SUNVESTA, INC. - FORM 10-Q - December 18, 2012

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - SUNVESTA, INC.	Financial_Report.xls
EX-32 - SUNVESTA CERTIFICATION - SUNVESTA, INC.	exhibit32.htm
EX-31 - SUNVESTA CERTIFICATION - SUNVESTA, INC.	exhibit31.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2011.

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

For the transition period from

Commission file number: 000-28731

SUNVESTA, INC.

(Exact name of registrant as specified in its charter)

Florida

98-0211356

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

Seestrasse 97, Oberrieden, Switzerland CH-8942

(Address of principal executive offices) (Zip Code)

011 41 43 388 40 60

(Registrant’s telephone number, including area code)

n/a

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or

15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that

the registrant was required to file such reports), and (2) has been subject to such filing requirements for the

past 90 days. Yes o No þ

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web

site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation

S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant

was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated

filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and

“smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange

Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest

practicable date. The number of shares outstanding of the issuer’s common stock, $0.01 par value (the only

class of voting stock), at December 17, 2012, was 54,092,186.

TABLE OF CONTENTS

PART 1- FINANCIAL INFORMATION

Item1.

Financial Statements:

Consolidated Balance Sheets as of June 30, 2011 (Unaudited) and December 31,

2010

Unaudited Consolidated Statements of Operations and Comprehensive Loss for the

three and six months ended June 30, 2011 and June 30, 2010 and cumulative

amounts

Unaudited Consolidated Statements of Cash Flows for the six months ended June

30, 2011 and June 30, 2010 and cumulative amounts

Notes to Unaudited Consolidated Financial Statements

Item 2.

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

Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Item 4.

Controls and Procedures

PART II-OTHER INFORMATION

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

(Removed and Reserved)

Item 5.

Item 6.

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

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

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

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

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

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

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

SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

June 30 2011

December 31 2010

Assets

(Unaudited)

Current assets

Cash and cash equivalents

180,871

44,018

Other assets

16,468

9,421

Receivables from related parties

427,018

Total current assets

624,357

53,439

Non-current assets

Property and equipment - net

9,901,000

9,321,976

Debt issuance cost - net

672,032

291,288

Down payments for property & equipment

689,000

Others

50,914

Total non-current assets

11,312,946

9,613,264

Total assets

11,937,303

9,666,703

Liabilities and stockholders' equity

Current liabilities

Accounts payable

735,260

914,420

Accrued expenses

683,409

65,824

Notes payable to third parties

551,155

Notes payable to related parties

39,409

811,246

Total current liabilities

1,458,078

2,342,645

Non-current liabilities

EUR-Bond

6,313,479

265,273

Pension liabilities

44,474

Total non-current liabilities

6,357,953

265,273

Total liabilities

7,816,031

2,607,918

Stockholders' equity

Preferred stock, $0.01 par value;

50,000,000 share authorized

no shares issued and outstanding

Common stock,$ 0.01 par value;

200,000,000 share authorized;

54,092,186 shares issued and outstanding

540,922

Additional paid-in capital

18,728,391

Accumulated other comprehensive income (loss)

169,748

(59,452)

Retained earnings prior to development stage

1,602

Deficit accumulated during the development stage

(15,295,636)

(12,128,923)

Treasury stock, 157,220 and 157,220 shares

(23,755)

Total stockholders' equity

4,121,272

7,058,785

Total liabilities and stockholders' equity

11,937,303

9,666,703

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

SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Three Months Ended

Six Months Ended

Cumulative*

June 30,

June 30

Amounts

2011

2010

2011

2010

(Unaudited) (Unaudited) (Unaudited) (Unaudited)

(Unaudited)

Revenues

Revenues, net

Cost of revenues

Gross profit

Operating expenses

General and administrative expenses

1,923,282

252,383

2,361,300

397,860

10,841,002

Marketing

111,470

628

117,454

13,255

449,664

Total operating expenses

2,034,752

253,011

2,478,754

411,115

11,290,666

Loss from operations

(2,034,752)

(253,011) (2,478,754)

(411,115) (11,290,666)

Other income / - expenses

Loss on disposals of assets

(3,258)

Loss on sale of investments

(1,137,158)

Loss on extinguishment of debt

(258,882)

(1,806,758)

Interest income

66,881

Interest expense

(268,690)

(9,308)

(302,316)

(19,319)

(818,568)

Amortization of debt issuance cost

and commissions

(120,572)

Exchange differences

(265,071)

Other income / - expenses

79,534

Total other income / - expenses

(654,333)

(9,308)

(687,959)

(278,201)

(4,004,970)

Loss before income taxes

(2,689,085)

(262,319) (3,166,713)

(689,316) (15,295,636)

Income taxes

Net loss

$ (2,689,085)

(262,319) (3,166,713)

(689,316) (15,295,636)

Comprehensive loss:

Foreign currency translation net of

taxes

312,274

10,891

229,200

71,648

190,748

Comprehensive loss

$ (2,376,811)

(251,428) (2,937,513)

(617,668) (15,104,888)

Loss per common share

Basic and diluted

(0.05)

(0.00)

(0.06)

(0.01)

Weighted average common shares

Basic and diluted

54,092,186

54,092,186 54,092,186 54,092,186

*Cumulative amounts: From January 1, 2005 (inception date) to June 30, 2011

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

SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

January 1 to

Cumulative*

June 30, 2011

June 30, 2010

Amounts

(Unaudited)

Cash flows from operating activities

Net loss

(3,166,713)

(689,316)

(15,295,636)

Adjustments to reconcile net loss to net cash

Depreciation and amortization

16,749

266

289,494

Amortization of debt issuance cost and

commissions

120,572

128,271

Unrealized exchange differences

265,071

Stock compensation expense

107,269

Loss on securities acquired as deposit on stock

1,008,324

Loss on disposal of assets

3,258

Loss on extinguishment of debt

258,882

1,806,758

Increase in pension fund commitments

44,474

- Increase / decrease in:

Other current assets

(7,047)

(12,046)

(17,297)

Accounts payable

(178,361)

71,735

1,271,875

Accrued expenses

617,585

60,043

1,003,139

Net cash used in operating activities

(2,287,670)

(310,436)

(9,385,000)

Cash flows from investing activities

Proceeds from securities available-for-sale

1,740,381

Increase in receivables from related parties

(427,018)

Purchase of property and equipment

(592,018)

(6,918)

(10,397,504)

Down payments on purchase of investment

(689,000)

Other non-current assets

(50,914)

1,863

(50,914)

Net cash used in investing activities

(1,758,950)

(5,055)

(9,824,055)

Cash flows from financing activities

Net proceeds from deposit on stock

3,664,417

Proceeds from stock issuance

300,000

Proceeds from notes payable related parties, net

(771,837)

207,470

10,206,295

Advances from third parties

700,000

Decrease in note payable

(551,155)

(714,819)

Proceeds from bond issuance, net of commission

6,053,640

6,318,913

Payment for debt issuance costs

(499,747)

(521,417)

Purchase of treasury stock

(11,555)

(23,755)

Net cash provided by financing activities

4,230,901

195,915

19,929,634

Effect of exchange rate changes

(47,428)

49,560

(540,263)

Net increase / - decrease in cash

136,853

(70,016)

180,316

Cash, beginning of period

44,018

73,945

555

Cash, end of period

180,871

3,929

180,871

Additional information

Interest paid

84,000

Income taxes paid

* Cumulative amounts: From January 1, 2005 (inception date) to June 30, 2011

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

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

CORPORATE INFORMATION

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

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

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

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

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

focus to the development of private equity financial products, whose funds will be invested

primarily in the hospitality and related industry. The Company has not materialized any revenues

yet and is therefore a “development stage company”.

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

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

The accompanying unaudited consolidated financial statements have been prepared by

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

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

therefore, be read in conjunction with the Company’s Form 10-K, for the year ended December

31, 2010, filed with the Securities and Exchange Commission. These statements do include all

normal recurring adjustments which the Company believes necessary for a fair presentation of the

statements. The interim results of operations are not necessarily indicative of the results to be

expected for the full year ended December 31, 2011.

Except as indicated in the notes below, there have been no other material changes in the

information disclosed in the notes to the financial statements included in the Company’s Form

10-K for the year ended December 31, 2010, filed with the Securities and Exchange

Commission. Therefore, those footnotes are included herein by reference.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

SIGNIFICANT ACCOUNTING POLICIES

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 and interest"). With respect

to the construction in progress the Company capitalized $17,000 and $0 of interest expense

during the six months period ended June 30, 2011 and June 30, 2010.

EUR bonds

Non-current liabilities comprise of bonds payable in EUR (€), which bear fixed interest rates. The

EUR bonds are carried at nominal value.

Issuance costs and placement provisions are capitalized 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.

Pension Plan

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

defined benefit plan and accounted in accordance with ASC 715 ("compensation - retirement

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

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

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

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

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

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

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

pension liability.

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

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

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

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

assets are determined based on prevailing market prices.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, receivables from

related parties, accounts payable, note payables and bonds. The fair value of these financial

instruments approximate their carrying value due to the short maturities of these instruments,

unless otherwise noted.

ASC 820 (Fair Value Measurements) establishes a three-tier fair value hierarchy, which

prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as

observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than

quoted prices in active markets that are either directly or indirectly observable; and Level 3,

defined as unobservable inputs in which little or no market data exists, therefore requiring an

entity to develop its own assumptions.

New accounting standards

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards

Update ("ASU") 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve

Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,

which results in a consistent definition of fair value and common requirements for measurement

of and disclosure about fair value between accounting principles generally accepted in the United

States and IFRS. ASU 2011-04 is effective for interim and annual periods beginning after

December 15, 2011. The Company expects the adoption of this standard will have no significant

impact on the Company’s consolidated financial statements and related disclosures.

In June 2011, the FASB issued amendments to Topic 220, Comprehensive Income, in this

Update, an entity has the option to present the total of comprehensive income, the components of

net income, and the components of other comprehensive income either in a single continuous

statement of comprehensive income or in two separate but consecutive statements. In both

choices, an entity is required to present each component of net income along with total net

income, each component of other comprehensive income along with a total for other

comprehensive income, and a total amount for comprehensive income. This Update eliminates

the option to present the components of other comprehensive income as part of the statement of

changes in stockholders' equity. The amendments in this Update do not change the items that

must be reported in other comprehensive income or when an item of other comprehensive income

must be reclassified to net income. Effective for annual periods beginning after December 15,

2011. The Company expects the adoption of this standard will have no significant impact on its

consolidated financial statements and related disclosures.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

GOING CONCERN

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

of Guanacaste, Costa Rica.

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

project, the following expenditures are estimated to be incurred:

USD $1,000

Gross project cost

195,000

Less: Proceeds from sale of villas

-24,000

Net project cost

171,000

Overhead expenses

21,000

Less: Recuperated in gross project cost

-12,000

Total, excluding other potential projects

180,000

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

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

project cost”, as well as “non-recuperated overhead expenses” and the cost of prospective “other

projects” are expected to be financed by four of the Company’s principal shareholders or

principal lenders to the project, i.e.:

Zypam Ltd., shareholder

Mr. Hans Rigendinger, shareholder and board member

Mr. Max Rössler, majority shareholder of Aires International Investment,

Inc. (also refer to Note 16)

Mr. Josef Mettler, shareholder and Chief Executive Officer

Subsequent to June 30, 2011, they signed a Guaranty Agreement. Refer to Note 16.

