
|
Foreign
currency adjustments
|
|
|
8,075
|
|
|
|
(32,862
|
)
|
Sub-total
|
|
|
—
|
|
|
|
511,805
|
|
Discounts
(commissions paid to bondholders) and
debt
issuance costs
|
|
|
(174,660
|
)
|
|
|
(174,660
|
)
|
Accumulated
amortization of discounts and
debt
issuance costs
|
|
|
174,660
|
|
|
|
140,754
|
|
Reclassification
from / to Bond (net)
|
|
|
—
|
|
|
|
—
|
|
Total
accumulated unamortized discounts and
debt
issuance costs
|
|
|
—
|
|
|
|
(33,906
|
)
|
Balances
June 30 and December 31 (Carrying value)
|
|
|
—
|
|
|
|
477,899
|
|
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,
convertible
into shares of the issuer,
in accordance with Swiss law
|
|
Senior
convertible bonds,
convertible
into shares of the issuer,
in accordance 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, the
first time September 30, 2016
|
|
September 30 of
each year, the
first time September 30, 2016
|
Reference
price:
|
|
CHF 6.50
|
|
CHF 6.50
|
Initial
conversion price:
|
|
CHF 8.00
|
|
CHF 8.00
|
Applicable
law:
|
|
Swiss
|
|
Swiss
|
SUNVESTA,
INC.
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017
10.
BONDS – CONTINUED
Convertible CHF BOND
I
|
|
Convertible
CHF Bond I 2017
|
|
Convertible
CHF Bond I 2016
|
|
|
$
|
|
$
|
Balances
January 1
|
|
|
3,648,383
|
|
|
|
2,250,048
|
|
Cash
inflows
|
|
|
—
|
|
|
|
1,640,887
|
|
Cash
outflows
|
|
|
—
|
|
|
|
(103,008
|
)
|
Foreign
currency adjustments
|
|
|
232,837
|
|
|
|
(105,058
|
)
|
Reclassification
from / to Bond (net)
|
|
|
—
|
|
|
|
(34,486
|
)
|
Sub-total
|
|
|
3,881,220
|
|
|
|
3,648,383
|
|
Discounts
(commissions paid to bondholders) and debt issuance costs
|
|
|
(240,760
|
)
|
|
|
(136,722
|
)
|
Accumulated
Amortization of discounts and debt issuance costs
|
|
|
147,214
|
|
|
|
117,652
|
|
Reclassification
from / to Bond (net)
|
|
|
—
|
|
|
|
(104,038
|
)
|
Total
Accumulated Unamortized discounts and debt issuance costs
|
|
|
(93,546
|
)
|
|
|
(123,108
|
)
|
Balances June
30 and December 31 (Carrying value)
|
|
|
3,787,673
|
|
|
|
3,525,275
|
|
In the first quarter
of 2016, the Company reclassified $634,186 from Convertible CHF Bond I.
As per date of this report,
the Company has realized a cumulative amount of CHF 3.63 million ($3.82 million) related to the CHF Convertible Bond I.
Convertible CHF BOND
II
|
|
Convertible
CHF Bond II 2017
|
|
Convertible
CHF Bond II 2016
|
|
|
$
|
|
$
|
Balances
January 1
|
|
|
36,770,369
|
|
|
|
26,470,395
|
|
Cash
inflows
|
|
|
20,079
|
|
|
|
7,142,850
|
|
Cash
outflows
|
|
|
(1,795,594
|
)
|
|
|
(787,371
|
)
|
Foreign
currency adjustments
|
|
|
1,384,464
|
|
|
|
(1,187,441
|
)
|
Reclassification
from / to Bond (net)
|
|
|
(27,127,499
|
)
|
|
|
5,131,937
|
|
Sub-total
|
|
|
9,251,819
|
|
|
|
36,770,369
|
|
Discounts
(commissions paid to bondholders) and debt issuance costs
|
|
|
(4,791,860
|
)
|
|
|
(4,890,690
|
)
|
Accumulated
Amortization of discounts and debt issuance costs
|
|
|
4,375,342
|
|
|
|
2,586,541
|
|
Reclassification
from / to Bond (net)
|
|
|
(416,518
|
)
|
|
|
104,038
|
|
Total
Accumulated Unamortized discounts and debt issuance costs
|
|
|
(1,637,795
|
)
|
|
|
(2,200,111
|
)
|
Balances June
30 and December 31 (Carrying value)
|
|
|
8,835,301
|
|
|
|
34,570,259
|
|
SUNVESTA,
INC.
