SUNVESTA, INC. - FORM 10-K

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - SUNVESTA, INC.	Financial_Report.xls
EX-32 - CERTIFICATION - SUNVESTA, INC.	exhibit32.htm
EX-31 - CERTIFICATION - SUNVESTA, INC.	exhibit31.htm
EX-21 - SUBSIDUARIES - SUNVESTA, INC.	exhibit21.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2013.

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

For the transition period from

___ to

Commission file number: 000-28731

SUNVESTA, INC.

(Exact name of registrant as specified in its charter)

Florida

98-0211356

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

Seestrasse 97, Oberrieden, Switzerland CH-8942

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: 011 41 43 388 40 60

Securities registered under Section 12(b) of the Act: none.

Securities registered under Section 12(g) of the Act: common stock (title of class), $0.01 par value.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such

reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every

Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during

the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not

contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements

incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule

12b-2 of the Exchange Act. Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

The aggregate market value of the registrant’s common stock, $0.01 par value (the only class of voting stock), held by non-affiliates

(49,673,847 shares) was approximately $3,228,800 based on the based on the average closing bid and ask prices ($0.065) for the

common stock on April 14, 2014.

At April 15, 2014, the number of shares outstanding of the registrant’s common stock, $0.01 par value (the only class of voting

stock), was 84,581,445.

TABLE OF CONTENTS
PART I
Item1.	Business	3
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	14
Item 2.	Properties	15
Item 3.	Legal Proceedings	15
Item 4.	Mine Safety Disclosures	15

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	16
Item 6.	Selected Financial Data	17
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	22
Item 8.	Financial Statements and Supplementary Data	22
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	23
Item 9A.	Controls and Procedures	23
Item 9B.	Other Information	25
PART III
Item 10.	Directors, Executive Officers, and Corporate Governance	26
Item 11.	Executive Compensation	30
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	34
Item 13.	Certain Relationships and Related Transactions, and Director Independence	35
Item 14.	Principal Accountant Fees and Services	36
PART IV
Item 15.	Exhibits, Financial Statement Schedules	37
Signatures	Exhibits, Financial Statement Schedules	38

PART I

ITEM 1.

BUSINESS

As used herein the terms “Company,” “we,” “our,” and “us” refer to SunVesta, Inc., its predecessors,

and its subsidiaries, unless context indicates otherwise.

Corporate History

The Company was incorporated under the laws of the State of Florida on September 12, 1989, as “Thor

Ventures Corp.” On November 26, 2002 the Company’s name was changed to “Jure Holdings, Inc.” as part

of a process to restructure the corporation. On April 25, 2003, we acquired OPENLiMiT Holding AG, a

Swiss developer of digital signature software and subsequently changed our name to “OPENLiMiT, Inc.”

We spun-off OPENLiMiT Holding AG to our stockholders on September 1, 2005. On August 24, 2007, we

changed the Company’s name to “SunVesta, Inc.” and on August 27, 2007, acquired SunVesta Holding AG

(hereinafter “SunVesta AG”) as a wholly-owned subsidiary.

SunVesta AG was incorporated under the laws of Switzerland on December 18, 2001, and is domiciled in

the Canton of Zurich, Switzerland. SunVesta AG operates through its wholly owned subsidiaries:

— SunVesta Projects & Management AG (Switzerland)

— SunVesta Costa Rica Limitada (Costa Rica)

— Rich Land Investments Limitada (Costa Rica)

— Altos del Risco SA (Costa Rica)

— Profunda Capital Partners LLC (USA)

The Company’s principal place of business is located at Seestrasse 97, Oberrieden, Switzerland CH-8942.

Our telephone number is 011 41 43 388 40 60. Our registered agent is Hubco Registered Agents Services,

Inc., located at 155 Office Plaza Drive, 1^st Floor, Tallahassee, Florida, 32301 and their telephone number is

(800) 443-8177.

SunVesta

Business Overview

We are in the process of developing high-end luxury hotels and resorts worldwide. Our initial focus is

concentrated on offering luxury hotel products located in attractive, top-class coastal vacation destinations

in countries such as Costa Rica that are fast emerging as popular tourist destinations. Each prospective

development takes into consideration country specific conditions and general considerations that include

the stability of local political conditions, geologically useful cultivability, and the types of destinations that

attract a five-star clientele. Once identified as eligible, prospective developments are compared against a

validation checklist and then, if warranted, subjected to a substantial due diligence process. Since location

is the key to the success of any tourist based luxury real estate project, each development will be carefully

considered during the eligibility process.

Initial Development

Our initial real estate development, to be constructed on 20.5 hectares of prime land located in Guanacaste

Province, Costa Rica, is the Paradisus Papagayo Bay Resort & Luxury Villas, a five star luxury hotel

scheduled to open in the 4^th quarter of 2015 subject to requisite financing.

Specifications

Paradisus Papagayo Bay Resort & Luxury Villas’ initial specifications are to be as follows:

— eco-luxury all-inclusive resort

— 382-keys

— direct beach access

— five restaurants and five bars

— Yhi Spa and Health Club

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

— Paradisus’ “Family Concierge” program

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

Royal Service

Our Royal Service will include an extensive range of services such as butler service, private pools for each

Garden Villa and/or a Jacuzzi in every suite.

The Royal Service area will include:

— 108 Junior Suites Grand Deluxe

(43-60* square meters)

— 2 Junior Suites Grand Deluxe for Handicapped Guests

(53* square meters)

— 6 Grand Master Suites

(87* square meters)

— 2 Deluxe Suites Presidential

(60 square meters)

— 1 Grand Presidential Suite (4 bedrooms)

(145* square meters)

— 20 one or two bedroom Garden Villas

(91–212* square meters)

* Room size does not include balconies and terraces.

All ground floor suites will have direct access to swim-up pools. Each of the suites and villas will have a full

view of the sea. Royal Service guests will furthermore have access to restaurants, bars, lounges, fitness

equipment, spas and outside massage areas.

Family Concierge

The Family Concierge will be the family orientated part of the Paradisus Papagayo Bay Resort & Luxury

Villas. The accommodations will be designed to satisfy the needs of the modern family.

— 166 Junior Suites Deluxe

(47* square meters)

— 34 Suites Deluxe

(87* square meters)

— 33 Suites Premium

(93* square meters)

— 6 Handicapped Junior Suites Deluxe

(47* square meters)

— 1 Bridal Suites

(93* square meters)

— 2 Deluxe Suites Presidential

(88* square meters)

— 1 Presidential Suite

(194* square meters)

* Room size does not include balconies and terraces.

All ground floor suites will have direct access to swim-up pools. Each of the suites will have a full view of

the sea. Family Concierge guests will furthermore have access to restaurants, bars, and lounges. The

intended Onyx Night Club and the Gabi Club will be located near the beach.

The Paradisus Papagayo Bay Resort & Luxury Villa’s will feature other highlights including:

— over 65 private, swim up and resort pools including the world’s second largest Infinity Pool all

within idyllic landscaped grounds

— a wedding chapel with a stunning ocean view

— rain forest walkways that permit guests to experience the flora and fauna of the rain forest

— a multipurpose convention hall with over 2,000 square meters of space that can be utilized as a

whole or divided to create smaller meeting rooms

— a full service spa committed to providing for the wellbeing of our guests. The spa will be located

with a 180 degree sea view within approximately 1,000 square meters that will include 12 large

treatment rooms, a hairdresser, relaxation areas, pools, saunas and steam rooms

— the 20 private villas will be located within the Royal Service area of the resort. The present

intention being that these villas will be sold to individuals who will then let them back to the resort

when not occupied by the owners.

A comprehensive market analysis undertaken by HVS, an international hotel consulting and valuation firm,

concluded in September of 2013, that the Paradisus Papagayo Bay Resort & Luxury Villa’s on stabilization

of operations would operate as a profitable business, with net income of 35.3% of total revenue.

Management

Overall project development is lead by Josef Mettler, our chief executive officer, Charles Fessel, project

director Paradisus Papagayo Bay Resort & Luxury Villas, Hans Rigendinger, chairman of the board and

chief operating officer of SunVesta AG and Ernst Rosenberger, the Company’s corporate controller. The

lead architect is Ossenbach, Pendones & Bonilla, one of Costa Rica’s largest architectural offices with over

45 architects and designers. Civil engineering services are provided by DEHC Engineers and structural

engineering services by IEAC. Landscape architects are TPA and interior designers are led by Concreta Srl.

Resort management is to be provided by Melía Hotels International (“Melía”). “Paradisus” is Melía’s five

star all-inclusive luxury hotel brand that is well recognized in the hospitality industry around the world.

Melía was founded in 1956 in Palma de Mallorca, Spain and is today one of the world’s largest resort hotel

chains, as well as Spain’s leading hotel chain for business or leisure. The company currently offers more

than 300 hotels in 26 countries over four continents under its Gran Sol Melía, Sol Melía, ME by Sol Melía,

Innside by Sol Melía, Tryp, Sol Melía, Sol Melía Vacation Club, and Paradisus brands. The Paradisus brand

represents all-inclusive luxury resorts with hotels in Mexico and the Dominican Republic, including:

Paradisus Palma Real (Dominican Republic)

— 496 oversized suites

— numerous pools and whirlpools, five tennis courts, casino, beach, golf, meeting space, five

restaurants, two buffets, nine bars, etc.

The Reserve at Palma Real (Dominican Republic)

— 184 rooms “Residential Concierge Suites”

— private beach, swimming pools, 7800 sq ft “Kids Zone”, 24,000 sq. ft. Yhi Spa, three

restaurants, two buffets, two bars, etc.

Paradisus Punta Cana (Dominican Republic)

— 884 oversized suites (500 - 1000+ sq ft)

— seven pools, four tennis courts, casino, beach, “Kids Zone”, Yhi Spa and fitness, meeting

rooms, 12 restaurants, eight bars, etc.

The Reserve at Punta Cana (Dominican Republic)

— 132 residential suites

— pools (with partially underwater pool beds, water features, etc), private beach, spa, cabanas,

etc.

La Esmeralda at Playa del Carmen

— 512 suites including 56 swim-up suites

— spas, meeting spaces, 11 restaurants, 10 bars, etc. (partially shared with La Perla at Playa del

Carmen).

La Perla at Playa del Carmen

— 394 suites including 60 swim-up suites

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

— spas, meeting spaces, 11 restaurants, 10 bars, etc. (partially shared with La Esmeralda at

Playa del Carmen)

Our Paradisus Papagayo Bay Resort & Luxury Villas development is intended to replace Paradisus Resorts’

former Paradisus Playa Conchal in Guanacaste, Costa Rica which property was operated by Melía until

April 30, 2011. Our project is part of Melía’s master expansion plan, which includes the opening of two

resorts in Playa del Carmen, Mexico. Melía aims to solidify Paradisus Resorts as a leader in the luxury

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

Bay Resort & Luxury Villas project.

Additional Concession Properties

On April 20, 2012, SunVesta AG entered into an agreement with Meridian IBG (“Meridian”) to purchase

two additional concession properties in Polo Papagayo, Gunacaste. The additional concession properties

with a total surface of approximately 230,000 square metres, were to be purchased for a total of

$22,895,806 in addition to equity in the Polo Papagayo concession properties and the Paradisus Papagayo

Bay Resort & Luxury Villas. The agreement was amended on November 13, 2012, to eliminate the agreed

equity payments, to decrease the total purchase price to $17,200,000 and to provide that all payments for the

purchase were refundable in the event SunVesta AG determined not to complete the purchase. On May 7,

2013, the parties entered into a new agreement to replace the original amended agreement that included the

following terms and conditions:

— New purchase price of $17,500,000 of which amount $16,130,000 outstanding as of the date

of the new agreement.

— Payment of $8,000,000 to be paid directly by SunVesta AG to third party.

— Payment of the $8,130,000 to be paid by SunVesta to Meridian.

— Payments to be made according to a fixed schedule.

Third Party Payment Schedule

— $300,000 on May 4, 2013, which was paid on May 3, 2013 and is non-refundable.

— $1,000,000 on June 30, 2013, which is refundable, $700,000 of which amount was paid on

October 29, 2013. The remaining $300,000 is unpaid.

— $1,000,000 on July 31, 2013, which is refundable and unpaid.

— $1,000,000 on August 31, 2013, which is refundable and unpaid.

— $1,500,000 on September 30, 2013, which is refundable and unpaid.

— $1,500,000 on October 31, 2013, which is refundable and unpaid.

— $1,700,000 on November 30, 2013, which is refundable and unpaid.

$8,000,000 in total to be paid to Third Party

Meridian Payment Schedule

— $1,000,000 on January 31, 2014, which is non-refundable and unpaid

— $1,000,000 on February 28, 2014, which is non-refundable and unpaid

— $1,000,000 on March 31, 2014, which is non-refundable and unpaid.

— $1,000,000 on April 30, 2014, which is non-refundable.

— $1,000,000 on May 31, 2014, which is non-refundable.

— $1,000,000 on June 30, 2014, which is non-refundable.

— $1,000,000 on July 31, 2014, which is non-refundable.

— $1,130,000 on August 31, 2014, which is non-refundable

$8,130,000 in total to be paid to Meridian

SunVesta AG paid down-payments on the purchase of these properties of $2,369,816 as of December 31,

2013. Subsequent to the annual period end, SunVesta AG has not paid any further amounts against the

purchase price for the additional properties and is delinquent in its obligations to Meridian. SunVesta AG is

in negotiations with Meridian to re-design and re-schedule payment of the purchase agreement.

Hotel and Entertainment Complex (Atlanta, Georgia, U.S.A)

On September 19, 2012, SunVesta AG entered into an agreement, as amended, with Fundus America

(Atlanta) Limited Partnership (“Fundus) to purchase a hotel and entertainment complex in Atlanta, Georgia

(United States of America). The entire purchase amount of $26 million for the assets had no firm financing

commitment. Additionally, an additional amount of approximately $18 million for renovations would need

to be invested in the hotel and entertainment complex. SunVesta AG pursued negotiations with various

parties to procure a financing package to purchase and renovate the project but was unable to conclude the

transaction. On October 15, 2013, the fifth amendment expired, causing the Company to fall into default.