Management therefore believes that available funds are sufficient to finance cash flows for the

twelve months subsequent to June 30, 2011 and the filing date though future anticipated cash

outflows for investing activities will continue to depend on the availability of financing and can

be adjusted as necessary.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

PROPERTY & EQUIPMENT

June 30, 2011

December 31, 2010

Unaudited

Land

7,000,000

IT equipment

185,846

Other equipment and furniture

29,979

Leasehold improvements

66,617

Construction in progress

2,901,000

2,311,276

Gross

10,183,442

9,593,718

Less: Accumulated depreciation

(282,442)

(271,742)

Net

9,901,000

9,321,976

CONSTRUCTION IN PROCESS

The Company possesses a concession for a piece of land (~84,000 square meters), i.e. a right to

build a hotel and apartments in the “Papagayo Gulf Tourism Project”, Guanacaste, Costa Rica,

which was acquired for $7 million and recorded as land in property and equipment.

The concession is a right to use the property for a specific purpose over a term of 20 years, which

term thereafter can be renewed at no further cost, if the Company is up to date with its

obligations as stipulated by the Cota Rican government and if no significant change in

government policies takes place. The current concession expires in June 2022.

The construction in process amount that was spent as of June 30, 2011 is attributed primarily to

architectural work related to the hotel and apartments.

NOTE PAYABLE TO THIRD PARTIES

The Company’s note payable was to Bruesa Construccione S.A. (Bruesa), a Spanish construction

contractor. The note was repayable in Euros and was collateralized by a 10% interest in Rich

Land and bore interest at 6%. The note payable balance sheet amounts of $551,155 for December

31, 2010 included related accrued interest of approximately $59,000. As of June 17, 2011 the

amount due was paid in full and Bruesa’s interest in Rich Land was returned to the Company.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

RECEIVABLES FROM AND NOTES PAYABLES TO RELATED PARTIES

Receivables

Payables

June 30,

December 31,

June 30,

December 31

2011

2010

2011

2010

(unaudited)

01 Adrian Oehler

39,409

31,887

02 Zypam Ltd

427,018

685,621

03 Sportiva

83,000

Total excluding

interest

427,018

39,409

800,508

Accrued interest

10,738

Total

427,018

39,409

811,246

of which non-current

Related party

Capacity

Interest

Repayment

Security

Rate

Terms

01 Adrian Oehler

Shareholder

3.00%

None

02 Zypam Ltd

Shareholder

None

N/A

None

03 Sportiva

An entity owned by a

3.00%

None

Company board member

RELATED PARTY TRANSACTIONS

Debt Settlement Agreements

During the year ending December 31, 2010 the Company concluded certain debt settlement

agreements. The issuances of shares of the Company were recorded at fair value in the year ended

December 31, 2010 and the difference between the carrying value of the payables and the fair

value was recorded as loss on extinguishment of debt in the statement of operations for the year

ended December 31, 2010.The details are as follows:

a. A “Debt Settlement Agreement”, whereby a payable by SunVesta AG to Zypam Ltd. in the

amount of $900,000 has been settled by the issuance of 13,846,154 shares of the Company.

b. A “Debt Settlement Agreement”, whereby a payable by SunVesta AG to H. Rigendinger in

the amount of $49,990 has been settled by the issuance of 769,076 shares of the Company.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

NON-CURRENT LIABILITIES

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

Description

EUR (€) bond

Issuer:

SunVesta AG

Type of securities:

Bond in accordance with Swiss law

Approval by SunVesta AG’s board of directors

May 12, 2010

Volume:

Up to € 25,000,000

Units:

€1,000

Offering period:

11.10.2010 – 04.30.2011

Due date:

November 30, 2013

Issuance price:

100 %

Issuance day::

December 1, 2010

Interest rate:

8.25% p.a.

Interest due dates:

November 30 of each year,

the first time 30 November 2011

Applicable law:

Swiss

The nominal amounts have changed as follows:

EUR-Bond

2011

2010

Balances January 1

265,273

Cash inflows

6,301,836

265,273

Foreign currency adjustments

(14,055)

Sub-total (Fair value)

6,553,054

265,273

Commissions paid to bondholders

(248,196)

Amortization of such commissions

8,621

Balance June 30, 2011 (Carrying value)

6,313,479

265,273

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

10.

PENSION PLAN

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

defined benefit plan and accounted in accordance with ASC 715 ("compensation - retirement

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

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

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

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

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

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

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

pension liability.

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

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

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

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

assets are determined based on prevailing market prices.

Actuarial valuation

The actuarial valuation was carried out the first time as of December 31, 2011 and simultaneously

as of June 30, 2011. No previous valuations were done because management concluded that the

failure did not materially impact the financial statements as of December 31, 2010.

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

Six months ended

June 30, 2011

June 30, 2010

(unaudited)

Pension Expense

Current service cost

50,766

Past service cost

Interest cost

1,543

Expected return on assets

(1,384)

Employee contributions

(20,328)

During the periods ended June 30, 2011 and June 30, 2010 the Company made cash

contributions of $20,000 and $0, respectively, to its defined benefit pension plan.

The expected future cash flows to be paid by the Company in respect of employer contributions

to the pension plan for the year ended December 31, 2011 are $0.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

11.

AGREEMENT TO PURCHASE NEIGHBORING PIECE OF LAND

In 2010 SunVesta AG concluded a sale and purchase agreement with a company called DIA S.A.

(“DIA”), being domiciled in San José, Costa Rica. The purpose of the agreement is to acquire a

contigious parcel of land consisting of approximately 120,000 square meters with direct beach

access by purchasing 100% of the shares of Altos del Risco S.A. from DIA. The total purchase

consideration is $12.5 million. Upon payment of the entire amount, ownership of Altos del Risco

S.A. will be transferred to SunVesta AG. As at June 30, 2011 and December 31, 2010, $0.69

million and $0 has been paid, respectively.