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017
10.
BONDS – CONTINUED
In April 2016, Global
Care AG (a related party controlled by Dr. Rössler, a Company board member) assumed a liability of CHF 4.5 million due to
Aires International Investment Inc., (also a related party controlled by Dr. Rössler). This CHF 4.5 million was subsequently
subscribed into bonds of the Convertible Bond II 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 comprehensive statements of loss
from revaluation of conversion feature to extinguishment of debt. In the 2
nd
quarter 2017, $26,091,605 was transferred
to the new CHF-Bond IV and $1,564,444 to a note payable to Global Care AG. As the terms of the new straight bond are significantly
different to the convertible bond, unamortized transaction cost of $1,221,277 were recognized as a gain on extinuishment of debt
in the statement of comprehensive income.
As per date of this report
the Company has realized a cumulative amount of CHF 8.58 million ($9.04 million) related to the Convertible Bond II.
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, with
the following conditions:
Description
|
|
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
|
CHF BOND III original
|
|
CHF
Bond III 2017
|
|
CHF
Bond III 2016
|
|
|
$
|
|
$
|
Balances
January 1
|
|
|
15,601,389
|
|
|
|
—
|
|
Cash
inflows
|
|
|
943,704
|
|
|
|
699,650
|
|
Cash
outflows
|
|
|
—
|
|
|
|
—
|
|
Foreign
currency adjustments
|
|
|
1,033,172
|
|
|
|
(290,665
|
)
|
Reclassification
from / to Bond (net)
|
|
|
—
|
|
|
|
15,192,404
|
|
Sub-total
|
|
|
17,578,266
|
|
|
|
15,601,389
|
|
Discounts
(commissions paid to bondholders) and debt issuance costs
|
|
|
(160,270
|
)
|
|
|
(56,643
|
)
|
Accumulated
Amortization of discounts and debt issuance costs
|
|
|
18,921
|
|
|
|
3,814
|
|
Reclassification
from / to Bond (net)
|
|
|
—
|
|
|
|
(49,975
|
)
|
Total
Accumulated Unamortized discounts and debt issuance costs
|
|
|
(141,349
|
)
|
|
|
(102,804
|
)
|
Balances
June 30 and December 31 (Carrying value)
|
|
|
17,436,917
|
|
|
|
15,498,586
|
|
SUNVESTA,
INC.
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017
10.
BONDS – CONTINUED
During
the year 2016 an amount of $15,192,404 (CHF 15.2 million) was subscribed into this CHF Bond III 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.
As
per date of this report the Company has realized a cumulative amount of CHF 16.70 million ($17.61 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 of which was reclassified from EUR Bond II.
Within
the CHF Bond III, the Company initiated a new parallel offering of senior unsecured CHF bonds on September 21, 2016.
CHF BOND III parallel
|
|
CHF
Bond III 2017
|
|
CHF
Bond III 2016
|
|
|
$
|
|
$
|
Balances
January 1
|
|
|
961,595
|
|
|
|
—
|
|
Cash
inflows
|
|
|
—
|
|
|
|
—
|
|
Cash
outflows
|
|
|
—
|
|
|
|
—
|
|
Foreign
currency adjustments
|
|
|
61,368
|
|
|
|
(17,915
|
)
|
Reclassification
from / to Bond (net)
|
|
|
—
|
|
|
|
979,510
|
|
Sub-total
|
|
|
1,022,963
|
|
|
|
961,595
|
|
Discounts
(commissions paid to bondholders) and debt issuance costs
|
|
|
(79,289
|
)
|
|
|
(79,289
|
)
|
Accumulated
Amortization of discounts and debt issuance costs
|
|
|
11,096
|
|
|
|
4,001
|
|
Reclassification
from / to Bond (net)
|
|
|
—
|
|
|
|
—
|
|
Total
Accumulated Unamortized discounts and debt issuance costs
|
|
|
(68,193
|
)
|
|
|
(75,288
|
)
|
Balances
June 30 and December 31 (Carrying value)
|
|
|
954,770
|
|
|
|
886,307
|
|
As
per date of this report the Company has realized a cumulative amount of CHF 0.91 million ($0.96 million) related to the CHF Bond
III parallel.