Therefore, those amounts paid as non-refundable deposits and taxes related to the property of total

$1,573,957 were expensed on October 16, 2013. On October 28, 2013, SunVesta AG entered into a sixth

amendment to the original purchase agreement with Fundus that required it to pay $2,500,000 by

November 12, 2013, as an initial installment against the purchase price and to pay the remaining

$22,500,000, taking into effect the $1,000,000 paid in deposits, by January 31, 2014. Since November 12,

2013, SunVesta AG was also obligated to pay six percent (6%) interest on the unpaid initial installment of

$2,500,000 to be paid with the remainder of the purchase price on January 31, 2014. Subsequent to

December 31, 2013, SunVesta AG decided not to continue with the acquisition due to the changes in the

conditions related to the acquisition and an inability to adjust a financing package to the new conditions.

The parties have since entered into a settlement agreement in order to avoid the potential for litigation.

Finance

The anticipated completion of the Paradisus Papagayo Bay Resort & Luxury Villas in the fourth quarter of

2015 will require a net investment of approximately $171 million (excluding non-recuperated overhead

expenses), of which approximately $44 million has been expended as of December 31, 2013. We expect to

realize a minimum of $127 million in new funding over the next twelve months. New funding over the next

twelve months is expected to be raised from a construction loan (see paragraph regarding Banco Nacional

hereinafter), debt financing through bonds, shareholder loans and, if necessary, the guaranty agreement in

place as described herein.

Bonds

SunVesta AG, has three bond issues outstanding as of year-end, denominated in either EUR (€) or Swiss

Francs (CHF).

EUR (€) Bonds

SunVesta AG initiated the offering of unsecured EUR bonds on December 1, 2010, of up to €25,000,000 in

units of €1,000 that bore interest at 8.25% per annum payable each November 30 over a three year term that

expired on November 30, 2013. SunVesta AG raised $792,740 for the year ended December 31, 2013 and

$4,015,549 for the year ended December 31, 2012, for a cumulative total raise of $15,009,447 as of

December 31, 2013, in connection with this offering. SunVesta AG was unable to repay $5,786,248 of that

amount due for repayment on November 30, 2013 as of December 31, 2013. As of the filing date of this

report, the amount that remained due on the first EUR bond offering as of the end of the annual

period has been paid in full.

SunVesta AG initiated a second offering of unsecured EUR bonds on December 2, 2013, of up to

€15,000,000 in units of €10,000 that bear interest at 7.25% per annum payable each December 1 over a

three year term that expires on December 2, 2016. SunVesta AG raised $6,603,097 for the year ended

December 31, 2013, and has raised a cumulative amount of $8,138,410 as of the date of this report.

Swiss Francs (CHF) Bonds

SunVesta AG initiated the offering of CHF bonds on September 1, 2011, of up to CHF 15,000,000 in units

of CHF 50,000 that bear interest at 7.25% per annum payable each August 31 over a four year term that

expires on August 31, 2015. SunVesta AG raised $2,650,882 for the year ended December 31, 2013 and

$3,191,888 for the year ended December 31, 2012, for a total cumulative raise of $10,031,640 as of

December 31, 2013, and has raised a cumulative net amount of $11,315,500 as of the date of this report.

Aires International Investment, Inc.

On July 27, 2011, SunVesta AG entered into a line of credit agreement with Aires International Investment,

Inc. (“Aires”), a company owned by a board member of the Company. The agreement was amended on

May 11, 2012, and on June 21, 2012. The amended agreement includes the following provisions:

— Aires grants SunVesta AG a terminable, interest bearing and non-secured line of credit up to a

maximum amount of CHF 10,000,000.

— the conversion right to convert the balance of the line of credit into a 10% ownership interest

in Rich Land was cancelled.

— once the maximum amount has been drawn down, Aires has the right to convert that amount

into 20% shares of the Company (instead of Richland).

— the repayment of the line of credit is due on September 30, 2015, until such time Aires can

exercise its conversion option subject to the subordination noted in the following.

— CHF 10,000,000 of this line of credit is subordinated in favour of other creditors.

— the interest rate is 7.25% and interest is due on September 30 of each year.

On October 31, 2013, SunVesta AG and Aires signed a new loan agreement that includes the following

main clauses:

— All existing loan agreements, including amendments, between SunVesta AG and Aires were

cancelled and superseded by the new agreement.

— The loan shall not be due before December 31, 2015, but at the latest on December 31, 2020.

— Both parties have the option, despite of the scheduled repayment dates, to cancel the loan

agreement with a notice period of 90 days, and in the case of SunVesta AG full repayment.

— The complete loan amount including further additions is subordinated.

— Yearly interest on the loan is 7.25% that will be credited to the loan account.

Furthermore, SunVesta AG, Aires and the Company entered into an assignment of debt agreement, dated

effective December 31, 2012, whereby the parties agreed that SunVesta AG’s debt to Aires as of December

31, 2012, in the amount of CHF 10,044,370, including accrued interest, be assumed by the Company with

the following conditions:

— The principal amount together with any interest shall be payable on December 31, 2015.

— The interest rate is 7.25%

— Any amount of principal or interest which is not paid when due shall bear interest at the rate

of 10% per year from the due date until paid

The Company has borrowed on a consolidated basis approximately $33,410,000 from Aires as of

December 31, 2013, and $10,407,764 from Aires as of December 31, 2012.

Dr. Max Rössler

During 2012 up to the current year end period, SunVesta AG entered into a series of interest free loans with

Dr. Max Rössler, a director of the Company and a principal of Aires. The loans were originally due either

on predetermined dates or on demand, repayable in cash or in a fixed number of shares of certain publically

traded entities, as follows:

Date

Amount

Due Date

Public Entity

June 7, 2012

$1,810,000

10,000

May 30, 2013*

Intershop Holding AG

*Debt obligation transferred to Aires on April 19, 2013, now governed by the terms and conditions of the loan

agreement with Aires dated October 31, 2013.

Date

Amount

Due Date

Public Entity

July 24, 2012

$470,000

10,000

May 30, 2014

Schindler Holding AG

August 8, 2012 $400,000

700

May 30, 2014

Zug Estates Holding AG

March 1, 2013 $50,000

52,500

May 30, 2014

Datewyler Holding AG

Dia S.A.

On March 8, 2013, SunVesta AG entered into an interest free loan agreement with DIA S.A. in the amount

of $2,000,000 payable on March 8, 2014, in connection with the purchase of land adjacent to the Paradisus

Papagayo Bay Resort & Luxury Villas from Altos held in the name of Altos del Risco S.A. The terms of the

loan agreement were amended on February 19, 2014, to extend the due date for said payable until February

of 2015.

Guaranty Agreement

During the year ended December 31, 2013, the Company borrowed $1,065,693 at 3% interest from Josef

Mettler pursuant to the terms and conditions of the guaranty agreement dated July 16, 2012. The amount

borrowed has decreased to $584,604 as of the filing date of this report.

Banco Nacional

Subsequent to year end, on March 13, 2014, the Company received conditional approval for a credit facility

of $50,000,000 from Banco Nacional, San José, Costa Rica, subject to the fulfillment of certain legal and

financial conditions, including but not limited to, increasing the capitalization of AdR to a minimum of

$10,000,000. The Company expects to fulfill all these conditions. The credit facility is expected to be part

of a syndicated loan in the aggregate amount of $100,000,000 which amount may be allocated in equal

shares between Banco de Costa Rica and Banco Nacional. However, we have not received notice of Banco

Costa Rica’s conditional participation. Should we meet the conditions of the loan and the anticipated credit

facility made available to us, we do not expect to be able to draw against same before the middle of 2014.

Timeline

Our expected timeline for developing the Paradisus Papagayo Bay Resort & Luxury Villas is as follows:

— complete architectural plans in the 2^nd quarter of 2014

— secure construction loan in the 2^nd quarter of 2014

— commence onsite vertical construction in the 2^nd quarter of 2014

— complete construction in the 3^rd quarter of 2015

— handover to Melía in the 4^th quarter of 2015

Competition

Three key factors have been taken into consideration when defining our hotel competitors in relation to the

Paradisus Papagayo Bay Resort & Luxury Villas:

— the proximity of competitors to our location in Guanacaste Province, Costa Rica

— the consumption habits of prospective clientele

— the ability to compete based on product similarity in relation to service standards, facilities,

the availability of equipment and the number or variety of services offered.

Based on our criteria we have determined that our prospective competitors are those characterized as 5 star

holiday resorts in geographic proximity to our planned location.

Luxury Hotel Resorts

Our primary competition in Guanacaste Province consists of nine 5-star establishments which include the

Four Seasons Peninsula Papagayo, The Chocolate Hotel & Five Star Hostel, Sol Papagayo Resort Culebra,

Hilton Papagayo Costa Rica Resort & Spa, Casa Conde del Mar Hotel Culebra, Hilton Garden Inn Liberia

Airport, the Westin Hotel, and the J.W. Marriott Guanacaste Resort & Spa. The closest direct competition

for our Guanacaste property will be the Four Seasons Hotel. All of our primary competitive establishments

have common characteristics with a standard vacation resort format with much more equipment and many

more facilities to offer than hotels based in a city such as:

— several modules/ lodging buildings around central services

— ample water areas with outdoor swimming pools, areas for hammocks and sun bathing

— children and entertainment activity areas

— restaurant pool areas with bars and service throughout the day

— large lounges for breakfast, lunch and dinner services

— alternative gastronomic or theme restaurants

— sports areas (basketball court, tennis courts, golf course, soccer field)

— Fitness Center, Wellness Centre and Spa Areas

Our competitors are managed by leading international chains or experienced domestic companies.

Despite what might be construed as obvious obstacles to entry, including robust competition within the

hospitality industry in Guanacaste Province, we believe that our development of the Paradisus Papagayo

Bay Resort & Luxury Villas will be successful based principally on the following factors:

— the beach front location of the development

— environmental integrity in project development and operation

— the reputation of the Paradisus brand in the region and internationally

Further, we believe that we have certain distinctive competitive advantages over all or many of our

competitors including:

— location in one of the most appealing areas worldwide

— environmental integrity in project development and operation

— superior project development and management agreements that maximize resources and

broaden market penetration

We believe that all of the factors detailed above, in combination with the dedication of our personnel and

partners, will enable us to be competitive in developing the Paradisus Papagayo Bay Resort & Luxury

Villas.

Marketability

Costa Rican Tourism

Costa Rica has a long track record of political stability along with a well-established outward-looking

growth model. The government has adopted a proactive policy of fostering higher-end beach resort tourism,

mainly through fiscal incentives for investors. As such, Costa Rica is benefiting from a burgeoning hotel

development pipeline emerging as a regional hotel investment hot-spot, boasting a burgeoning upscale and

luxury hotel development pipeline which still provides much fertile ground for real estate investors and

developers to expand their search for profitable growth. Foreign tourism investment is projected to continue

this upward trend over the next several years as demand outpaces the existing lodging and tourism services

supply.

Costa Rica stands as the most visited nation in the Central American region. The Costa Rican Tourism

Institute (“TI”) is responsible for collecting information on the number and economic impact of tourists that

visit Costa Rica. TI also collects information related to hotel rooms and the country of origin for tourists

arriving in Costa Rica. Records produced by TI detail that the number of tourists visiting Costa Rica

surpassed 2 million in 2008, and that tourist-related income reached US$2.1 billion that year. Due to the

global economic crisis, TI recorded that international arrivals began to fall beginning in August 2008, as the

number of U.S. citizens visiting the country shrank, which market segment represented 54% of all foreign

tourists visiting Costa Rica. The combined effect of the economic crisis and the 2009 flu pandemic resulted

in reduction of tourist arrivals in 2009 to 1.9 million visitors, an 8 percent reduction as compared to 2008.

However, in 2013 TI determined that the number of visitors rose to a historical record of 2.34 million,

which number represented a 6.9% increase over 2012. The continuing increase in visitors to Costa Rica

over the period indicates a mature demand market attractor with very positive worldwide destination

positioning.

The 2013 Travel and Tourism Competitiveness Index (TTCI), indicates that Costa Rica reached the 47th

place in the world ranking, classified as the second most competitive among Latin American countries after

Mexico, and ranking sixth in the Americas. Just considering the sub index measuring human, cultural, and

natural resources, Costa Rica ranks in the 38th place at a worldwide level, and 7th when considering just the

natural resources criteria. The TTCI report also notes Costa Rica's main weaknesses, limited number of

cultural sites (109th), time required to start a business (130th), poor condition of ground transport

infrastructure (100th), and poor quality of port infrastructure (136th).

TI has determined that the most relevant origin markets in terms of demand are the United States, Canada

and Mexico which generated approximately 48% of all tourists followed by Central American countries

including Guatemala, El Salvador, Panama and Nicaragua, which generated approximately 31% of the

tourists arriving in Costa Rica in 2011. According to official data, the United States remains the largest

source of tourists to Costa Rica with a total of 929,402 in 2013, representing 40% of all visits. Tourists from

European countries represented approximately 14% all tourists in 2011 led by Spain, Germany, France,

Holland and the United Kingdom.

TI and the Directorate General of Immigration (DGME) reported that in the first two months of 2014 there

were 545,117 tourists through all ports, an increase of 36,110 from January and February of 2013. Air

arrivals were the most increased with 351,777 arrivals in the first two months of 2014 compared to the same

period in 2013, an increase of 9%, representing the greatest increase over the last four years. The increase

in airport arrivals is directly related to the government’s policy to attract new airlines, including Spirit

Airlines, Frontier Airlines, JetBlue, Interjet, Aeromexico, United Airlines and Delta Airlines. Most visitors

to Costa Rica arrive through the airport in San Jose, Costa Rica, during three peak seasons from December

to January, March to April and June through August. Recently however, there has been an increase in the

number of visitors received through the country’s second airport in Liberia, Guanacaste. Entering the

country through Liberia airport enables weary travelers to be on the Guanacaste beaches within an hour of

arrival.