The sixth addendum dated November 12, 2012, stipulates that:

$8.5 million has already been paid

$4.0 million has still to be paid

The current contractual situation does not call for any penalties. The purchase of the neighbouring

piece of land is expected to be completed during the 1^st Quarter of 2013.

12.

FUTURE LEASE COMMITMENTS

Since January 1, 2010 the Company had has a sub-rental agreement for its Swiss office with a

related party called “Sportiva”. The annual sub-rental expense is approx. $80,000. The sub-rental

agreement is concluded for an undetermined period of time, however, there is a verbal agreement

to maintain the agreement at least until December 31, 2013.

13.

RELATIONSHIP WITH WIMBERLY ALLISON TONG & GOO (“WTAG”)

Legal proceedings were initiated by Wimberley Allison Tong & Goo (WATG) against SunVesta

Projects and Management AG on November 6, 2008 in the Superior Court of the State of

California, County of Orange. The claim was based on an alleged failure to satisfy the terms of a

promissory note executed in exchange for certain design services rendered in connection with the

El Cielo Hideaway Eco Resort and Spa. The claim sought approximately $355,000 plus accrued

interest in addition to legal fees incurred in prosecuting the suit. The Company engaged legal

counsel and paid $100,000 in 2009 to Wimberley Allison Tong & Goo against the amount due.

In 2010, WATG engaged a debt collector for the remaining amount of approximately $255,000

plus accrued interest and legal fees. The Company returned to settlement negotiations and agreed

to settle the outstanding amount, without interest or legal fees, in equal instalments due on April

30, May 31, June 30, and July 31, 2010. This agreement was then extended to August 31, 2010.

As of March 31, 2011, The Company has paid approximately $195,000, leaving a remaining

balance due of approximately $60,000 as of that date. As of May 26, 2011, the Company

finalized the settlement and paid the remaining balance due.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

14.

WING FIELD CORPORATION INC.

On August 31, 2009 the Company concluded a development agreement with WingField

Corporation Inc. (“WingField”), which included various services to be provided by WingField. A

major item was the procurement of a management contract for the management of the planned

resort in Guanacaste, Costa Rica. (Refer to Note 16 also.)

15.

MANGEMENT AGREEMENT WITH MELIÁ HOTELS & RESORTS

In March 2011 the Company concluded a management agreement with Sol Meliá, S.A. for the

management of the planned resort in Guanacaste, Costa Rica. This agreement includes a clause

that provides that if the Company is unable to conclude the purchase of the property described in

Note 11 by November 30, 2011, a penalty of $1,000,000 would become due to Sol Meliá, S.A.

The maturity date of this penalty has been extended to June 30, 2012.

The Company is yet to conclude the purchase of the property described in Note 11 and is

presently negotiating with Sol Meliá, S.A. to include an addendum to the management agreement

that would circumvent this penalty.

16.

SUBSEQUENT EVENTS

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

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

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

except for the below:

EUR Bond Offering

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

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

bonds due November 30, 2013.

A cumulative amount of € 8.9 million ($11,329,000) has been realized by the Company from the

initial date up to November 15, 2012.

CHF Bond Offering

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

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

the bonds due August 31, 2015.

A cumulative amount of CHF 5.5 million ($5,816,000) has been realized by the Company from

the initial date up to November 15, 2012.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

16.

SUBSEQUENT EVENTS – CONTINUED

WingField Corporation

The development agreement with WingField included a detail of certain services to be provided

by WingField one of which was to procure a management contract for the operation of the

planned resort. The management agreement with Sol Meliá, S.A. in the first quarter of 2011

satisfied this item. The Company has since decided to build up its own internal project

organisation and consequently reached an agreement with Wingfield in October 2011 to terminate

the development agreement by paying a flat remuneration of $2,500,000, including a “finders

fee”.

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

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

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

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

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

five percent in equity of Paradisus (the hotel currently under construction), both located in Costa

Rica. The payment schedule is as follows:

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

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

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

Equity is required to be transferred upon final payment

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

its funds on deposit.

On November 13, 2012 the above agreement was amended as follows:

The total purchase price was changed to $17.2 million with no equity payment. The terms and conditions of the cash payment are yet to be defined. Furthermore, all payments by the Company to date and in the future are refundable.

Subsequent to signing the agreements, the Compaid paid down-payments on the purchase of the properties of approximately $1,400,000.

Advisory Services Agreements

In order to raise the necessary funds for the completion of the project, various advisory service

agreements have been concluded, both in Europe as well as Central America. In addition, a

European rating agency has been engaged in order to receive a rating. While the basic cost for the

advisory services are not significant, the actual funding will be accompanied by costs (finders’

fees), which are in the area of 3% in the best case and 12% in the worst case.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

16.

SUBSEQUENT EVENTS – CONTINUED

Amendments to Line of Credit Agreement with Aires International Investment, Inc.

On July 27, 2011 the Company entered into a line of credit agreement with Aires International

Investment, Inc. (“Aires”) allowing it to borrow up to CHF 6,000,000 by February 29, 2012. The

line of credit bears interest at 7.25% and is secured by 10% of the stock of Rich Land. Interest

payments are due September 30 of each year with the line of credit maturing on September 30,

2015. Prior to maturity, if the maximum limit is borrowed, the issuer of the line of credit may

convert the balance of the line of credit into a 10% ownership interest in Rich Land.

An addendum to the existing line of credit agreement was signed on May 11, 2012 that includes

the following clauses:

The line of credit amount was increased by CHF 4,000,000 to a total amount of CHF 10,000,000.

The additional CHF 4,000,000 to be paid in installments through the end of July 2012.