As
of March 6, 2017 the Company has approved issuance of a new bond with the following conditions.
Description
|
|
CHF Bond
IV
|
Issuer:
|
|
SunVesta
Holding AG
|
Type of securities:
|
|
Senior
bonds
|
Approval
by SunVesta AG BOD:
|
|
March 6, 2017
|
Volume:
|
|
Up
to CHF 50,000,000
|
Denomination:
|
|
CHF 1,000
|
Offering period:
|
|
May 1
st
– November 1
st
, 2017
|
Maturity
date:
|
|
August 15, 2022
|
Issue
price:
|
|
100%
|
Redemption price:
|
|
100%
|
Issuance
date:
|
|
May 1, 2017
|
Coupon:
|
|
6.50 % p.a.
|
Interest
due dates:
|
|
May
1
st
of each year, the first
time
May 1
st
, 2018
|
Applicable
law:
|
|
Swiss
|
SUNVESTA,
INC.
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017
10.
BONDS – CONTINUED
CHF BOND IV
|
|
CHF
Bond IV 2017
|
|
|
$
|
Balances
January 1
|
|
|
—
|
|
Cash
inflows
|
|
|
1,021,493
|
|
Foreign
currency adjustments
|
|
|
891,149
|
|
Reclassification
from / to Bond (net)
|
|
|
26,091,605
|
|
Sub-total
|
|
|
28,004,247
|
|
Discounts
(commissions paid to bondholders) and debt issuance costs
|
|
|
(1,378,296
|
)
|
Accumulated
Amortization of discounts and debt issuance costs
|
|
|
6,055
|
|
Reclassification
from / to Bond (net)
|
|
|
—
|
|
Total
Accumulated Unamortized discounts and debt issuance costs
|
|
|
(1,372,240
|
)
|
Balances
June 30 (Carrying value)
|
|
|
26,632,007
|
|
As
per date of this report the Company has realized a cumulative amount of CHF 25.65 million ($27.03 million) related to the CHF
Bond IV.
SUNVESTA,
INC.
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017
11.
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.
Actuarial valuation
Net periodic pension
cost has been included in the Company's results as follows:
Pension expense
|
|
Three
months ended
June
30, 2017
$
|
|
Six
months ended
June
30, 2017
$
|
|
Three
months ended
June
30, 2016
$
|
|
Six
months
ended
June
30, 2016
$
|
Current
service cost
|
|
|
14,055
|
|
|
|
28,110
|
|
|
|
15,357
|
|
|
|
30,713
|
|
Net actuarial (gain)
loss recognized
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Interest cost
|
|
|
577
|
|
|
|
1,155
|
|
|
|
945
|
|
|
|
1,891
|
|
Expected return on
assets
|
|
|
(1,431
|
)
|
|
|
(2,861
|
)
|
|
|
(1,916
|
)
|
|
|
(3,833
|
)
|
Employee contributions
|
|
|
(5,020
|
)
|
|
|
(10,039
|
)
|
|
|
(5,877
|
)
|
|
|
(11,754
|
)
|
Net
periodic pension cost
|
|
|
8,182
|
|
|
|
16,364
|
|
|
|
9,148
|
|
|
|
18,295
|
|
During the three month,
periods ended June 30, 2017 and June 30, 2016, the Company made cash contributions of $5,020 and $5,877, respectively, to its
defined benefit pension plan.
All of the assets are
held under a collective contract by the plan's re-insurance company and are invested in a mix of Swiss and international fixed-income
and equity securities within the limits set out by the Swiss pension law.
The remaining expected
future cash flows to be paid by the Company in respect to employer contributions to the pension plan for the year ended December
31, 2017 are $10,039.
SUNVESTA,
INC.
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017
12.