TI has also reported that medical tourism in 2011 generated $388 million from some 48,000 foreigners, of

which 82% came from the United States, 11% from Canada, 3% from Central America and the Caribbean

and 1% from Europe and Asia. Proximity to North America is particularly attractive to tourists arriving

from the United States who seek out quality in medical services and lower costs. Costa Rica estimates that

medical tourism offers from 30% to 50% in savings as compared to US costs for quality dental and cosmetic

surgery services, and on average, up to 70% in lower costs for nonsurgical procedures and tests. IT states

that its goal in 2014 is to attract 100,000 health tourists.

When it comes to facilitating hospitality in Costa Rica, TI expects that 1,309 new rooms will be added to

existing inventory by November 2014 to service the need and forecasts strong growth in the hotel sector

over the next two years. IT also notes that seven major hotel projects are currently under way in Costa Rica

and that positive signs of growth in the vacation rentals sector in Guanacaste province. However, hotel

records in Guanacaste, as detailed by TI statistics, evidence that the number of hotels in the 4 to 5 star

category has not increased since 2008 while the number of 4 or 5 star category rooms has increased from

2,728 rooms in 2008 to 3,415 rooms in 2011. The fact that the number of rooms on Guanacaste has

increased even though the number of hotels in our category has remained the same over the past three years

indicates a building demand for new facilities that fall within the 4 to 5 star category and the attendant

additional rooms that new resort construction will bring to the area.

Geography

Costa Rica’s Guanacaste Province is bound in the east by a group of vegetated volcanoes and the west by

beaches on the Pacific Ocean. The province contains heavily forested areas and seven national parks, and

includes the Area de Conservación Guanacaste World Heritage Site. Guanacaste is the northern-most

province of Costa Rica, with the Papagayo Bay a 40-minute flight and one-hour car transfer from the

capital’s airport. Tourism has emerged as the most lucrative revenue source in the province. Tourists to the

Guanacaste Province of Costa Rica are most often motivated by a desire for favorable weather and beach

conditions. Active tourism – those activities including canopying, trekking, visiting volcanoes and flora or

fauna watching – are secondary considerations.

We believe that the Paradisus Papagayo Bay Resort & Luxury Villas will be well positioned to fill that

demand for additional hospitality properties with a project that should be highly marketable.

Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements and Labor Contracts

The Company currently operates under and holds no patents, trademarks, licenses, franchises, or

concessions other than having registered its “SunVesta” trademark in various countries.

The Company is not subject to any labor contracts.

Governmental and Environmental Regulation

Our operations are subject to a variety of national, federal, provincial and local laws, rules and regulations

relating to, among other things, worker safety and the use, storage, discharge and disposal of

environmentally sensitive materials. We believe that we are in compliance in all material respects with all

laws, rules, regulations and requirements that affect our business. Further, we believe that compliance with

such laws, rules, regulations and requirements do not impose a material impediment on our ability to

conduct business.

Costa Rican National Environmental Office

The Costa Rican National Environmental Office (SETENA) created by the Organic Environmental Law is

tasked with administering the process of reviewing and evaluating environmental impact considerations.

Local municipal governments often require a ruling from SETENA before issuing building permits. Any

larger project in Costa Rica must apply for an Environmental Impact Statement from SETENA before

development is permitted. Delays associated with this process would have a negative impact on the

Company’s project in Guanacaste Province.

Costa Rican Sustainable Development

Costa Rica is considered as being in the forefront of implementing environmental policies. The country’s

national strategies for sustainable development are a broad matrix of policies requiring eco-friendly

practices, such as Agenda 21. The Agenda 21 process as developed by the 1992 and 2002 Earth Summits is

defined as a participative planning tool in which sectors in the government and civil society concertedly

determine the course to be taken by their communities, regions, or countries in pursuit of sustainable

development. This process and other Costa Rican sustainable development policies could delay or increase

the cost of the development of the property.

Climate Change Legislation and Greenhouse Gas Regulation

Many studies over the past couple decades have indicated that emissions of certain gases contribute to

warming of the Earth’s atmosphere. In response to these studies, many nations agreed to limit emissions of

“greenhouse gases” or “GHGs” pursuant to the United Nations Framework Convention on Climate Change,

and the “Kyoto Protocol” to which Costa Rica is a signatory. Greenhouse gas legislation in Costa Rica

could have a material adverse effect on our business, financial condition, and results of operations.

Employees

The Company is a development stage company and currently has four employees. Our management uses

consultants, attorneys, and accountants to assist in the conduct of our business.

ITEM 1A.

RISK FACTORS

Not required of smaller reporting companies.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2.

PROPERTIES

Costa Rican Properties

The Company owns approximately 20 hectares of undeveloped prime land in Guanacaste Province, Costa

Rica, approximately 12 hectares of which was purchased as a separate parcel. The properties are contiguous

and comprise the on which the Company is in the process of developing the Paradisus Papagayo Bay Resort

& Luxury Villas. The purchase of the additional 12 hectares was based on an agreement dated March 22,

2010 with DIA S.A. of San Jose, Costa Rica. The purchase price of $12,700,000 was paid on terms, of

which $10,700,000 had been paid against the purchase price of the property as of December 31, 2013, with

the remainder of $2,000,000 converted into an interest free loan due by February of 2015.

On April 20, 2012, SunVesta AG entered into an agreement with Meridian to purchase two additional

concession properties in Polo Papagayo, Gunacaste for$ 22,895,806 in addition to equity in the Polo

Papagayo concession properties and the Paradisus Papagayo Bay Resort & Luxury Villas. The additional

concession properties comprise a total surface area of approximately 230,000 square meters. The agreement

was amended on November 13, 2012, to eliminate the agreed equity payments, to decrease the total

purchase price to $17,200,000 and to provide that all payments for the purchase were refundable in the

event SunVesta AG determined not to complete the purchase. On May 7, 2013, the parties entered into a

new agreement that replaced the original contract, with a new total purchase price of $17,500,000 and a

remaining due of $16,130,000 as of the date of the agreement. The new agreement includes a payment plan

for the remainder due to be divided amongst Meridian and a third party. SunVesta AG had paid

down-payments on the purchase of these properties of $2,369,816 as of December 31, 2013. Subsequent to

the annual period end, SunVesta AG has not paid any further amounts against the purchase price for the

additional properties and is delinquent in its obligations to Meridian. SunVesta AG is in negotiations with

Meridian to re-design and re-schedule payment of the purchase agreement.

Executive Offices

We maintain our offices at Seestrasse 97, Oberrieden Switzerland CH-8942 on a leasehold basis with an

annual rental expense of $130,000 per annum through December 31, 2017.

The Company recognized lease expenses of $130,000 and $125,000 for the years ended December 31, 2013

and 2013, respectively, for the use of these executive offices. We believe that we have sufficient office

space for the foreseeable future in order to pursue the completion of the project described herein.

ITEM 3.

LEGAL PROCEEDINGS

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.

MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS,

AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s common stock is quoted on the Over the Counter Pink Sheets, a service maintained by

OTC Link under the symbol “SVSA.” Trading in the common stock over-the-counter market has been

limited and sporadic and the quotations set forth below are not necessarily indicative of actual market

conditions. These prices reflect inter-dealer prices without retail mark-up, mark-down, or commission, and

may not necessarily reflect actual transactions. The high and low bid prices for the common stock for each

quarter of the years ended December 31, 2013 and 2012 are as follows:

Year

Quarter Ended

High

Low

2013

December 31

$0.12

$0.10

September 30

$0.30

$0.05

June 30

$0.10

$0.05

March 31

$0.10

$0.05

2012

December 31

$0.15

$0.01

September 30

$0.20

$0.03

June 30

$0.30

$0.09

March 31

$0.30

$0.03

Capital Stock

The following is a summary of the material terms of the Company’s capital stock. This summary is subject

to and qualified by our articles of incorporation and bylaws.

Common Stock

As of December 31, 2013, there were 84 shareholders of record holding a total of 83,541,445 shares of fully

paid and non-assessable common stock of the 200,000,000 shares of common stock, par value $0.01,

authorized. The board of directors believes that the number of beneficial owners is greater than the number

of record holders because a portion of our outstanding common stock is held in broker “street names” for

the benefit of individual investors. The holders of the common stock are entitled to one vote for each share

held of record on all matters submitted to a vote of stockholders. Holders of the common stock have no

preemptive rights and no right to convert their common stock into any other securities. There are no

redemption or sinking fund provisions applicable to the common stock.

Preferred Stock

As of December 31, 2013, there were no shares issued and outstanding of the 50,000,000 shares of

preferred stock authorized. The par value of the preferred stock is $0.01 per share. Our preferred stock may

have such rights, preferences and designations and may be issued in such series as determined by the board

of directors.

Stock Options

As of December 31, 2013, we have granted 32,000,000 outstanding stock options, pursuant to the 2013

SunVesta Stock Option Plan, to purchase shares of our common stock at an exercise price of $0.05 that vest

according to the realization of specific milestones, none of which have vested as of year-end.

Warrants

As of December 31, 2013, we have no outstanding warrants to purchase shares of our common stock.

Dividends

We have not declared any cash dividends since inception and do not anticipate paying any dividends in the

near future. The payment of dividends is within the discretion of the board of directors and will depend on

our earnings, capital requirements, financial condition, and other relevant factors. There are no restrictions

that currently limit our ability to pay dividends on its common stock other than those generally imposed by

applicable state law.

Transfer Agent and Registrar

Our transfer agent and registrar is Standard Register & Company, Inc., located at 12528 South 1840 East,

Draper, Utah 84020 and their phone number is (801) 571-8844.

Purchases of Equity Securities made by the Issuer and Affiliated Purchasers

None.

Recent Sales of Unregistered Securities

None.

ITEM 6.

SELECTED FINANCIAL DATA

Not required.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

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

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

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

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

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

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

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

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

financial statements and notes thereto included in this current report. Our fiscal year end is December 31.

Discussion and Analysis

Our plan of operation through July of 2015 is to complete the Paradisus Papagayo Bay Resort & Luxury

Villas project that will require a total net investment of approximately $171 million (excluding

non-recuperated overhead expenses). We expect to realize a minimum of $70 million in new funding over

the next twelve months, though our actual financing requirements may be adjusted to suit that amount

realized, and an additional $57 million in funding by the time the development is completed. New funding

over the next twelve months is expected to be raised from debt financing through bonds, shareholder loans

and the guaranty agreement in place as described herein.

Results of Operations

During the year ended December 31, 2013, our operations were focused on (i) completing the purchase of

an additional 12 hectares contiguous with our existing property in Guanacaste Province, Costa Rica in

connection with the development of the Paradisus Papagayo Bay Resort & Luxury Villas;(ii) appointing

Mr. Rigendinger and Mr. Rössler to the board of directors and engaging Mr. Rigendinger as chief operating

officer; (iii) obtaining building permits for the development of the Paradisus Papagayo Bay Resort &

Luxury Villas property; (iv) commencing earth work excavations on the Paradisus Papagayo Bay Resort &

Luxury Villas property; (v) discussions with prospective project development partners; (vi) pursuing

additional debt and equity financing arrangements including a new Euro bond offering through SunVesta

AG in Europe and procuring loans from related parties; and (vii) repaying a portion of the Euro bond

outstanding.

The Company has been funded since inception from debt or equity placements and by shareholders or

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

Costa Rican property including the purchase of the land and general and administrative costs.

Comprehensive Losses

For the period from the date of inception of development stage on January 1, 2005, until December 31,

2013, the Company had incurred comprehensive losses of $41,907,111.

Comprehensive losses for the year ended December 31, 2013 were $12,039,166 as compared to $7,339,214

for the year ended December 31, 2012. The increase in comprehensive losses over the comparative twelve

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

$8,323,503, from $4,467,015, of which significant components include the increase in personnel costs of

$1,864,845 (mainly due to stock compensation), the complete write off of those expenses associated with

the hotel and resort project in Atlanta, Georgia of $1,573,957, the increase in consulting expenses of

$590,842, offset by a decrease of in other operating expenses of $356,354. Other contributing factors to the

increase in comprehensive losses over the comparative twelve month periods include the increase in

interest expense to $2,589,556 from $1,511,137, due to interest accruing on bonds and notes, the loss on

currency exchange difference of $844,394 from a gain of $206,821, the decrease in interest income to

$44,383 from $101,086, the increase in other expenses to $91,784 from $35,435 and the increase in foreign

currency translation loss to $1,100,506 from $1,064,531, which change is due to volatility between Swiss

Francs and US Dollars and the related foreign currency translation difference on intercompany loans which

is classified as a permanent investment and the translation of the balance sheet and results of operations of

our foreign subsidiaries, offset by a gain of $1,000,000 related to the release of an accrual for a penalty that

was to be paid to Melía.

We did not generate revenue during this period and we expect to continue to incur losses through the year

ended December 31, 2014.

Income Tax Expense (Benefit)

The Company has a prospective income tax benefit resulting from a net operating loss carry-forward and

startup costs that will offset future operating profits.

Capital Expenditures

The Company expended a significant amount on capital expenditures for the period from January 1, 2005 to

December 31, 2013, in connection with the purchase of land that includes a hotel concession in Costa Rica

and expects to incur future cash outflows on capital expenditure as discussed in the "Liquidity and Capital

Resources" and the "Going Concern" paragraphs below.

Liquidity and Capital Resources

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

liquidity, capital resources, and stockholders’ equity.

As of December 31, 2013, we had a working capital deficit of $20,196,341. We had current assets of

$650,927 and total assets of $50,430,640. Our current assets consisted of $629,673 in cash, and $21,254 in

other assets. Our total assets consisted of current assets and property and equipment of $43,372,214,

deposits related to construction work of $650,685 net debt issuance costs of $1,689,023, down payments for

property and equipment of $2,369,816 and restricted cash of $1,697,974.