Should the entire amount of CHF 10,000,000 be drawn down, Aires will have the right to convert

the entire line of credit of CHF 10,000,000 into a 20% holding of the capital of the Company.

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

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

The entire amount of CHF 10,000,000 is subordinated in favor of other creditors.

A letter agreement signed by Aires on June 21, 2012 agreed to increase the line of credit by

CHF 2,000,000 to a total amount of CHF 12,000,000.

The Company and Aires International are currently negotiating a revised conversion option that is

supposed to replace the one stated above. The major contemplated change is that Aires

International will convert its receivable at the time of conversion of into 20% of the preferred

shares of shares of SunVesta Inc., at a price and with preferential rights yet to be determined.

As of November 15, 2012 the Company has borrowed CHF10.8 million ($11,420,000) from the

Aires line of credit.

Tax Liability Contingency

During April 2012, the Company was advised by the Internal Revenue Service (IRS) of aggregate

penalties amounting to $140,000 in connection with its failure to file certain tax returns for the

years ended 2008, 2009 and 2010. The Company is in correspondence with the IRS in order to

seek an abatement of the penalties.

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

16.

SUBSEQUENT EVENTS – CONTINUED

Guaranty Agreement

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

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

guarantee is to ensure that until such time as financing is secured for the entire project that they

will act as a guarantor to creditors to the extent of the project’s ongoing capital requirements. The

guaranty agreement requires that within 30 days of receiving a demand notice, the guarantors are

required to pay to SunVesta AG that amount required for ongoing capital requirements, until such

time as financing of the project is secured. The guaranty may not be terminated until such time as

SunVesta AG has secured financing for the completion of the project.

Hotel Project Atlanta

During the third quarter 2012 the Company entered into an agreement to purchase a hotel and

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

The entire purchase amount of $26 million for the assets has no firm financing commitment.

Additionally, approximately an additional $18 million for renovations would need to be invested

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

finalize a financing package for this project. This company is confident that it will be able to

procure financing for this project.

Nonwithstanding all other factors, the Company may terminate this agreement, within a due

dilligence period, if it is not satisfied with the property after an examination of the assets.

The agreement includes a non-refundable deposit of $250,000.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other

parts of this quarterly report contain forward-looking statements that involve risks and uncertainties.

Forward-looking statements can be identified by words such as “anticipates,” “expects,” “believes,”

“plans,” “predicts,” and similar terms. Forward-looking statements are not guarantees of future

performance and our actual results may differ significantly from the results discussed in the forward-

looking statements. Factors that might cause such differences include but are not limited to those

discussed in the subsection entitled Forward-Looking Statements and Factors That May Affect Future

Results and Financial Condition below. The following discussion should be read in conjunction with our

financial statements and notes hereto included in this report. All information presented herein is based on

our three and six month periods ended June 30, 2011. Our fiscal year end is December 31.

Discussion and Analysis

Business Overview

SunVesta is in the process of developing high-end luxury hotels and resorts in emerging tourist

destinations. We are initially concentrating on offering luxury hotel products located in attractive, top-

class coastal vacation destinations in countries such as Costa Rica, Vietnam, and Turkey that are fast

emerging as popular tourist destinations. Our initial real estate development, to be constructed on 20.5

hectares of prime land located in Guanacaste Province, Costa Rica is the Paradisus Papagayo Bay, a five

star luxury hotel scheduled to open in November 2014 subject to the availability of requisite financing.

We have entered into a management agreement, through our wholly owned subsidiary Rich Land

Investments, Limitada (“Rich Land”) with Sol Meliá, S.A. (“Sol Meliá”) to assist us in the planning,

design, construction, furnishing and management of the Paradisus Papagayo Bay. “Paradisus” is Sol

Meliá’s five star all-inclusive luxury hotel brand represented in the Dominican Republic and Mexico.

Paradisus Papagayo Bay’s initial specifications are to be as follows:

 Eco-luxury all-inclusive resort;

 381-keys;

 Direct beach access;

 Five restaurants and five bars;

 Yhi Spa and Health Club;

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

 Paradisus’ “Family Concierge” program; and

 19,000 square feet of meeting facilities with the business traveler in mind.

Our Paradisus Papagayo Bay development is intended to replace Paradisus Resorts’ former Paradisus

Playa Conchal in Guanacaste, Costa Rica which property was operated by Sol Meliá until April 30, 2011.

Our project is part of Sol Meliá master expansion plan, which includes the opening of two resorts in Playa

del Carmen, Mexico in November of 2011. Sol Meliá aims to solidify Paradisus Resorts as a leader in the

luxury all-inclusive market segment with the new properties in Playa del Carman and our own Paradisus

Papagayo Bay project.

Our plan of operation over the next thirty six months is to complete the Paradisus Payagyo Bay

development which will require a total investment of approximately $180 million. We expect to realize a

minimum of $20,000,000 in new funding over the next twelve months though our actual financing

requirements may be adjusted to suit that amount realized, and an additional $140,000,000 in funding by

the time the development is completed.

SunVesta Holding AG (“SunVesta AG”), our wholly owned subsidiary, is in the process of issuing fixed-

income Euro bonds up to an aggregate amount of € 25,000,000 to fund the initial development of the

Paradisus Payagyo Bay hotel. The bonds are unsecured, have a 3-year term, bear interest at 8.25% per

annum with interest due paid on November 30, of each year over the term regardless of issue date and

mature on November 30, 2013. SunVesta AG raised $6,053,640 in the six months ended June 30, 2011

for a total of approximately $11,268,000 as of November 15, 2012, in connection with the Euro bond

offering.