STOCK COMPENSATION
The Company has included
share based compensation under the SunVesta Inc. Stock Option Plan 2013 (“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 stock options under
the Plan to acquire shares of its common stock.
The purpose of the Plan
is to advance the interests of the Company by encouraging its employees to remain associated with the Company and to assist it
in building value.
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 3,500,000 common shares to Hans Rigendinger, valued at $0.08 an amount equal to the share price and fair value
of the shares on the grant date in connection with his employment agreement with the Company. His employment agreement obligates
the Company to issue 2,500,000 common shares as a retention award on each anniversary of the employment agreement. The employment
agreement has an initial term of three years with the option to extend for an additional two years. Mr. Rigendinger's employment
agreement was renewed on January 1, 2016. Therefore, the Company may issue up to 12,500,000 common shares, of which 10,000,000
have been earned, 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 in connection with his appointment to the Board of Directors.
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 with the Company. His employment agreement obligated
the Company to issue 3,000,000 common shares as a retention award on each anniversary of the employment agreement. The employment
agreement had an initial term of three years with the option to extend for two additional two-year periods. Mr. Mettler's employment
agreement was renewed on July 4, 2016. Therefore, in total the Company could have issued up to 21,000,000 common shares, of which
9,000,000 were earned prior to his death, through December 31, 2020.
Josef Mettler died during
the third quarter of 2016. Subsequently, the necessary accrual up until his death was reversed as of September 30, 2016.
Share Grants –
Mr. José María Figueres
On March 10, 2014, the
Company granted 500,000 common shares to José María Figueres, valued at $0.10, an amount equal to the share price
and therefore the fair value on grant date, in connection with his appointment to the Board of Directors. His appointment obligates
the Company to issue 200,000 common shares for each fully completed year of service.
SUNVESTA,
INC.
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017
12.
STOCK COMPENSATION – CONTINUED
Howard Glicken
On March 10, 2014, the
Company granted 500,000 common shares to Howard Glicken, valued at $0.10, an amount equal to the share price and therefore the
fair value on grant date, in connection with his appointment to the Board of Directors. His appointment obligates the Company
to issue 200,000 common shares for each fully completed year of service.
Share Grants –
Third party
On November 1, 2016,
the Company granted 10,000,000 common shares to a non-related individual, valued at a total of $240,947 (CHF 240,000) the fair
value on grant date, in connection with his consulting services for the Company. His appointment obligates the Company to issue
1,666,667 common shares for each fully completed month of service. From November 1, 2016 to June 30, 2017 the individual earned
a total of 8,333,335 shares, creating an expense for the Company in the amount of $200,789 (CHF 200,000).
During the quarter ended
June 30, 2017, it was agreed with the third party to replace the granted shares with cash compensation.
Based on these contracts,
the Company has included the following stock-based compensation in the Company's results:
Stock-based
compensation (shares)
|
|
Three
and six
months
ended
June
30,
2017
|
|
Three
and six months
ended
June
30,
2016
|
Shares granted
|
|
|
57,200,000
shares
|
|
|
|
46,800,000
shares
|
|
Fair
Value respectively market price on grant date
|
|
$
|
0.0659
|
|
|
$
|
0.0744
|
|
Total maximal expenses
(2013-2020)
|
|
$
|
3,770,947
|
|
|
$
|
3,450,000
|
|
Shares vested
|
|
|
32,700,000
shares
|
|
|
|
26,800,000
shares
|
|
Shares forfeited
|
|
|
22,000,000
shares
|
|
|
|
-
shares
|
|
Unvested shares
|
|
|
2,500,000 shares
|
|
|
|
20,000,000
shares
|
|
Of the granted shares,
12,000,000 were forfeited due to the death of Josef Mettler during the third quarter 2016.
As of June 30, 2017,
the Company expects to record compensation expense in the future up to $100,000 as follows:
|
|
|
|
|
|
|
Year
ending December 31,
|
|
Stock-based compensation
(shares)
|
|
|
Through
December 31, 2017
$
|
|
|
|
2018
$
|
|
|
|
2019
$
|
|
|
|
2020
$
|
|
Unrecognized
compensation expense
|
|
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options –
Mr. Hans Rigendinger
The Company granted 10,000,000
stock options to Hans Rigendinger on January 1, 2013, in connection with his employment contract. Each option entitles Mr. Rigendinger
to buy one Company share at an exercise price of $0.05. These options vest in two identical installments (Installment A and Installment
B) of 5,000,000.