As of December 31, 2013, we had current liabilities of $20,847,269 and total liabilities of $69,692,823. Our

current liabilities consisted of $7,063,071 in accounts payable, $3,276,506 in accrued expenses, $2,000,000

in a note payable, $2,721,445 in notes payable to related parties and $5,786,248 in Euro bond debt. Our

non-current liabilities consisted of new Euro bond debt of $6,757,065, CHF bond debt of $8,558,443, notes

payable to related parties of $33,409,095, other long term debts of $30,426 and pension liabilities of

$90,524. Total stockholders’ deficit in the Company was $19,262,182 at December 31, 2013.

For the period from January 1, 2005 to December 31, 2013, our net cash used in operating activities was

$18,866,587.

Net cash used in operating activities for the twelve months ended December 31, 2013, was $1,348,660 as

compared to $4,648,535 for the twelve months ended December 31, 2012, which differences reflect

changes in working capital. Net cash used in operating activities in the current twelve month period is

primarily comprised of general and administrative expenses that include but are not limited to, personnel

costs, accounting fees, consulting expenses, travel expenses, rental costs, professional fees, such as for

auditing purposes and legal consultation and changes in other assets, accounts payable and accrued

expenses. Net cash used in operating activities in the prior twelve month period can also be primarily

attributed to general and administrative expenses and changes in other assets, accounts payable and accrued

expenses.

We expect negative net cash in operating activities until such time as net losses transition to net income

which transition is not anticipated until we complete the Paradisus Papagayo Bay Resort & Luxury Villas

project in 2015.

For the period from January 1, 2005 to December 31, 2013, our net cash used in investing activities was

$47,715,195.

Net cash used in investing activities for the twelve months ended December 31, 2013, was $19,203,791 as

compared to $13,190,950 for the twelve months ended December 31, 2012. Net cash used in investing

activities in the current twelve month period is comprised of other receivables from related parties, the

purchase of property and equipment, deposits related to construction, down payments for property and

equipment, and restricted cash. Net cash used in investing activities in the prior twelve month period is

comprised of other receivables from related parties, the purchase of property and equipment, and down

payments for property and equipment, offset by short term investments.

We expect negative net cash in investing activities while in the process of developing the Paradisus

Papagayo Bay Resort & Luxury Villas and looking to additional projects.

For the period January 1, 2005 to December 31, 2013, our net cash provided by financing activities was

$67,907,230. Net cash provided by financing activities for the twelve months ended December 31, 2013,

was $20,859,541 as compared to $17,603,793 for the year ended December 31, 2012. Net cash provided by

financing activities in the current twelve month period is comprised of proceeds from SunVesta AG’s bond

issuance and advances from related parties, offset by the repayment of bonds and the payment of debt

issuance costs. Net cash provided by financing activities in the prior twelve month period ended December

31, 2012, was comprised of proceeds from notes payable related parties, and proceeds from bond issuances,

offset by the repayment of bonds, and debt issuance costs.

We expect net cash flow provided by financing activities from the debt and equity infusions necessary to

complete the development of the Paradisus Papagayo Bay Resort & Luxury Villas.

Management believes that our cash on hand, ongoing proceeds from our new Euro bond offering, short term

related party loans and the assurance of the guaranty agreement as described in the going concern paragraph

below are sufficient for us to conduct operations over the next twelve months.

We had no lines of credit or other bank financing arrangements as of December 31, 2013.

We have commitments for executed purchase orders and agreements in the amount of $57 million as of

December 31, 2013, in connection with the development of the Paradisus Papagayo Bay Resort & Luxury

Villas, which commitments are included in the required estimated financing of $185 million to complete the

project. Most material commitments were not contractually agreed as of the end of the period.

The fifth addendum (dated September 6, 2013) to the management agreement with Melía stipulates that

should the completion of the construction not occur by July 1, 2015, and should an extension date not be

agreed, subsequent to July 1, 2015, Melía will be entitled to receive a daily amount of $2,000 as liquidated

damages. Should the completion of the construction not occur by October 1, 2015 Melía will be entitled to

terminate the management agreement and to receive a termination amount of $5 million unless the parties

agree in writing to extend such date. Management is in negotiations with Melía to have the prospective

penalty abated due to delays associated with architectural changes requested by Melía.

We have cancellable commitments that are not included in the required financing for the development of

the Paradisus Papagayo Bay Resort & Luxury Villas of approximately $15,000,000 as of December 31,

2013, to Meridian for the purchase of two additional concession properties in Polo Papagayo, Guanacaste,

Costa Rica.

We maintain a defined benefit plan that covers all of our Swiss employees and have employment

agreements with our chief executive officer and chief operating officer as of December 31, 2013.

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

the planned construction of the Paradisus Papagayo Bay Resort & Luxury Villas and discussed above.

We have no current plans to make any changes in the number of our employees as of December 31, 2013.

Future Financings

We have received conditional approval for a credit facility of $50,000,000 from Banco Nacional, San José,

Costa Rica, subject to the Company’s fulfillment of certain legal and financial conditions which it believes

can be met. Further, the credit facility is expected to be part of a syndicated loan in the aggregate amount of

$100,000,000 which amount may be allocated in equal shares between Banco de Costa Rica and Banco

Nacional. However, we have not received notice of Banco Costa Rica conditional participation in this loan.

Should we meet the conditions of the loan – one of which is to capitalize AdR with a minimum of

$10,000,000 in equity –and the anticipated credit facility made available to us, we do not expect to be able

to draw against same before the middle of 2014. Further, we will continue to rely on debt financing through

bonds, shareholder loans and, if necessary, the guaranty agreement in place as described herein to finance

our on-going business, as well as we expect to raise the $10,000,000 additional equity funds for AdR

through these sources of finance.

Off-Balance Sheet Arrangements

As of December 31, 2013, we had no significant off-balance sheet arrangements that have or are reasonably

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

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

stockholders.

Going Concern

The Company intends to build a hotel in the Papagayo Gulf Tourism Project area of Guanacaste, Costa

Rica. The total net investment is estimated to be approximately $171 million.

The project is expected to open in the fourth quarter of 2015. Until the completion of the project, the

following expenditures are estimated to be incurred:

a. Gross project cost

195,000,000

b. Less: Proceeds from sale of villas

(24,000,000)

c. Net project cost

171,000,000

d. Overhead expenses

26,000,000

e. Less: Recuperated in gross project cost

(12,000,000)

f Total, excluding other potential projects

185,000,000

Sixty percent (60% ) of the “Net project cost” is going to be financed by traditional mortgage loans, for

which negotiations have been initiated. The remaining forty percent (40% of the “Net project cost”, as well

as “non-recuperated overhead expenses” and the cost of potential “other projects” are going to be financed

by the main shareholders or lenders of the project, i.e. Zypam Ltd., shareholder and related entity to Mr.

Josef Mettler, Mr. Hans Rigendinger, shareholder, chief operating officer and Company board member, Mr

Max Rössler, Company board member and controlling shareholder of Aires, Mr Josef Mettler, shareholder,

director and chief executive officer.

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

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

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

extent of the project’s ongoing capital requirements. The guaranty agreement requires that within 30 days

of receiving a demand notice, the guarantors are required to pay to SunVesta AG that amount required for

ongoing capital requirements, until such time as financing of the project is secured. The guaranty may not

be terminated until such time as SunVesta AG has secured financing for the completion of the project.

Based on this guaranty agreement, management believes that available funds are sufficient to finance cash

flows for the twelve months subsequent to December 31, 2013 and the filing date, though future anticipated

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

adjusted as necessary.

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

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

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

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

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

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

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

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

statements concerning:

— our anticipated financial performance and business plan

— the sufficiency of existing capital resources

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

— uncertainties related to our future business prospects

— our ability to generate revenues to fund future operations

— the volatility of the stock market

— general economic conditions

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

cause our actual results to differ materially from those discussed or anticipated elsewhere in this report. We

also wish to advise readers not to place any undue reliance on the forward-looking statements contained in

this report, which reflect our beliefs and expectations only as of the date of this report. We assume no

obligation to update or revise these forward-looking statements to reflect new events or circumstances or

any changes in our beliefs or expectations, other than as required by law.

Recent Accounting Pronouncements

Please see Note 2 to the accompanying consolidated financial statements for recent accounting

pronouncements.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our audited financial statements for the years ended December 31, 2013 and 2012 are attached hereto as

F-1 through F-42.

SUNVESTA, INC.

(A Development Stage Company)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

Page

Report of Independent Registered Public Accounting Firm

F-2

Consolidated Balance Sheets

F-3

Consolidated Statements of Comprehensive Loss

F-4

Consolidated Statements of Stockholders’ Equity (Deficit)

F-5

Consolidated Statements of Cash Flows

F-6

Notes to Consolidated Financial Statements

F-8

F-1

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

SunVesta, Inc. (a Development Stage Company), Oberrieden, Switzerland

We have audited the accompanying consolidated balance sheets of SunVesta, Inc. (a Development Stage

Company) as of December 31, 2013 and 2012 and the related consolidated statements of comprehensive loss,

stockholders’ equity (deficit), and cash flows for the years ended December 31, 2013 and 2012 and the period

from January 1, 2005 (date of inception of the development stage) to December 31, 2013. These financial

statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on

these financial statements based on our audits. We did not audit the financial statements of SunVesta, Inc. for the

period from inception to December 31, 2010. Such statements are included in the cumulative inception to

December 31, 2013 totals of the statements of comprehensive loss and cash flows and reflect total revenues and

net losses of 0% and 31%, respectively of the related cumulative totals. Those statements were audited by other

auditors whose report has been furnished to us, and our opinion, insofar as it relates to amounts for the period

from inception to December 31, 2010, included in the cumulative totals, is based solely on the report of the other

auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board

(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about

whether the financial statements are free of material misstatement. The Company is not required to have, nor

were we engaged to perform, an audit of its internal control over financial reporting. Our audits included

consideration of internal control over financial reporting as a basis for designing audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also

includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,

assessing the accounting principles used and significant estimates made by management, as well as evaluating

the overall financial statement presentation. We believe that our audits provide a reasonable basis for our

opinion.

In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred

to above present fairly, in all material respects, the financial position of SunVesta, Inc. (a Development Stage

Company) at December 31, 2013 and 2012, and the results of its operations and its cash flows for the years ended

December 31, 2013 and 2012 and the period from January 1, 2005 (date of inception of the development stage)

to December 31, 2013, in conformity with accounting principles generally accepted in the United States of

America.

Zürich, April 15, 2014

BDO Visura International AG

/s/ Christoph Tschumi /s/ Benjamin Patzen

Christoph Tschumi

Benjamin Patzen

F-2

SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

December 31, 2013

December 31, 2012

Assets

Current assets

Cash and cash equivalents

629,673

260,520

Other assets

21,255

39,238

Total current assets

650,928

299,758

Non-current assets

Property and equipment - net

43,372,214

16,799,540

Deposits related to construction work

650,685

Debt issuance costs - net

1,689,023

1,649,216

Down payment for property and equipment

2,369,816

10,320,144

Restricted cash

1,697,974

241,500

Total non-current assets

49,779,712

29,010,400

Total assets

50,430,640

29,310,158

Liabilities and stockholders' equity (deficit)

Current liabilities

Accounts payable

7,063,070

827,102

Accrued expenses

3,276,506

3,868,914

Note payable

2,000,000

Notes payable to related parties

2,721,445

3,432,064

EUR-Bond

5,786,248

14,216,707

Total current liabilities

20,847,269

22,344,787

Non-current liabilities

EUR-Bond

6,757,065

CHF-Bond

8,558,443

5,689,364

Notes payable to related parties

33,409,095

11,125,741

Other long term debts

30,426

Pension liabilities

90,524

74,075

Total non-current liabilities

48,845,553

16,889,180

Total liabilities

69,692,822

39,233,967

Stockholders' equity (deficit)

Preferred stock, $0.01 par value; 50,000,000 shares

authorized, no shares issued and outstanding

Common stock, $0.01 par value; 200,000,000 shares

authorized; 83,541,445 shares issued and outstanding

835,416

540,922

Additional paid-in capital

21,852,666

19,446,367

Accumulated other comprehensive loss

(2,202,914)

(1,102,408)

Retained earnings prior to development stage

1,602

Deficit accumulated during the development stage

(39,725,197)

(28,786,537)

Treasury stock, 157,220 and 157,220 shares

(23,755)

Total stockholders' equity (deficit)

(19,262,182)

(9,923,809)

Total liabilities and stockholders' equity (deficit)

50,430,640

29,310,158

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

F-3

SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Years Ended December 31, 2013 and 2012 and Cumulative Amounts

Cumulative

2013

2012

Amounts*

Revenues

Revenues, net

Cost of revenues

Gross profit

Operating expenses

General and administrative expenses

(8,323,503)

(4,467,015)

(29,532,760)

Sales and marketing

(480,872)

Impairment of property and equipment

(1,311,000)

Release of accrual for penalty to Mélia Hotel & Resorts

1,000,000

Total operating expenses

(7,323,503)

(4,467,015)

(30,324,632)

Loss from operations

(7,323,503)

(4,467,015)

(30,324,632)

Other income / - expenses

Loss on disposals of assets

(3,258)

Loss on sale of investments

(1,137,158)

Loss on extinguishment of debt

(1,806,758)

Interest income

44,383

101,086

212,350

Interest expense

(2,589,556)

(1,511,137)

(5,064,539)

Amortization of debt issuance costs and commissions

(133,806)

(428,868)

(938,044)

Exchange differences

(844,394)

206,821

(468,337)

Other income / - expenses

(91,784)

(35,435)

(54,685)

Total other income / - expenses

(3,615,157)

(1,667,533)

(9,260,429)

Loss before income taxes

(10,938,660)

(6,134,548)

(39,585,061)

Income Taxes

(140,136)

Net loss

(10,938,660)

(6,274,684)

(39,725,197)

Comprehensive loss:

Foreign currency translation

(1,100,506)

(1,064,531)

(2,181,914)

Comprehensive loss

(12,039,166)

(7,339,215)

(41,907,111)

Loss per common share

Basic and diluted

(0.14)

(0.12)

Weighted average common shares

Basic and diluted

76,171,495

54,092,186

* Cumulative amounts: January 1, 2005 (date of inception of the development stage) to December 31, 2013

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

F-4

SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

January 1, 2005 (Date of Inception) to December 31, 2013

Common

Additional

Accumulated

Prior

Deficit

Treasury

Total

Stock

Paid in Capital

Other

Earnings

Accumulated

Stock

Stockholders’

Comprehensive

During

Equity (Deficit)

Income (Loss)

Development Stage

January 1, 2005

210,000 $

281,521 $

128 $

1,602 $

- $

493,251

Net loss

(807,118)

Translation adjustments

23,149

December 31, 2005

210,000

281,521

23,277

1,602

(807,118)

(290,718)

Net loss

(3,575,713)

Translation adjustments

(163,151)

December 31, 2006

210,000

281,521

(139,874)

1,602

(4,382,831)

(4,029,582)

Net loss

(2,912,578)

Translation adjustments

35,580

Acquisition of OpenLimit, Inc.