Subsequent to the period end, on July 27, 2011, SunVesta AG entered into a line of credit agreement with

Aires International Investment, Inc. (“Aires”) that permitted it to borrow up to CHF 12,000,000. The line

of credit bears interest at 7.25% due on September 30 of each year maturing on September 30, 2015. The

line of credit agreement with Aires was subsequently amended as follows:

An addendum was signed on May 11, 2012 that included the following provisions:

 The line of credit was increased by CHF 4,000,000 to a total amount of CHF 10,000,000. The

additional CHF 4,000,000 to be paid in installments through the end of July 2012.Should the

entire amount of CHF 10,000,000 be drawn down, Aires would have the right to convert the

entire line of credit of CHF 10,000,000 into a 20% holding of the capital of SunVesta.

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

into a 10% ownership interest in RichLand was cancelled.

 The entire line of credit is subordinated in favor of other creditors.

A letter agreement signed by Aires on June 21, 2012 increased the line of credit by CHF 2,000,000 to a

total of CHF 12,000,000.

SunVesta AG has borrowed CHF 10,300,000 from this line of credit as of the date of this report.

Subsequent to the period end, on September 1, 2011, SunVesta AG initiated a CHF bond offering of up to

CHF 15,000,000 in units of CHF 50,000 that bear 7.25% interest per annum payable each August 31 over

the term of the bonds due August 31, 2015. SunVesta raised a total of approximately $5,816,000 as of

November 15, 2012, in connection with the CHF bond offering.

Subsequent to the period end, on April 20, 2012, SunVesta 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. Down payments of approximately $1,100,000 have been made

against these purchases.

The remaining amounts required to develop the Paradisus Papagayo Bay to completion and to purchase

the additional concession properties located in Polo Papagayo are anticipated to be in the form of a

traditional construction loan and further debt or equity placements from related and unrelated parties.

Timeline

Our expected timeline for developing the Paradisus Papagayo Bay is as follows:

 Complete revisions of architectural plans which will incorporate Sol Meliá requirements in the

fourth 4^th quarter of 2012;

 Receive traditional construction loan in the 1^st quarter of 2013;

 Receive final building permits in 1^st quarter of 2013;

 Begin construction in the 1^st quarter of 2013; and

 Complete construction work in the 4^th quarter of 2014.

Results of Operations

During the six month period ended June 30, 2011, our operations were focused on (i) entering into

agreements with Sol Meliá to assist us in the planning, design, construction, furnishing and management

of the Paradisus Papagayo Bay; (ii) revision of architectural plans to incorporate Sol Meliá requirements

for the development; (iii) arranging a line of credit with Aires; and (iv) pursuing SunVesta AG’s bond

offering in Europe.

SunVesta has been funded since inception from equity placements and by shareholders or partners in the

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

Costa Rica as a five star destination resort including the purchase of the land and general and

administrative costs.

Comprehensive Losses

For the period from the date of inception of development stage on January 1, 2005, until June 30, 2011,

SunVesta has incurred comprehensive losses of $15,104,888.

Comprehensive losses for the three months ended June 30, 2011 were $2,376,811 as compared to

$251,428 for the three months ended June 30, 2010. The increase in comprehensive losses over the

comparative three month periods can be primarily attributed to the increase in general and administrative

expenses to $1,923,282 in the three month period ended June 30, 2011, from $252,383 in the three month

period ended June 30, 2010 of which significant components were finder’s fees associated with the

management contract with Sol Melià, the increase in marketing costs to $111,470 in the three month

period ended June 30, 2011 from $628 in the three month period ended June 30, 2010 associated with the

Paradisus Papagayo Bay development, the increase in interest expenses on outstanding debt to $268,960

in the three month period ended June 30, 2011 from $9,308 in the three month period ended June 30,

2010 which expense can be primarily attributed to debt associated with the Euro bond offering, the non-

cash amortization of debt issuance costs to $120, 572 in the three month period ended June 30, 2011,

from $0 in the three month period ended June 30, 2010 in connection with the Euro bond offering, and the

increase in the loss on foreign currency translation between Euro’s and CHF to $265,071 in the three

month period ended June 30, 2011, from $0 in the three month period ended June 30, 2010 due to a

decrease in the Euro’s value as compared to that of CHF over the period.

Comprehensive loss for the six months ended June 30, 2011 was $2,937,513 as compared to $617,668 for

the six months ended June 30, 2010. The increase in comprehensive losses over the comparative six

month periods can primarily be attributed to the increase in general and administrative expenses to

$2,391,300 in the six month period ended June 30, 2011, from $397,860 in the six month period ended

June 30, 2010 of which significant components were finder’s fees and advisory services, the increase in

interest expenses on outstanding debt to $302,316 in the six month period ended June 30, 2011 from

$19,319, in the six month period ended June 30, 2010 which can be primarily attributed to debt associated

with the Euro bond offering, the increase in marketing costs to $117,454 in the six month period ended

June 30, 2011, from $13,255 in the six month period ended June 30, 2010, the increase in non-cash

amortization of debt issuance costs to $120,572 in the six month period ended June 30, 2011,from $0 in

the six month period ended June 30, 2010 and the increase in the loss on foreign currency translation

between Euro’s and Swiss Francs to $265,071 in the six month period ended June 30, 2011, from $0 in

the six month period ended June 30, 2010.

We did not generate revenue from the date of inception of development stage on January 1, 2005 through

the end of the period ended June 30, 2011 and expect to continue to incur losses through the year ended

December 31, 2011.

Income Tax Expense (Benefit)

SunVesta has a prospective income tax benefit resulting from a net operating loss carry-forward and start

up costs that will offset future operating profits.

Capital Expenditures

SunVesta incurred a significant amount on capital expenditures for the period from January 1, 2005 to

June 30, 2011, in connection with the purchase of land that includes a hotel concession in Costa Rica.

Liquidity and Capital Resources

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

liquidity, capital resources, and stockholders’ equity.