SUNVESTA,
INC.
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017
12.
STOCK COMPENSATION – CONTINUED
Stock Options –
Mr. Hans Rigendinger - continued
Installment A vesting
was contingent on realizing 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 would 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 that removed the requirement for financing with a specific counterparty and updated
for any counterparty. As of the date of the revised stock option agreement, the fair value was $246,000. Since the modification
changed the expectation that the options would 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 recalculated expected remaining vesting period.
Installment B vesting
is contingent on Meliá Hotels International (“Melía”) assuming management responsibilities for the Paradisus
Papagayo Bay Resort & Luxury Villas. As of the 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 assessed the probability that this performance
condition would be met to be 100%, but the date on which the performance condition would have to be achieved was postponed to
the fourth quarter 2015, in line with the expected opening date.
As of the date of this
report, the estimated opening date has been postponed further to a date after the fourth quarter 2018, being the required date
of the performance condition. The Company still assesses the probability that this performance condition will be met at 100%.
Hence, the remaining fair value of the award has been expensed on a straight-line basis over the recalculated expected remaining
vesting period.
Stock Options –
Dr. Max Rӧssler
The Company granted 10,000,000
stock options to Dr. Max Rӧssler on July 3, 2013, in connection with his appointment to the Board of Directors. Each option
entitles Dr. Rӧssler to buy one Company share at an exercise price of $0.05. These options vest in two identical installments
(Installment A and Installment B) of 5,000,000 options.
Installment A vesting
is contingent on realizing a financing arrangement to complete the development of the Paradisus Papagayo Bay Resort & Luxury
Villas. As of the grant date, the fair value was $249,835. The Company has expensed the total fair value of the award on a straight-line
basis over the expected vesting period.
Installment B vesting
is contingent on Meliá assuming management responsibilities for the Paradisus Papagayo Bay Resort & Luxury Villas.
As of the 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 assessed the probability that this performance condition would be met to be 100%,
but the date on which the performance condition would have to be achieved was postponed to the fourth quarter 2015, in line with
the expected opening date.
As of the date of this
report, the estimated opening date has been postponed further to a date after the fourth quarter 2018, being the required date
of the performance condition. The Company still assesses the probability that this performance condition will be met at 100%.
Hence, the remaining fair value of the award has been expensed on a straight-line basis over the recalculated expected remaining
vesting period.
SUNVESTA,
INC.
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017
12.
STOCK COMPENSATION – CONTINUED
Stock Options –
Mr. Josef Mettler
The Company granted several
installments of stock options in connection with his employment contract.
Due to his passing away
during the third quarter 2016, the probability that any of the corresponding performance conditions will be met is 0%. Therefore,
all previously recognized expenses in the amount of $561,064, corresponding to options that had not yet vested, was reversed as
of September 30, 2016.
Stock Options –
Summary
A summary of stock options
outstanding as per June 30, 2017 is as follows:
Options
outstanding
|
|
Number
of Options
|
|
Weighted
average exercise price
|
|
Weighted
average remaining contractual life
|
Outstanding
January 1, 2017
|
|
|
20,000,000
|
|
|
$
|
0.05
|
|
|
|
7.42
years
|
|
Granted
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Outstanding June 30,
2017
|
|
|
20,000,000
|
|
|
$
|
0.05
|
|
|
|
5.88
years
|
|
Exercisable June 30,
2017
|
|
|
—
|
|
|
|
|
|
|
|
|
|
The following table depicts
the Company's non-vested options as of June 30, 2017 and changes during the period:
Non-vested
options
|
|
Shares
under Options
|
|
Weighted
average grant date fair value
|
Non-vested
at January 1, 2017
|
|
|
20,000,000
|
|
|
$
|
0.075
|
|
Non-vested-granted
|
|
|
—
|
|
|
|
—
|
|
Vested
|
|
|
—
|
|
|
|
—
|
|
Non-vested, forfeited
or cancelled
|
|
|
—
|
|
|
|
—
|
|
Non-vested at June
30, 2017
|
|
|
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. No stock options were granted for the periods
ended June 30, 2017 and June 30, 2016.