14,000

(63,080)

(49,080)

Issuance of stock for debt

64,312

10,742,025

10,806,337

December 31, 2007

288,312

10,960,466

(104,294)

1,602

(7,295,409)

3,850,677

Net loss

(1,188,377)

(1,188,377

Translation adjustments

(367,601)

Issuance of stock for compensation

417

61,852

62,269

Issuance of stock for debt

18,182

2,709,091

2,727,273

December 31, 2008

306,911

13,731,409

(471,895)

1,602

(8,483,786)

5,084,241

Net loss

(2,471,845)

Translation adjustments

401,460

Issuance of stock for compensation

600

44,400

45,000

Issuance of stock for cash

10,000

290,000

300,000

Issuance of stock for debt

77,259

3,785,668

3,862,927

Purchase of treasury stock

(12,200)

December 31, 2009

394,770

17,851,477

(70,435))

1,602

(10,955,631)

(12,200)

7,209,583

Net loss

(1,173,292)

Translation adjustments

10,983

Issuance of stock for debt

146,152

876,914

1,023,066

Purchase of treasury stock

(11,555)

December 31, 2010

540,922

18,728,391

(59,452)

1,602

(12,128,923)

(23,755)

7,058,785

Net loss

(10,382,930)

Translation adjustments

21,575

December 31, 2011

540,922

18,728,391

(37,877)

1,602

(22,511,853)

(23,755)

(3,302,570)

Net loss

(6,274,684)

Translation adjustments

(1,064,531)

Stock based compensation expense

717,976

December 31, 2012

540,922

19,446,367

(1,102,408)

1,602

(28,786,537)

(23,755)

(9,923,809)

Net loss

(10,938,660)

Translation adjustments

(1,100,506)

Stock based compensation expense

115,000

1,867,816

1,982,816

Issuance of stock for debt

179,494

538,483

717,977

December 31, 2013

835,416 $

21,852,666 $

(2,202,914) $

1,602 $

(39,725,197) $

(23,755) $

(19,262,182)

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

F-5

SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2013 and 2012 and Cumulative Amounts

2013

2012

Cumulative*

Amounts

Cash flows from operating activities

Net loss

(10,938,660)

(6,274,684)

(39,725,197)

Adjustments to reconcile net loss to net cash

Depreciation and amortization

50,967

31,350

371,052

Other income/expenses

(60,700)

Write-off down payment on property

1,573,957

Release of accrual for penalty to Melía Hotels & Resorts

(1,000,000)

Impairment of property and equipment

1,311,000

Amortization of debt issuance cost and commissions

133,806

428,867

945,742

Unrealized exchange differences

844,395

(206,821)

468,338

Stock compensation expense

1,982,816

717,976

2,808,061

Loss on securities acquired as deposit on stock

1,008,324

Loss on disposal of assets

3,258

Loss on extinguishment of debt

1,806,758

Increase in pension fund commitments

16,449

23,734

90,524

- Increase / decrease in:

Other current assets

17,983

(41,273)

(31,894)

Accounts payable

5,662,036

(574,034)

7,024,955

Accrued expenses

307,591

1,307,050

4,439,235

Net cash used in operating activities

(1,348,660)

(4,648,535)

(18,966,587)

Cash flows from investing activities

Proceeds from securities available-for-sale

1,740,381

Short term investments

75,000

Other receivables from related parties

(856,522)

(1,728,835)

(3,028,856)

Purchase of property and equipment

(12,524,712)

(4,567,028)

(30,292,520)

Deposits related to construction

(650,685)

Down payments for property and equipment

(3,750,045)

(6,970,086)

(13,820,188)

Other non-current assets

(241,500)

Restricted cash

(1,421,827)

Net cash used in investing activities

(19,203,791)

(13,190,950)

(47,715,195)

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

22,769,759

13,070,429

49,989,480

Repayment of notes payable related parties

(778,243)

Advances from third parties

700,000

Note payable

(714,819)

Proceeds from bond issuance, net of commissions

9,663,234

7,085,507

31,086,035

Repayment of bonds

(9,779,614)

(1,474,823)

(11,254,437)

Payment for debt issuance costs

(1,793,838)

(1,077,320)

(5,061,449)

Purchase of treasury stock

(23,755)

Net cash provided by financing activities

20,859,541

17,603,793

67,907,230

Effect of exchange rate changes

62,063

(9,289)

(596,330)

Net increase / - decrease in cash

369,153

(244,980)

629,118

Cash and cash equivalents, beginning of period

260,520

505,500

555

Cash and cash equivalents, end of period

629,673

260,520

629,673

* Cumulative amounts: January 1, 2005 (date of inception of the development stage) to December 31, 2012

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

F-6

SUNVESTA, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2013 and 2012 and Cumulative Amounts

Continued

2013

2012

Additional information

Interest paid

717,472

832,530

Income taxes paid

Conversion of note payable to Hans Rigendinger to

to stockholders equity (non-cash)

717,977

Purchase of property and equipment through a note payable

(non-cash)

2,000,000

Reclassification of down payment for property and equipment

to property and equipment

10,200,000

Capitalized interest and debt issuance costs for construction

(non-cash)

2,039,000

1,215,000

Reclassification of loan from Dr. Rössler to Aires loan

1,740,000

Assumption of receivables in settlement of related party payable

payable (non-cash)

856,522

2,506,035

Bond issuance with offset against related party payable

(non-cash)

324,828

* Cumulative amounts: January 1, 2005 (date of inception of

the development stage) to December 31, 2013

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

F-7

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

CORPORATE INFORMATION

In January 2005 (date of inception of development stage), SunVesta Inc. (the “Company”) changed

its business focus to the development of holiday resorts and investments in the hospitality and

related industry. The Company has not materialized any revenues yet and is therefore a

“development stage company”.

On August 27, 2007, the Company acquired SunVesta Holding AG (SunVesta AG) (collectively

the Company). SunVesta AG has five wholly-owned subsidiaries as of December 31, 2013:

SunVesta Projects and Management AG, a Swiss company; Rich Land Investments Limitada, a

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

(SVCR), Altos del Risco SA, a Costa Rican Company (AdR) and Profunda Capital Partners LLC, a

US company (Profunda).

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).

SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include those of SunVesta Inc. and its subsidiaries. 100% of

assets and liabilities as well as revenues and expenses of all consolidated companies are included.

Receivables, payables, as well as revenues and expenses between consolidated companies are

eliminated. Unrealized intercompany profits, which may be included in assets as of the ends of the

periods are eliminated as well. Certain previously reported amounts have been reclassified to

conform to the current presentation.

Fiscal year

The fiscal year of the Company and all its subsidiaries is corresponding with the calendar year.

Use of estimates

The preparation of consolidated financial statements in conformity with accounting principles

generally accepted in the United States of America (“U.S. GAAP”) requires management to make

assumptions and estimates, which have an impact on the reported assets and liabilities as well as on

the disclosure of contingent assets and liabilities at the balance sheet dates, as well as on the

reported income statement items. While the effective amounts may vary from the estimates,

management is convinced that all relevant information having an impact on the estimates have been

taken into consideration and are appropriately disclosed. Management is of the opinion that in

particular the valuation of property and equipment includes substantial estimates.

Cash and cash equivalents

Cash and cash equivalents include petty cash, post and bank accounts as well as possible time

deposits with maturities of less than three months.

F-8

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Other assets

Other assets include mainly credits such as value added tax, withholding tax or similar credits with

maturities less than one year.

Property and equipment

Property and equipment are valued at cost less accumulated depreciation. Repair and maintenance

expenses are charged to the income statement when incurred. The cost of fixed assets, including

leasehold improvements are capitalized and depreciated over the following useful lives:

— Land (concession)

not depreciated

— IT equipment

3 years

— Other equipment and furniture

5 years

— Leasehold improvements

5 years

— Project in process

not depreciated until project finished

The cost and the related accumulated depreciation are removed from the balance sheet at the time

of disposal.

Project in process relates to costs incurred those are directly related to the planning and

construction of the hotel in the Papagayo Gulf Tourism Project of Costa Rica and are reasonably

expected to be recovered from future hotel and rental operations or the sale of certain apartments.

Once the project in process is finished SunVesta will reclassify the capitalized costs to

corresponding categories and determine the depreciation method and depreciation period.

Interest capitalization

Interest expense is capitalized on the carrying value of the construction in progress during the

construction period, in accordance with ASC 835-20 ("capitalization of interest"). With respect to

the construction in progress, the Company capitalized $3,254,000 and $1,215,000 of interest

expense and debt issuance costs as of December 31, 2013 and December 31, 2012, respectively to

property and equipment.

Deposits related to construction work

These deposits arise as result of the construction work, whereas the company has to pay deposits to

construction companies.

Debt issuance costs

Debt issuance costs arise as a result of issuing non-current debt, i.e. the EUR bonds, CHF bonds

and the loan with Aires International Investments Inc., and are amortized over the life of the debt

using the effective interest method. The costs comprise of finder's fees of generally between 3 and

12 percent of the amount issued and costs incurred in connection with issuing the bonds, such as

legal and accounting fees, stamp duty taxes. The accumulated amortization of debt issuance costs

was $2,399,005 and $562,657 as of December 31, 2013 and December 31, 2012, respectively.

F-9

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Down payment for property and equipment

Down payment for property and equipment are recorded at cost. Once the corresponding property

and equipment item has completely bought it will be reclassified to corresponding subcategory

within property and equipment and amortized. The Company assessed regularly if the down

payments are recoverable. Should any down payments due to specific circumstances not be

assessed as recoverable, they will be depreciated.

Restricted Cash

Restricted cash included cash that is not disposable for the Company without third party permission

such as rental deposits or deposits related to the project in process. Based on the nature of the

underlying business case it will be determined if the deposit is to consider as current or nun-current

assets.

Long-lived assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances

indicate that the carrying amount of the assets may not be recoverable. The carrying value of a

long-lived asset or asset group is considered to be impaired when the undiscounted expected cash

flows from the asset or asset group are less than its carrying amount. In that event, an impairment

loss is recognized to the extent that the carrying value exceeds its fair value. Fair value is

determined based on quoted market prices, where available, or is estimated as the present value of

the expected future cash flows from the asset or asset group discounted at a rate commensurate with

the risk involved.

F-10

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Income taxes

The Company has not incurred material current taxes on income as it has not generated taxable

income in any of the jurisdictions it operates in.

Deferred taxes are calculated on the temporary differences that arise between the tax base of an

asset or liability and its carrying value in the balance sheet of the Company prepared for

consolidation purposes, with the exception of temporary differences arising on investments in

foreign subsidiaries where the Company has plans to permanently reinvest profits into the foreign

subsidiaries.

Deferred tax assets on tax loss carry-forwards are only recognized to the extent that it is more likely

than not, that future profits will be available and the tax loss carry-forward can be utilized.

Changes to tax laws or tax rates enacted at the balance sheet date are taken into account in the

determination of the applicable tax rate provided that they are likely to be applicable in the period

when the deferred tax assets or tax liabilities are realized.

The Company is subject to income taxes in the United States of America, Switzerland and Costa

Rica. Significant judgment is required in determining income tax provisions and in evaluating tax

positions.

The Company recognizes the benefit of uncertain tax positions in the financial statements when it is

more likely than not that the position will be sustained on examination by the tax authorities. The

benefit recognized is the largest amount of tax benefit that is greater than 50 percent likely of being

realized on settlement with the tax authority, assuming full knowledge of the position and all

relevant facts. The Company adjusts its recognition of these uncertain tax benefits in the period in

which new information is available impacting either the recognition of measurement of its

uncertain tax position. Interest and penalties related to uncertain tax positions are recognized as

income tax expense.

Concentration of risks

Financial instruments that potentially subject the Company to concentrations of credit risk are

primarily cash and cash equivalents. Cash and cash equivalents are maintained with several

financial institutions. Deposits held with banks may exceed the amount of insurance provided on

such deposits. Generally, these deposits may be redeemed upon demand. Cash and cash equivalents

are subject to currency exchange rate fluctuations.

F-11

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Foreign Currency Translation and Transactions

The consolidated financial statements of the Company are presented in US dollars (“$”) which is

also the functional currency of the parent company. The financial position and results of operations

of our foreign subsidiaries are determined using the currency of the environment in which an entity

primarily generates and expends cash as the functional currency. Assets and liabilities of these

subsidiaries are translated at the exchange rate in effect at each year-end. Statement of

comprehensive loss accounts are translated at the average rate of exchange prevailing during the

year. Translation adjustments arising from the use of differing exchange rates from period to period

are included in accumulated other comprehensive income in stockholders’ equity. Gains and losses

resulting from foreign currency transactions are included in other income and expenses (exchange

differences), except intercompany foreign currency transactions that are of a long-term-investment

nature which are included in accumulated other comprehensive income in stockholders’ equity.

Bonds

Bonds comprise of bonds payable in EUR and CHF, which bear fixed interest rates. Bonds are

carried at notional value. If a bond becomes repayable within the next 12 months from the balance

sheet date on, such bond or the corresponding portion of this bond will be categorized as current.

Commissions paid to bondholders themselves are reflected as debt discounts and amortized over

the term of the bond, based on the “effective interest method”. The amortization expense is

reflected in amortization of debt issuance cost and commissions.