As of June 30, 2011, we had a working capital deficit of $833,721. We had current assets of $624,357 and

total assets of $11,937,303. Our current assets consisted of $180,871 in cash, $427,018 in receivables

from related parties and $16,468 in other assets. Our total assets consisted of current assets, property and

equipment of $9,901,000, net debt issuance costs of $672,032, down payments for property and

equipment of $689,000 and others of $50,914. We had current liabilities of $1,458,078 and total liabilities

of $7,816,031. Our current liabilities consisted of $735,260 in accounts payable, $683,409 in accrued

expenses, and $39,409 in related party payables. Our total liabilities consisted of current liabilities and

long term debt of $6,313,479 associated with SunVesta AG’s Euro-Bond and $44,474 in pension

liabilities. Total stockholders’ equity in SunVesta was $4,121,272 at June 30, 2011.

For the period from January 1, 2005 to June 30, 2011, our net cash flow used in development stage

activities was $9,385,000. Net cash used in development stage for the six month period ended June 30,

2011, was $2,287,670 as compared to $310,436 for the six month period ended June 30, 2010. Net cash

used in development stage activities in the current six month period include a number of items that are

book expense items which do not affect the total amount relative to actual cash used including an increase

in pension fund commitments, depreciation, amortization of debt issuance cost and unrealized exchange

difference. Actual cash items used, that are not income statement related items such as general and

administrative expenses, include accrued expenses offset by other current assets and accounts payable.

We expect to continue to generate negative cash flow in operating activities until such time as net losses

transition to net income which transition is not anticipated until we complete the project.

For the period from January 1, 2005 to June 30, 2011, our net cash used in investing activities was

$9,824,055. Net cash used in investing activities for the six month period ended June 30, 2011, was

$1,758,950 as compared to $5,055 for the six month period ended June 30, 2010. Net cash used in

investing activities in the current six month period can be attributed to receivables from related parties,

the purchase of property and equipment, a payment against the purchase of the investment property and

other non-current assets. Net cash used in the prior six month period can be attributed to the purchase of

property and equipment. We expect to continue to generate negative cash flow in investing activities in

future periods as we develop the Paradisus Papagayo Bay.

For the period January 1, 2005 to June 30, 2011, our net cash provided by financing activities was

$19,929,634. Net cash provided by financing activities for the six month period ended June 30, 2011, was

$4,230,901 as compared to $195,915 for the six month period ended June 30, 2010. Net cash provided by

financing activities in the current six month period can be attributed to proceeds from SunVesta AG’s

bond offering, offset by cash flow used in financing activities to net proceeds from notes payable from

related parties, a decrease in a note payable and debt issuance costs. Net cash provided by financing

activities in the prior six month period can be attributed to proceeds from note payable from related

parties. We expect to continue to generate net cash from financing activities in future periods in

connection with anticipated proceeds from SunVesta AG’s bond offerings and the Aires credit line.

Management believes that our current assets in addition to the equity financing efforts and a line of credit

are sufficient for us to conduct operations over the next twelve months. Current equity financing efforts

include a Euro bond offering in progress and a CHF bond offering initiated subsequent to period end.

Management also has a credit line commitment agreed subsequent to period end that permits us to draw

capital as necessary to meet ongoing capital requirements. SunVesta has, as of November 15, 2012,

realized $17,084,000 through its Euro and CHF bond offerings and drawn down $11,441,000 against the

line of credit with Aires. However, such amounts are not sufficient to ensure the completion of the

Paradisus Papagayo Bay project which completion will require a total investment of approximately $180

million. Net costs associated with completing the project are projected to be approximately $171,000,000.

Management expects that sixty percent (60%) of the net project cost will be financed by traditional

mortgage loans, for which negotiations have been initiated. The remaining forty percent (40%) of net

project costs, as well as non-recuperated overhead expenses are expected to be financed by four of our

principal shareholders or principal lenders to the project. Subsequent to period end, these individuals

entered into a guaranty agreement with SunVesta AG by which they agreed to guarantee the availability

of capital to develop the project until such time as financing for the completion of the Paradisus Papagayo

Bay project is secured, which objective is yet to be accomplished. Management believes that debt or

equity placements, lines of credit, traditional construction loans and the guaranty in place will provide the

financing requisite to completing the project. Despite these measures, no commitments outside of the

guaranty are in place to secure the requisite financing. Should sufficient financing efforts fail to

materialize, SunVesta will be unable to complete the Paradisus Papagayo Bay project.

We had no lines of credit or other bank financing arrangements as of June 30, 2011, though we have

borrowed CHF 10,820,000 against the Aires line of credit as of November 15, 2012 and may borrow

approximately an additional CHF 1,700,000 pursuant to this line of credit.

At June 30, 2011, we had commitments to DIA, S.A and other third parties in connection with the

purchase of property parcels made part of the development amounting to $11.8 million and certain

commitments to the Costa Rican government for water and development rights as well as certain

commitments for the planning and construction of the resort project.

We maintain a defined benefit plan that covers all of our Swiss employees though we have no contractual

commitment with our sole officer and director.

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

with the planned construction of the Paradisus Papagayo Bay.

We have no current plans to make any changes in the number of our employees.

Future Financings

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

operations. Unfortunately, there is no assurance that we will be able to secure the financing requisite to

fund our business.

Off-Balance Sheet Arrangements

As of June 30, 2011, we had no significant off-balance sheet arrangements that have or are reasonably

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

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

material to stockholders.

Going Concern

SunVesta intends to build a hotel in the Papagayo Gulf Tourism Project area of Guanacaste, Costa Rica.