Assumption
|
|
|
June
30,
2017
|
|
|
|
June
30,
2016
|
|
Dividend yield
|
|
|
n.a
|
|
|
|
n.a
|
|
Risk-free interest
rate used (average)
|
|
|
n.a
|
|
|
|
n.a
|
|
Expected market price
volatility
|
|
|
n.a
|
|
|
|
n.a
|
|
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.
SUNVESTA,
INC.
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017
12.
STOCK COMPENSATION – CONTINUED
As of June 30, 2017,
the Company had unrecognized compensation expenses related to stock options currently outstanding, to be recognized in future
quarters or years, respectively as follows:
Stock-based
compensation (options)
|
|
Through
to December 31, 2017
$
|
|
Year
ending December 31, 2018
$
|
Unrecognized
compensation expense
|
|
|
20,421
|
|
|
|
30,723
|
|
13.
SUMMARY OF SHARE AND OPTION COMPENSATION EXPENSE
The Company recorded
the following amounts related to stock based compensation expense during the periods ended June 30, 2017 and June 30, 2016, respectively:
Summary
of share and option based compensation expense
|
|
Three
months ended June 30, 2017
$
|
|
Three
months ended June 30, 2016
$
|
|
Six
months ended June 30, 2017
$
|
|
Six
months ended June 30, 2016
$
|
Share grants
(see Note 14 for details)
|
|
|
47,666
|
|
|
|
112,500
|
|
|
|
308,455
|
|
|
|
225,000
|
|
Option grants (see
Note 14 for details)
|
|
|
10,241
|
|
|
|
15,335
|
|
|
|
20,482
|
|
|
|
30,670
|
|
Total
(recorded under general & administrative expense)
|
|
|
57,907
|
|
|
|
127,835
|
|
|
|
328,973
|
|
|
|
255,670
|
|
14.
FUTURE LEASE COMMITTMENTS
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 a decision in the third quarter
of the calendar year 2017.
Future
lease commitments
|
|
June
30, 2017
$
|
2017
|
|
|
65,000
|
|
15.
NOTE PAYABLE
|
|
June
30,
2017
|
|
December
31, 2016
|
|
|
$
|
|
$
|
Promissory
note
|
|
|
500,000
|
|
|
|
1,500,000
|
|
Total
|
|
|
500,000
|
|
|
|
1,500,000
|
|
Promissory Note
On September 19, 2016, the Company signed an agreement with the counterparty,
which stipulated payment terms of four quarterly installments of $500,000 each starting on November 21, 2016.
SUNVESTA,
INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2017
16.
OPENING DATE “Paradisus Papagayo Bay Resort & Luxury Villas”
On April 27, 2016, the
Company amended its agreement with Meliá (“Seventh addendum to the management agreement of March 8, 2011”)
to postpone the opening date as follows:
|
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, Meliá 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.
|
However, as of today,
the dates stipulated above are no longer likely to be realized. Consequently, it will be necessary to enter into an 8th Addendum
with Meliá. On the basis of our good professional relationship, we are confident to achieve this objective in due course
17.
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
|
|
Three-month
period ended
June
30, 2017
|
|
Three-month
period ended June 30, 2016
|
|
Six-month
period ended June 30, 2017
|
|
Six-month
period ended June 30, 2016
|
Company posted
|
|
|
Net
loss
|
|
|
|
Net
loss
|
|
|
|
Net
loss
|
|
|
|
Net
loss
|
|
Basic weighted
average shares outstanding
|
|
|
104,741,603
|
|
|
|
98,841,603
|
|
|
|
106,487,853
|
|
|
|
98,674,021
|
|
Dilutive effect of
common stock equivalents
|
|
|
None
|
|
|
|
None
|
|
|
|
None
|
|
|
|
None
|
|
Dilutive weighted average
shares outstanding
|
|
|
104,741,603
|
|
|
|
98,841,603
|
|
|
|
106,487,853
|
|
|
|
98,674,021
|
|
A total of 2,900,000
common shares vested have not been issued as per balance sheet date but are included in the basic weighted average shares outstanding.