Pension Plan

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

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

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

underlying principle is that employees render services ratably over this period, and therefore, the

statement of comprehensive loss effects of pensions should follow a similar pattern. ASC 715

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

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

corresponding expense in the net loss. If the projected benefit obligation exceeds the fair value of

plan assets, then that difference or unfunded status represents the pension liability.

The Company records a net periodic pension cost in the statement of comprehensive loss. The

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

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

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

assets are determined based on prevailing market prices.

F-12

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Related parties

Parties are considered to be related if one party directly or indirectly controls, is controlled by, or is

under common control with the other party, if it has an interest in the other party that gives its

significant influence over the party, if it has joint control over the party, or if it is an associate or a

joint venture. Senior management of the Company or close family members is also deemed to be

related parties.

Earnings per Share

Basic earnings per share are calculated using the Company’s weighted-average outstanding

common shares. When the effects are not anti-dilutive, diluted earnings per share is calculated

using the weighted-average outstanding common shares and the dilutive effect of warrants and

stock options, if any, as determined under the treasury stock method.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts payable to

third or related parties, note payables to third or related parties and bonds. The fair value of these

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

instruments, unless otherwise explicitly noted.

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

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

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

markets that are either directly or indirectly observable; and Level 3, defined as unobservable

inputs in which little or no market data exists, therefore requiring an entity to develop its own

assumptions.

Stock-based compensation

Stock-based compensation costs are recognized in earnings using the fair-value based method for

all awards granted. Compensation costs for unvested stock options and awards are recognized in

earnings over the requisite service period based on the fair value of those options and awards. For

employees fair value is estimated at the grant date and for non-employees fair value is re-measured

at each reporting date as required by ASC 718, Compensation-Stock Compensation, and ASC

505-50, Equity-Based Payments to Non-Employees. Fair values of awards granted under the share

option plans are estimated using a Black-Scholes option pricing model. The model input

assumptions are determined based on available internal and external data sources. The risk free rate

used in the model is based on the US treasury rate for the expected contractual term. Expected

volatility is based on historical volatilities of peer group similar companies in the same industry.

F-13

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

New accounting standards - adopted

In February 2013, the FASB released ASU 2013-02 — Accounting Standards Update 2013-02,

Comprehensive Income (Topic 220): Reporting of Amounts Reclassified out of Accumulated

Other Comprehensive Income. ASU 2013-02. This update was issued to end the deferral of new

presentation requirements for reclassifications out of accumulated other comprehensive income

(required by ASU 2011-05 and subsequently deferred by ASU 2011-12) and to resolve certain

cost/benefit concerns related to reporting reclassification adjustments. This Update provides

entities with two basic options for reporting the effect of significant reclassifications — either 1) on

the face of the statement where net income is presented or 2) as a separate footnote disclosure. The

adoption did not materially impact the Company’s consolidated financial statements.

New accounting standards - not yet adopted

In July 2013, the FASB released ASU 2013-11 — Accounting Standards Update 2013-11, Income

Taxes Topic 740: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry

forward, a similar Tax Loss, or a Tax Credit Carry forward Exists. The amendments in this Update

require an entity with net operating losses carry forwards or tax credit carry forwards which are not

available or intended to be used, that uncertain tax benefits should not be netted against deferred tax

assets for these items. Otherwise, the unrecognized tax benefit should be presented as a reduction to

the related deferred tax asset. The assessment of whether a deferred tax asset is available is based

on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be

made presuming disallowance of the tax position at the reporting date. This ASU will be adopted

by the Company as of January 1, 2014 and is not expected to materially impact the Company’s

consolidated financial statements.

In March 2013, the FASB released ASU 2013-05 — Accounting Standards Update 2013-05,

Foreign Currency Matters Topic 830: This update provides guidance for whether to release

cumulative translation adjustments (CTA) upon certain derecognition events. The Update was

issued to resolve the diversity in practice about whether Subtopic ASC 810-10,

Consolidation-Overall, or ASC 830-30, Foreign Currency Matters-Translation of Financial

Statements, applies to such transactions. The accounting for a CTA upon derecognition event is

based on the level at which the foreign investment is held by the parent. Accordingly, the Update

requires entities to distinguish between derecognition events of investments within a foreign entity

and changes in investments in foreign entity. This Update is effective for fiscal years, and interim

periods within those years, beginning after December 31, 2013. This ASU will be adopted by the

Company as of January 1, 2014 and is not expected to materially impact the Company’s

consolidated financial statements.

F-14

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

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 2015. Until the completion of the project,

the following expenditures are estimated to be incurred:

a. Gross project cost

195,000,000

b. Less: Proceeds from sale of villas

(24,000,000)

c. Net project cost

171,000,000

d. Overhead expenses

26,000,000

e. Less: Recuperated in gross project cost

(12,000,000)

Total, excluding other potential projects

185,000,000

Sixty percent (60%) of the “Net project cost” is going to be financed by traditional mortgage loans,

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

cost”, as well as “non-recuperated overhead expenses” are going to be financed by the main

shareholders or lenders of the project, i.e. Zypam Ltd., shareholder and related entity to Mr. Josef

Mettler, Mr. Hans Rigendinger, shareholder, Company director and chief operating officer, Mr.

Max Rössler, controlling shareholder of Aires International Investment, Inc. (also refer to Note 10)

and Company director, Mr. Josef Mettler, shareholder, Company director and chief executive

officer.

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

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

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

guarantor to creditors to the extent of the project’s ongoing capital requirements. The guaranty

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

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

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

AG has secured financing for the completion of the project.

Based on this guaranty agreement, management believes that available funds are sufficient to

finance cash flows for the twelve months subsequent to December 31, 2013 and the filing date,

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

availability of financing and can be adjusted as necessary.

F-15

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

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 & cash

USD ($)

EURO

CHF

CRC

Total

equivalents

December 31, 2013

December 31, 2012

original currency

10,335 374,679

98,115 493,493

in $

10,335 508,957 109,381

1,000

629,673

260,520

USD ($) =

US Dollar

EURO =

Euro

CHF

Swiss Francs

CRC

Costa Rican Colón

5. RESTRICTED CASH

As of December 31, 2013 the Company has the following restricted cash positions:

Restricted Cash

December 31, 2013

December 31, 2012

Credit Suisse in favor of

BVK Personalvorsorge des Cantons Zurich

142,657

HSBC in favor of

Costa Rican Tourism Board

372,205

241,500

Banco Nacional de Costa Rica in favor of the

Costa Rican Environmental Agency – SETENA

619,762

Banco National de Costa Rica in favor of the Costa Rican

Tourism Board

563,350

Gross

1,697,974

241,500

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 has been classified as long term.

The restricted cash position in favor of BVK Personalvorsorge des Cantons Zurich is a rental

deposit related to a long term lease contract for office space. Due to this fact this restricted cash

position is also classified as long term.

The balances as of December 31, 2012, were reclassified to conform to the current presentation.

F-16

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

PROPERTY & EQUIPMENT

December 31, 2013

December 31, 2012

Land

19,700,000

7,000,000

IT Equipment

185,846

Other equipment and furniture

321,901

284,901

Leasehold improvements

66,617

Vehicles

74,000

Construction in-process

23,404,599

9,591,958

Gross

43,752,963

17,129,322

Less accumulated depreciation

(380,749)

(329,782)

Net

43,372,214

16,799,540

Depreciation expenses for the year

50,967

31,350

Property & equipment is comprised primarily of land held in Costa Rica that is currently being

developed for hotels and capitalized project costs in connection with the Papagayo Gulf Tourism

project. The land amounts to $19.7 million whereas $7 million relates to the concession held by

RichLand (~84,000 m2) and $12.7 million held by AdR (~120,000 m2). The latter was acquired

through the acquisition of the shares of AdR whose only asset is the concession, which does not

qualify as a business. Control over AdR was obtained on March 8, 2013. The previous down

payments were reclassified to property and equipment. The RichLand concession is a right to use

the property for a specific period of time of 20 years, which thereafter will be renewed at no further

cost, if the landholder is up to date with its obligations and if there is no significant change in

government policies. The current concession expires in June 2022. The AdR concession is also a

right to use the property for a specific period of time of 30 years, which thereafter will 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, which was issued in 2006, expires in

November 2036. For both properties concession extension requests for 30 years (RichLand)

respectively 15 years and 7 months (AdR) (up to the year 2052) have been filed during third quarter

2013. These extensions request have not been answered as of date of this report.

The construction in process amount that was spent up to December 31, 2013 and December 31,

2012, is represented primarily by architectural work related to the hotel and apartments and also to

construction work.

Deposit related to construction work

During the year ended December 31, 2013, main earthmoving groundwork has started for which

work the Company has paid several deposits to contractors. These deposits will be offset against

invoices for such groundwork. As of December 31, 2013, the Company has deposits of $650,685

which have not been set off.

Guaranty Retention

During the year ended December 31, 2013, main earthmoving groundwork has started. Due to this,

the Company received several invoices from contractors. The Company retained some amounts

related to construction work. As soon as the corresponding work is officially accepted by the

Company the guaranty retention will be paid. As of December 31, 2013, the Company had guaranty

retention in the amount of $179,719, which is stated in accrued expenses.

F-17

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

PLEDGES

December 31, 2013

December 31, 2012

Pledge of shares of Rich Land Investments Ltda. in

none

10%

favor of Zypam Ltd. for Zypam Ltd.’s liabilities

(1 share)

Pledge of shares of Rich Land Investments Ltda. in

none

20%

favor of Melía Hotels International for bonds of EUR

(2 shares)

2 million (old EUR Bond see note 12)

The Company pledged the above shares as part of the bond agreement with Melía and

corresponding contracts in Zypam Ltd. During the period ended December 31, 2013 the share

pledges were released back to the Company due to the repayment of the old EUR bond due to Melía

(on January 31, 2013 respectively March 25, 2013) and the amendment of the corresponding

contracts in Zypam Ltd.

DOWN PAYMENTS FOR PROPERTY & EQUIPMENT

December 31, 2013

December 31, 2012

La Punta (neighboring piece of land)

2,369,816

1,369,816

Hotel Project Atlanta

1,573,9

250,000

Altos del Risco

8,700,328

Gross

3,943,773

10,320,144

Write off Hotel Project Atlanta

(1,573,957)

Total (net)

2,369,816

10,320,144

Agreement to Purchase a neighboring piece of land

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

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

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

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

percent in equity of Paradisus Papagayo Bay Resort & Luxury Villas (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 had elected not to proceed with the purchase, the Company would have been in

default and would have lost its funds on deposit.

On November 13, 2012, the above agreement was amended to decrease the total purchase price to

$17.2 million with no equity payment. The terms and conditions of the cash payment were still to

be defined. Furthermore, all payments by the Company to date and in the future are refundable.

F-18

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

DOWN PAYMENTS FOR PROPERTY & EQUIPMENT - CONTINUED

During the second quarter of 2013 the Company entered into a new, revised agreement for the

purchase of two additional concession properties at Polo Papagayo, Guanacaste. The original

contract as described above was cancelled and replaced by a new contract which includes the

following clauses:

The total purchase price is $17,500,000 of which $1,369,816 has been paid as of date of the new revised

agreement and therefore $16,130,000 is outstanding as per date of the new, revised agreement.

Since the original seller of these two additional concession properties at Polo Papagayo, Guanacaste owes a

third party $8,000,000 the Company has to pay $8,000,000 of the purchase price directly to this third party

instead of the original seller. The remaining $8,130,000 will be paid directly to the original seller of the

concession properties.

The payment schedule for these two additional concession properties at Polo Papagayo Guanacaste is as

hereinafter:

Third Party

$300,000 on May 4, 2013 which was paid on May 3, 2013 and is non-refundable

$1,000,000 on June 30, 2013, which is refundable and $700,000 of this $1,000,000 was paid on October 29,

2013. The remaining $300,000 has not been paid as of the date of this report.

$1,000,000 on July 31, 2013, which is refundable and has not been paid as of the date of this report.

$1,000,000 on August 31, 2013 which is refundable and has not been paid as of the date of this report.

$1,500,000 on September 30, 2013, which is refundable and has not been paid as of the date of this report.

$1,500,000 on October 31, 2013, which is refundable and has not been paid as of the date of this report.

$1,700,000 on November 30, 2013, which is refundable and has not been paid as of the date of this report.

$8,000,000 in total to Third Party

Original Seller

$1,000,000 on January 31, 2014 which has not been paid as of the date of this and is non-refundable.

$1,000,000 on February 28, 2014 which has not been paid as of the date of this and is non-refundable.

$1,000,000 on March 31, 2014 which has not been paid as of the date of this and is non-refundable.

$1,000,000 on April 30, 2014 and is non-refundable

$1,000,000 on May 31, 2014 and is non-refundable

$1,000,000 on June 30, 2014 and is non-refundable

$1,000,000 on July 31, 2014 and is non-refundable

$1,130,000 on August 31, 2014 and is non-refundable

$8, 130,000 in total to Original Seller

The Company paid down-payments on the purchase of these properties of $2,369,816 as of

December 31, 2013, which is included in down payment for property and equipment. As per date of

this report the Company has not paid any further amounts and is therefore in default. Despite of the

fact that the Company is in default with several partial payments, Management still intend to

proceed with the purchase of these properties and has contractually the opportunity to fulfill the

contract up to August 31, 2014. Due to these reasons Management believes that the non-refundable

payment of $300,000 has a further benefit and assessed no to write-off the payments.

F-19

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

DOWN PAYMENTS FOR PROPERTY & EQUIPMENT - CONTINUED

Hotel Project Atlanta

On September 19, 2012, the Company entered into a purchase agreement for a hotel and

entertainment complex in Atlanta, Georgia (United States of America). The entire purchase amount

of $26 million for the assets has no firm financing commitment. Additionally, an additional amount

of approximately $18 million for renovations would need to be invested in the hotel and

entertainment complex. The Company has been in negotiations with various parties to finalize a

financing package for this project but has not been able to conclude the transaction by October 15,

2013. On October 15, 2013, the fifth-amendment expired, causing the Company to fall into default.

Therefore those amounts paid as non-refundable deposits and taxes related to the property of total

$1,573,957 were expensed on October 16, 2013. The deposits and taxes paid were included in the

line item “Down payments for property and equipment” in the Company’s balance sheet and have

been expensed to General and administrative expenses in the Consolidated Statements of

Comprehensive Loss.