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

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

following expenditures are estimated to be incurred:

USD $1,000

a. Gross project cost

195,000

b. Less: Proceeds from sale of villas

-24,000

c. Net project cost

171,000

d. Overhead expenses

21,000

e. Less: Recuperated in gross project cost

-12,000

f Total, excluding other potential projects

180,000

Sixty percent (60%) of net project cost is expected to be financed by traditional mortgage loans, for which

negotiations have been initiated. The remaining forty percent (40%) of net project cost, as well as non-

recuperated overhead expenses and the cost of prospective “other projects” are expected to be financed by

the primary promoters of the project, i.e.:

Zypam Ltd.

Mr. Hans Rigendinger

Mr. Max Rössler

Mr. Josef Mettler

Management therefore believes that available funds are sufficient to finance cash flows for the next

twelve months though future anticipated cash outflows for investing activities will continue to depend on

the availability of financing and can be adjusted as necessary.

Subsequent to period end, certain principal shareholders of SunVesta or principal lenders to the project

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

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

creditors to the extent of the project’s ongoing capital requirements. The guaranty agreement requires that

within 30 days of receiving a demand notice, the guarantors are required to pay to SunVesta AG that

amount required for ongoing capital requirements, until such time as financing of the project is secured.

The guaranty may not be terminated until such time as SunVesta AG has secured financing for the

completion of the project.

Forward-Looking Statements and Factors That May Affect Future Results and Financial Condition

The statements contained in the section titled Management’s Discussion and Analysis of Financial

Condition and Results of Operations and elsewhere in this current report, with the exception of historical

facts, are forward-looking statements. We are ineligible to rely on the safe-harbor provision of the Private

Litigation Reform Act of 1995 for forward-looking statements made in this current report. Forward-

looking statements reflect our current expectations and beliefs regarding our future results of operations,

performance, and achievements. These statements are subject to risks and uncertainties and are based

upon assumptions and beliefs that may or may not materialize. These statements include, but are not

limited to, statements concerning:

 our anticipated financial performance and business plan;

 the sufficiency of existing capital resources;

 our ability to raise additional capital to fund cash requirements for future operations;

 uncertainties related to our future business prospects;

 our ability to generate revenues to fund future operations;

 the volatility of the stock market; and

 general economic conditions.

We wish to caution readers that our operating results are subject to various risks and uncertainties that

could cause our actual results to differ materially from those discussed or anticipated. 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 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

management, with the participation of the chief executive officer and chief financial officer, of the

effectiveness of SunVesta’s disclosure controls and procedures (as defined in Rules 13a-15(e) under the

Securities Exchange Act of 1934 (“Exchange Act”)). Disclosure controls and procedures are designed to

ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is

recorded, processed, summarized, and reported within the time periods specified in the Commission’s

rules and forms, and that such information is accumulated and communicated to management, including

the chief executive officer and chief financial officer, to allow timely decisions regarding required

disclosures.

Based on that evaluation, SunVesta’s management concluded, as of the end of the period covered by this

report, that due to a lack of resources and US GAAP knowledge, SunVesta’s disclosure controls and

procedures were ineffective in recording, processing, summarizing, and reporting information required to

be disclosed, within the time periods specified in the Commission’s rules and forms, and such information

was not accumulated and communicated to management, including the chief executive officer and the

chief financial officer, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

During the period ended June 30, 2011, there has been no change in internal control over financial

reporting that has materially affected, or is reasonably likely to materially affect our internal control over

financial reporting.

PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

Legal proceedings were initiated by Wimberley Allison Tong & Goo (“WATG”) against SunVesta

Projects and Management AG on November 6, 2008 in the Superior Court of the State of California,

County of Orange. The claim was based on an alleged failure to satisfy the terms of a promissory note

executed in exchange for certain design services rendered in connection with the Costa Rican property.

The claim sought approximately $355,000 plus accrued interest in addition to legal fees incurred in

prosecuting the suit. We engaged legal counsel and paid $100,000 in 2009 to WATG against the amount

due. In 2010, WATG engaged a debt collector for the remaining amount of approximately $255,000 plus

accrued interest and legal fees. We returned to settlement negotiations and agreed to settle the outstanding

amount, without interest or legal fees. At December 31, 2010, $60,000 of the amount remained

outstanding and was overdue. On May 26th, 2011 we paid $60,000 to WATG in final settlement.

ITEM 1A.

RISK FACTORS

Not required of smaller reporting companies.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.

DEFAULTS ON SENIOR SECURITIES

None.

ITEM 4.

REMOVED AND RESERVED

(Removed and Reserved)

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS

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

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

SIGNATURES

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

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

SunVesta, Inc.

Date

/s/ Josef Mettler

December 17, 2012

Josef Mettler

Chief Executive Officer, Chief Financial Officer

Principal Accounting Officer and Director

INDEX TO EXHIBITS

Exhibit

Description

3.1.1*

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

Commission on December 31, 1999).

3.1.2*

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

the Commission on April 9, 2003).

3.1.3*

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

the Commission on November 17, 2003).

3.1.4*

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

Commission on September 27, 2007).

3.2.1*

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

31, 1999).

3.2.2*

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

on November 17, 2003).

10.1*

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

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

with the Commission on June 21, 2007).

10.2*

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

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

10.3*

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

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

10.4*

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

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

10.5*

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

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

10.6*

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

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

14*

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

Commission on April 14, 2004).

21*

Subsidiaries of SunVesta (incorporated by reference from the 10-K filed with the Commission on

May 12, 2010).

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

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

the Sarbanes-Oxley Act of 2002.

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

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

101. INS

XBRL Instance Document^†

101. PRE

XBRL Taxonomy Extension Presentation Linkbase^†

101. LAB

XBRL Taxonomy Extension Label Linkbase^†

101. DEF

XBRL Taxonomy Extension Label Linkbase^†

101. CAL

XBRL Taxonomy Extension Label Linkbase^†

101. SCH

XBRL Taxonomy Extension Schema^†

Incorporated by reference to previous filings of SunVesta.

^†

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

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

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

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

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