SUNVESTA,
INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2017
17.
EARNINGS PER SHARE - CONTINUED
The following table shows
the number of stock equivalents of SunVesta Inc. 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
|
|
Three-month
period ended
June
30, 2017
|
|
Three-month
period ended
June
30, 2016
|
|
Six-month
period ended
June
30, 2017
|
|
Six-month
period ended
June
30, 2016
|
Options
to Hans Rigendinger
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
Options to Dr. M. Rössler
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
Options to Josef Mettler
|
|
|
|
|
|
|
12,000,000
|
|
|
|
|
|
|
|
12,000,000
|
|
Total Options
|
|
|
20,000,000
|
|
|
|
32,000,000
|
|
|
|
20,000,000
|
|
|
|
32,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares to Hans Rigendinger
(retention bonus – non vested)
|
|
|
2,500,000
|
|
|
|
5,000,000
|
|
|
|
2,500,000
|
|
|
|
5,000,000
|
|
Shares to Josef Mettler's
estate (retention award)
|
|
|
0
|
|
|
|
15,000,000
|
|
|
|
0
|
|
|
|
15,000,000
|
|
Shares to Howard Glicken
and José Maria Figueres (retention award)
|
|
|
400,000
|
|
|
|
400,000
|
|
|
|
400,000
|
|
|
|
400,000
|
|
Total Shares
|
|
|
2,900,000
|
|
|
|
25,400,000
|
|
|
|
2,900,000
|
|
|
|
25,400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Options and
Shares
|
|
|
22,900,000
|
|
|
|
57,400,000
|
|
|
|
22,900,000
|
|
|
|
57,400,000
|
|
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.
A number of 1,492,053
stock equivalents of SunVesta Holding AG associated with the Convertible CHF Bond were excluded from the computation of diluted
earnings per share for the six-month period ended June 30, 2017 because the effect would have been anti-dilutive (4,746,720 for
the six-month period ended June 30, 2016).
18.
GENERAL AND ADMINISTRATIVE EXPENSES
General
and administrative expenses according to the consolidated statement of comprehensive loss include:
|
|
Three-month
period ended June 30, 2017
$
|
|
Three-month
period ended June 30, 2016
$
|
|
Six-month
period ended June 30, 2017
$
|
|
Six-month
period ended June 30, 2016
$
|
Rental
& related expenses
|
|
|
36,993
|
|
|
|
50,172
|
|
|
|
76,113
|
|
|
|
104,786
|
|
Audit
|
|
|
49,996
|
|
|
|
200,416
|
|
|
|
149,606
|
|
|
|
187,639
|
|
Consulting
|
|
|
483,582
|
|
|
|
750,486
|
|
|
|
1,179,333
|
|
|
|
961,805
|
|
Marketing,
Investor & public relations
|
|
|
17,742
|
|
|
|
12,531
|
|
|
|
28,242
|
|
|
|
41,309
|
|
Travel
expenses
|
|
|
172,548
|
|
|
|
93,166
|
|
|
|
306,506
|
|
|
|
196,913
|
|
Personnel
costs including social security's costs and share based remuneration
|
|
|
230,435
|
|
|
|
442,454
|
|
|
|
513,968
|
|
|
|
906,155
|
|
Release
accrual for penalty on management agreement
|
|
|
—
|
|
|
|
(5,000,000
|
)
|
|
|
—
|
|
|
|
—
|
|
Office
Expenses
|
|
|
—
|
|
|
|
—
|
|
|
|
203
|
|
|
|
—
|
|
Various
other operating expenditures
|
|
|
145,991
|
|
|
|
304,539
|
|
|
|
259,286
|
|
|
|
528,127
|
|
Total according
statement of comprehensive loss
|
|
$
|
1,137,286
|
|
|
|
(3,146,235
|
)
|
|
|
2,513,257
|
|
|
|
2,926,735
|
|
19.
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 are no events that warrant disclosure or recognition in the financial statements.