On October 28, 2013 the Company concluded a further amendment (sixth-amendment) with the

counterparty. This sixth amendment includes the following clauses:

The Company has to pay $2,500,000 by November 12, 2013, to the counterparty as initial installment and to

pay the remaining purchase price of $22,500,000 by January 31, 2014. As of the date of this report the

Company has not paid the $2,500,000 nor the $22,500,000 and is in default without any further impacts for

the Company

Since November 12, 2013, the Company is obligated to pay 6% interest on the remaining, outstanding

purchase price, which interest is also payable on January 31, 2014.

If the Company does not close this transaction in accordance with the provisions in this sixth amendment, the

Company will be entitled to a refund of those purchase price installments timely received by the

counterparty.

The deposit, the three extension fees and the 2013 taxes paid, with all interest payments as noted above, shall

be deemed non-refundable. However, the deposit and the three extension fees in the total amount of $

1,000,000 will be credited to the purchase price in the event of a successful closing.

After the balance sheet date, on March 28, 2014, the Company decided not to continue with the

project due to the changes in the conditions related to the acquisition and an inability to adjust a

financing package to the new conditions. As part of the termination and to avoid potential

litigation, the Company agreed to pay the counterparty EUR 100,000 (approximately $124,500) to

settle any further obligation, which will be expensed on March 28, 2014.

F-20

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

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, we use quoted market prices to determine fair value, and we classify such

measurements within Level 1. In some cases where market prices are not available, we make use of

observable market based inputs to calculate fair value, in which case the measurements are

classified within Level 2. If quoted or observable market prices are not available, fair value is based

upon internally developed models that use, where possible, current market-based parameters such

as interest rates, yield curves and currency rates. These measurements are classified within Level 3.

Fair value measurements are classified according to the lowest level input or value-driver that is

significant to the valuation. A measurement may therefore be classified within Level 3 even though

there may be significant inputs that are readily observable.

Fair value measurement includes the consideration of nonperformance risk. Nonperformance risk

refers to the risk that an obligation (either by counterparty or us) will not be fulfilled. For financial

assets traded in an active market (Level 1), the nonperformance risk is included in the market price.

For certain other financial assets and liabilities (Level 2 and 3), our fair value calculations have

been adjusted accordingly.

As of December 31, 2013 and December 31, 2012, respectively, there are no financial assets or

liabilities measured on a recurring basis at fair value.

In addition to the methods and assumptions we use to record the fair value of financial instruments

as discussed above, we used the following methods and assumptions to estimate the fair value of

our financial instruments:

F-21

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

FAIR VALUE MEASUREMENT - CONTINUED

—

Cash and cash equivalents – carrying amount approximated fair value.

—

Restricted cash – carrying amount approximated fair value

—

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 payable to related parties - Dr. M. Rössler (current) – carrying amount approximated fair value due to the short

term nature of the notes payable and the fair value of the underlying publically traded shares.

—

Notes payable to related parties – (current) –carrying amount approximated fair value due to the short term nature of

the notes payable.

—

EUR– bond (old) – carrying amount approximated fair value due to the short term nature of the EUR-Bond.

—

EUR- bond (new) – 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-bond – The fair values of the bonds payable are classified as level 3 fair values. The fair values of the bonds

have been determined by discounting cash flow projections discounted at the respective interest rates of 7.25% for

CHF bonds, which represents the current market rate based on the creditworthiness of the Company. Hence, the

carrying values approximate fair value.

—

Notes payable to related parties – Aires (non-current) – The fair values of the notes payable to Aires International

Investments Inc. is classified as level 3 fair values. The fair values of the notes were determined by discounting cash

flow projections discounted at the respective interest rates of 7.25%, which represents the current market rate based

on the creditworthiness of the Company. Hence, the carrying value approximates fair value.

The fair value of our financial instruments is presented in the table below:

December 31, 2013

December 31, 2012

Carrying

Fair Value

Carrying

Fair Value

Amount

Reference

Levels

Cash and cash equivalents

629,673

260,520

Note 4

Restricted cash

1,697,974

241,500

Note 5

Accounts Payable

7,063,070

827,102

Note payable

2,000,000

Note 17

Notes payable to related

parties – Dr. M. Rössler

938,890

833,715

2,682,736

2,594,284

Note 10

(current)

Notes payable to related

parties – Rigendinger

600,000

Note 10

(current)

Notes payable to related

116,592

149,328

Note 10

parties – other (current)

Notes payable to related

parties – Mettler (current)

1,065,963

Note 10

EUR-bond (old)

5,786,248

5,786,248 14,216,707

14,216,707

Note 12

EUR-bond (new)

6,757,065

Note 12

CHF-bond

8,558,443

5,689,364

Note 12

Notes payable to related

parties – Aires 33,409,095

33,409,095 10,407,764

10,407,764

Note 10

(non-current)

Notes payable to related

parties – Rigendinger

717,977

Note 10

(non-current)

F-22

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

10.

RECEIVABLES FROM AND NOTES TO RELATED PARTIES

The advances from (to) related parties are composed as follows:

Receivables

Payables

December 31,

2013

2012

2013

2012

1 Hans Rigendinger

600,000

2 Josef Mettler

1,065,963

3 Adrian Oehler

39,002

37,380

4 Aires International

33,409,095

10,407,764

5 Dr. Max Rössler

938,890

2,682,736

6 4f capital ag

27,590

7 Hans Rigendinger

717,977

8 Sportiva

31,948

9 Akyinyi Interior and

Exterior Decoration

50,000

80,000

Total excluding interest

36,130,540

14,557,805

Accrued interest

1,693,166

566,093

Total

37,823,706

15,123,898

of which non-current

33,409,095

11,125,741

Related party

Capacity

Interest Repayment

Rate

Terms

Security

1 Hans Rigendinger Shareholder, COO and Company board member

none

2 Josef Mettler

Shareholder, CEO, CFO and Company board member

none

3 Adrian Oehler

Shareholder and member of the board SunVesta AG

none

4 Aires International

*** see hereinafter ***

5 Dr. Max Rössler

*** see hereinafter ***

6 4f capital ag

Company owned by J. Mettler (see No. 2)

none

7 Hans Rigendinger Shareholder and chairman of the board

converted to equity during the

year end December 31, 2013

8 Sportiva

Company owned by the Company's director and chief

executive officer

none

Akyinyi Interior

Company owned by the wife of a Company board

9 and exterior

member

none

Decoration

F-23

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

10.

RECEIVABLES FROM AND NOTES TO RELATED PARTIES - CONTINUED

Loan agreement Aires International Investment Inc.

On July 27, 2011, SunVesta AG signed a loan agreement with Aires International Investments Inc.

(“Aires”), a company owned by Mr. Rössler (a board member of the Company). The loan

agreement was amended on May 11, 2012 and again on June 21, 2012. The initial contract and

these amendments include the following major conditions:

— The lender grants the Company a terminable, interest bearing and non-secured loan in the maximum amount of

CHF 10,000,000.

— The conversion right granted in the original contract to convert the balance of the line of credit into a 10%

ownership interest in Rich Land was cancelled.

— Once the entire amount of CHF 10,000,000 has been drawn down, Aires has now the right to convert its entire loan

of CHF 10,000,000 into 20% shares of the capital of the Company (instead of Rich Land) whereas 20% shares

reflect the number of shares at the time the entire amount of CHF 10,000,000 has been drawn down

— In principle, the loan will become due on September 30, 2015 being the latest date in time when Aires can exercise

its conversion option.

— CHF 10,000,000 of this line of credit is subordinated in favour of other creditors.

— The interest rate is 7.25% and interest is due on September 30 of each year.

The conditions of the above mentioned conversion option was met during 2012. The Company has

analyzed the accounting treatment of this financial instrument. Based on this analysis the Company

concluded that the conversion option needs to be bifurcated and is to be accounted for as a

derivative under ASC 815. Main factors for this accounting treatment are: the debt is denominated

in CHF while the shares are convertible into shares of the Company, whose functional currency is $

and whose shares are traded in $. Based on that, the Company determined that the conversion

feature is not indexed to the Company’s shares and it should be bifurcated and accounted for as a

derivative. As of November 13, 2012 (the date when the loan became convertible) and December

31, 2012 the fair value of the conversion feature was immaterial. As of October 31, 2013 the fair

value of the conversion feature was approximately $26,170 which was recorded in fair value of

conversion option and expensed on this date due to the fact that on this date a new loan agreement

was signed without such conversion option: The new agreement includes the following main terms:

— All existing loan agreements including amendments between SunVesta Holding AG and Aires International

Investment, Inc. will be cancelled and superseded by the new agreement, signed on October 31, 2013.

— The loan shall not be due for repayment before December 31, 2015 but at the latest on December 31, 2020.

— Both parties have the possibility, despite of the scheduled repayment dates, to resign the loan agreement with a

notice period of 90 days subject to the subordination noted in the following.

— The complete loan amount including further additions is subordinated.

— Yearly interest on the loan is 7.25% and will be credited to the loan account on a quarterly basis, i.e. on March 31,

June 30, September 30 and December 31.

F-24

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

10.

RECEIVABLES FROM AND NOTES TO RELATED PARTIES - CONTINUED

Loan Agreement Aires International Investment, Inc. - Continued

In addition, the terms of the loan amounting to CHF 10,044,370 that was transferred from SunVesta

Holding AG to SunVesta, Inc. as of December 31, 2012, were clarified in a promissory note in

October 2013 with the main terms being:

— The effective date is December 31, 2012. However, since the promissory note was only signed in October 2013

this is the relevant date for accounting purposes.

— The principal amount together with any interest will be payable on December 31, 2015 (the maturity date)

— The interest rate is 7.25%.

— Any amount of principal or interest which is not paid when due shall bear interest at the rate of 10% per year from

the due date until it is paid.

— The conversion option as stated in the previous agreements was removed and the remaining fair value expensed.

— The following covenants have been agreed:

(A) So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s

written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash,

property or other securities) on shares of capital stock or (b) directly or indirectly or through any subsidiary make

any other payment or distribution in respect of its capital stock.

(B) So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s

written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other

securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the

Borrower or any warrants, rights or options to purchase or acquire any such shares.

Due to the transfer of the loan from SunVesta Holding AG to SunVesta Inc. the foreign exchange

gains or losses will be reflected through the income statement rather than in the comprehensive

income (cumulative translation adjustment).

As of December 31, 2013 and 2012 the Company borrowed CHF 31.12 million (approximately

$33.41 million) respectively CHF 9.53 million (approximately $10.41 million) from Aires and

accrued interest of CHF 1.59 million (approximately $1.69 million) respectively CHF 0.52 million

(approximately $0.57 million).

F-25

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

10.

RECEIVABLES FROM AND NOTES TO RELATED PARTIES - CONTINUED

Loans Dr. Max Rössler

On June 7, 2012, Dr. Max Rössler (board member of the Company) gave a short term loan of $1.81

million that would have been repayable on May 30, 2013, or on demand within five working days.

The Company is not required to pay any interest and can repay the loan either in cash or with the

delivery of 10,000 shares of Intershop Holding AG, a publically traded entity, regardless of actual

trading value on the date of delivery. The Company concluded on April 19, 2013, with Dr. Rössler

and Aires an act of transfer. Based on this act of transfer the loan has been transferred to Aires and

the balance has added to the existing loan agreement with Aires (refer to previous paragraph).

On July 24, 2012, Dr. Rössler gave a short term loan of $0.47 million that is repayable on May 30,

2014, or on demand within five working days. The Company is not required to pay any interest and

can repay the loan either in cash or with the delivery of 10,000 shares of Schindler Holding AG, a

publically traded entity, regardless of actual trading value on the date of delivery. The Company

therefore might recognize a gain if the loan is repaid in Schindler Holding AG shares and the

trading price of the shares is less than the amount due. Based on the trading price for Schindler

Holding AG shares on December 31, 2013, the Company would not have recognized a gain.

Therefore the fair value of the loan approximates the carrying value of the loan.

On August 8, 2012, Dr. Rössler gave a further short term loan of $0.4 million that is repayable also

on May 30, 2014, or on demand within five working days. The Company is not required to pay any

interest and can repay the loan either in cash or with the delivery of 700 shares of Zug Estates

Holding AG, a publically traded entity, regardless of actual trading value on the date of delivery.

The Company therefore might recognize a gain if the loan is repaid in Zug Estates Holding AG

shares and the trading price of the shares is less than the amount due. Based on the trading price for

Intershop Holding AG shares on December 31, 2013, the Company would have recognized a gain,

which has been immaterial and not recognized by the Company. Therefore the fair value of the loan

approximates the carrying value of the loan.

On March 1, 2013, Dr. Max Rössler gave a further short term loan of $0.05 million that is repayable

on May 30, 2014, or on demand within five working days. The Company is not required to pay any

interest and can repay the loan either in cash or with the delivery of 52,500 shares of Daetwyler

Holding AG, a publically traded entity, regardless of actual trading value on the date of delivery.

The Company therefore might recognize a gain if the loan is repaid in Datewyler Holding AG

shares and the trading price of the shares is less than the amount due. Based on the trading price for

Daetwyler Holding AG shares on December 31, 2013, the Company would not have recognized a

gain. Therefore the fair value of the loan approximates the carrying value of the loan.

Loan Josef Mettler (current)

During the financial year 2013 Josef Mettler gave the Company a short term loan based on the

guarantee agreement as described in Note 3. On this current loan the company has to pay 3%

interest. As per December 31, 2013 the Company has borrowed $1,065,693 (CHF 956,169) and as

per date of this report $659,814 (CHF 591,853).

For the financial year 2013, the Company paid interest to Josef Mettler of $10,236 related to this

current loan.

F-26

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

11.

RELATED PARTY TRANSACTIONS

Debt Settlement Agreements

On December 31, 2012 the Company concluded a debt settlement agreement with Hans

Ringendinger. This debt settlement agreement, settled the outstanding balance of $717,977 as of

December 31, 2012 as described hereinafter:

— The Company issued 17,949,417 shares of its common stock ($0.01 par value) at a conversion price of $0.04 to

Hans Rigendinger for the purposes of this debt settlement.

— The difference between the carrying value of this debt and the fair value of the common stock issued amounted to

$717,976. The difference has been recorded as stock compensation expense in general and administrative

expenses in the year ended December 31, 2012.

— To determine the fair value of the common stock issued the quoted market price as of December 31, 2012 was

used.

— The shares were not formally issued as of December 31, 2012, and therefore, the note payable was not eliminated

as of December 31, 2012. The satisfaction of the note payable was recorded on the issuance of the shares as of

January 8, 2013.

Commissions paid to related parties

During the periods ended December 31, 2013, and December 31, 2012, the Company paid

commissions to 4f capital ag in the amount of approximately $291,740 and $0, respectively related

to financing of the Company. 4f capital ag is a company owned and directed by Mr. Mettler (board

of director of the Company and CEO of the Company) and receives a commission of 1.5% for new

funds that the Company receives based on consulting services rendered by 4f capital ag. These

costs have been capitalized to debt issuance costs.

Service fees paid to Akyinyi Interior and Exterior Decoration

During the periods ended December 31, 2013, and December 31, 2012, the Company paid fees to

Akyinyi Interior and Exterior Decoration – a company owned by the wife of a member of the board

of directors – related to interior design of the Papagayo Gulf Tourism project in the amount of

approximately $120,000 and $0 respectively. These costs have been capitalized to property and

equipment. Until end of January 2015, the Company is committed to pay monthly $10,000 based on

the contract with Akyinyi Interior and Exterior Decoration.

F-27

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

12.

BONDS

SunVesta AG has two bonds outstanding and one bond which have been due on November 30,

2013 with the following major conditions.

Description

EUR (€) bond (old)

CHF bond

[sunvesta10kfinal002.gif]

Issuer:

SunVesta Holding AG

[sunvesta10kfinal002.gif]

Type of securities:

Bond in accordance with Swiss law

[sunvesta10kfinal002.gif]

Approval by SunVesta AG BOD

May 12, 2010

June 3, 2011

[sunvesta10kfinal002.gif]

Volume:

Up to € 25,000,000

Up to CHF 15,000,000

[sunvesta10kfinal002.gif]

Units:

€1,000

CHF 50,000

[sunvesta10kfinal002.gif]

Offering period:

11/10/2010 – 04/30/2011

09/01/2011 – 02/28/2012

[sunvesta10kfinal002.gif]

Due date:

November 30, 2013

August 31, 2015

[sunvesta10kfinal002.gif]

Issuance price:

100 %

100%

[sunvesta10kfinal002.gif]

Issuance day:

December 1, 2010

September 1, 2011

[sunvesta10kfinal004.gif]

Interest rate:

8.25% p.a.

7.25% p.a.

[sunvesta10kfinal002.gif]

Interest due dates:

November 30 of each year,

August 31 of each year,

the first time November 30, 2011

the first time August 31, 2012

[sunvesta10kfinal002.gif]

Applicable law:

Swiss

[sunvesta10kfinal002.gif]

Description

EUR (€) bond (new)

[sunvesta10kfinal002.gif]

Issuer:

SunVesta Holding AG

[sunvesta10kfinal002.gif]

Type of securities:

Bond in accordance with Swiss law

[sunvesta10kfinal002.gif]

Approval by SunVesta AG BOD

October 31, 2013

[sunvesta10kfinal002.gif]

Volume:

Up to €15,000,000

[sunvesta10kfinal004.gif]

Units:

€10,000

[sunvesta10kfinal002.gif]

Offering period:

11/07/2013 – 03/31/2014

[sunvesta10kfinal002.gif]

Due date:

December 2, 2016

[sunvesta10kfinal002.gif]

Issuance price:

100%

[sunvesta10kfinal002.gif]

Issuance day::

December 2, 2013

[sunvesta10kfinal002.gif]

Interest rate:

7.25% p.a.

[sunvesta10kfinal002.gif]

Interest due dates:

December 2, 2013

[sunvesta10kfinal002.gif]

Applicable law:

Swiss

[sunvesta10kfinal006.gif]

[sunvesta10kfinal008.gif]

[sunvesta10kfinal010.gif]

F-28

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

12.

BONDS - CONTINUED

The nominal amounts have changed as follows:

CHF Bond

2013

2012

USD

Balances January 1

5,689,364

3,818,898

Cash inflows

2,650,882

3,191,888

Cash outflows

(52,424)

(1,474,822)

Foreign currency adjustments

528,145

463,849

Sub-total (Fair value)

8,815,967

5,999,813

Discounts (commissions paid to bondholders)

(476,636)

(417,709)

Accumulated amortization of discounts

219,112

107,260

Unamortized discounts

257,254

310,449

Balance December 31 (Carrying value)

8,558,443

5,689,364

As per date of this report the Company has realized a cumulative amount of CHF 7.95 million

($8.86 million).

EUR-Bond

(new)

2013

USD

Balances December 2

Cash inflows

6,603,097

Cash outflows

Foreign currency adjustments

153,968

Sub-total (Fair value)

6,757,065

Discounts (commissions paid to bondholders)

Amortization of discounts

Unamortized discounts

Balance December 31 (Carrying value)

6,757,065

As per date of this report the Company has realized a cumulative amount of EUR 5.91 million

($7.31 million).

EUR-Bond

(old)

2013

2012

USD

Balances January 1

14,216,707

9,598,537

Cash inflows

792,740

4,015,549

Cash outflows

(9,727,189)

Foreign currency adjustments

503,991

692,295

Sub-total (Fair value)

5,786,249

14,306,380

Discounts (commissions paid to bondholders)

(248,195)

Amortization of discounts

248,195

158,522

Unamortized discounts

89,673

Balance December 31 (Carrying value)

5,786,248

14,216,707

As of December 31, 2013 SunVesta AG has not been able to fully repay the old EURO Bond which was due

on November 30, 2013. As per December 31, 2013, the Company had overdue bonds to repay of

$5,786,248 (EUR 4,195,000). As of the filing date of this report, the amount that remained due on the first

EUR bond offering as of the end of the annual period has been paid in full.

F-29

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

13.

INCOME TAXES

The components of loss before income taxes are as follows:

December 31, 2013

December 31, 2012

Domestic

(2,729,564)

(682,800)

Foreign

(8,209,096)

(5,451,747)

Loss before income tax

(10,938,660)

(6,134,547)

Income taxes relating to the Company’s operations are as follows:

December 31, 2013

December 31, 2012

Current income taxes

US Federal, state and local

140,000

Foreign

Deferred income taxes

US Federal, state and local

Foreign

136

Income tax expense/recovery

140,136

Income taxes at the United States federal statutory rate compared to the Company’s income tax

expenses as reported are as follows:

December 31, 2013

December 31, 2012

Net loss before income tax

(10,938,660)

(6,134,547)

Statutory rate

35%

Expected income tax recovery

(3,828,531)

(2,147,092)

Impact on income tax expense/recovery from

Change in valuation allowance

2,257,544

2,055,991

Different tax rates in foreign jurisdictions

949,069

378,674

Expiration of unused tax loss carry forwards

966,671

Permanent differences

(291,868)

(141,903)

Tax penalty US Federal, state and local

140,000

Others

(52,885)

(145,534)

Income tax expense

140,136

The Company’s deferred tax assets and liabilities consist of the following:

December 31, 2013

December 31, 2012

Deferred tax assets

Tax loss carry forward

11,032,107

8,774,564

Valuation allowance

(11,032,107)

(8,774,564)

Deferred tax assets/liabilities

The Company assesses the recoverability of its deferred tax assets and, to the extent recoverability

does not satisfy the “more likely than not” recognition criterion under ASC740, records a valuation

allowance against its deferred tax assets. The Company considered its recent operating results and

anticipated future taxable income in assessing the need for its valuation allowance.

F-30

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

13.

INCOME TAXES - CONTINUED

As of April 2, 2012 the Company was advised by the Internal Revenue Services (IRS) of aggregate

penalties amounting to $140,000. This penalty concerns failures to file certain tax returns for the

years ended 2008, 2009 and 2010. Despite an ongoing appeal process the Company changed its

assessment during the year ended December 31, 2012 and determined that it is “more likely than

not” that it will have to pay the penalty. Therefore the Company recorded $140,000 in income tax

expense.

As of December 31, 2013 and 2012, there were no known uncertain tax positions with the

exception of the above mentioned potential tax penalty. We have not identified any tax positions

for which it is reasonably possible that a significant change will occur during the next 12 months

Pursuant to ASC 740-10-25-3, provision has not been made for U.S. or additional foreign taxes

since all subsidiaries of the Company are not generating any income and will not for the foreseeable

future. The company expects that future earnings will be reinvested but could become subject to

additional tax if they were remitted as dividends or were loaned to the Company, or if the Company

should sell or dispose of its stock in the foreign subsidiaries. It is not practical to determine the

deferred tax liability, if any, that might be payable on foreign earnings because if the Company

were to repatriate these earnings, the Company believes there would be various methods available

to it, each with different U.S. tax consequences.

The Company’s operating loss carry forward of all jurisdictions expire according to the following

schedule:

Domestic

Foreign

2014

1,410,518

2015

22,297

2016

1,179,883

2017

615,520

2018

3,890,371

2019

6,941,725

2020

9,292,976

Beyond 2020

14,840,092

Total operating loss carry forwards

14,840,092

23,353,291

The following tax years remain subject to examination:

United States of America

Switzerland

Costa Rica*

2008

YES

N/A

2009

YES

N/A

2010

YES

N/A

2011

YES

N/A

2012

YES

2013

YES

* The Costa Rican companies are taxable since 2013.

F-31

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

14.

PENSION PLAN

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

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

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

underlying principle is that employees render services ratably over this period, and therefore, the

income statement effects of pensions should follow a similar pattern. ASC 715 requires recognition

of the funded status, or difference between the fair value of plan assets and the projected benefit

obligations of the pension plan on the balance sheet, with a corresponding adjustment 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.

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

2013

2012

Projected Benefit Obligations beginning of year

239,046

209,238

Service cost - current

56,633

107,178

Interest expense

4,905

5,353

Benefit payments and transfers

(13,378)

(43,702)

Actuarial gains/losses

1,338

(44,576)

Currency translation losses

4,877

5,555

Projected Benefit Obligations end of year

293,421

239,046

Fair Asset Values beginning of year

164,970

158,897

Expected returns

5,017

4,915

Contributions paid

45,262

41,515

Benefits paid and transfers

(13,378)

(43,702)

Actuarial gains/losses

(2,341)

(874)

Currency translation losses

3,366

4,222

Fair Asset Value of assets end of year

202,896

164,970

Net liabilities

(90,525)

(74,076)

The following were the primary assumptions:

December 31, 2013

December 31, 2012

Assumptions at year end

Discount rate

2.00%

Expected rate of return on plan assets

3.00%

Future salary increases

1.50%

Future pension increases

0.00%

Future benefits, to the extent that they are based on compensation, include salary increases, as

presented above, consistent with past experiences and estimates of future increases in the Swiss

labor market.

F-32

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

14.

PENSION PLAN – CONTINUED

Net periodic pension costs have been included in the Company’s results as follows:

December 31, 2013

December 31, 2012

Pension expense

Current service cost

56,633

107,178

Net actuarial (gain) loss recorded

(1,115)

Interest cost

4,905

5,353

Expected return on assets

(5,018)

(4,915)

Employee contributions

(22,631)

(20,758)

Net periodic pension cost

32,776

86,858

During the twelve-month periods ended December 31, 2013 and December 31, 2012 the Company

made cash contributions of $22,600 and $20,800, respectively, to its defined benefit pension plan.

All of the assets are held under the collective contract by the plan’s re-insurer Company and are

invested in a mix of Swiss and international bond and equity securities within the limits prescribed

by the Swiss Pension Law.

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

the pension plan for the year ended December 31, 2014 are $23,400.

15.

STOCK COMPENSATION

The Company has included share based remuneration based on “SunVesta Inc. Stock Option Plan

2013” as part of the total remuneration in some new employment contracts. Based on this stock

option plan the Company has the possibility since January 1, 2013 to issue up to 50,000,000

common stock shares under the plan.

The purpose of these share based remuneration is to advance the interests of the Company by

encouraging its employees to remain associated with the Company and assist the Company in

building value. Such share based remuneration includes either shares or options to acquire shares of

the Company’s common stock.

For all employees fair value is estimated at the grant date. Compensation costs for unvested shares

are expensed over the requisite service period on a straight-line-basis.

Share Grants

On January 1, 2013 the Company issued 3,500,000 common shares, valued at $0.08 which has been

the share price and therefore the fair value on grant date, to Hans Rigendinger in connection with

his employment agreement of even date as so-called signing bonus.

Additionally the Company granted 2,500,000 common shares as a retention award for each

completed year of employment (e.g. first time as per January 1, 2014). The employment contract

has been concluded for three years with an additional bilateral option for another two years.

Therefore in total the Company could be requested to issue maximal 12,500,000 common shares up

to January 1, 2018 to Hans Rigendinger related to this retention bonus.

F-33

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

15.

STOCK COMPENSATION - CONTINUED

Share Grants - Continued

On July 3, 2013 the Company granted 3,000,000 common shares, valued at $0.07 which has been

the share price and therefore the fair value on grant date, to Dr. Max Rössler in connection with his

election to the board of directors as so-called signing bonus. These shares were officially issued on

October 15, 2013.

On July 4, 2013 the Company granted 5,000,000 common shares, valued at $0.07 which has been

the share price and therefore the fair value on grant date, to Josef Mettler in connection with his

employment agreement as so-called signing bonus. These shares were officially issued on October

15, 2013.

Additionally the Company granted 3,000,000 common shares as a retention award for each

completed year of employment (e.g. first time as per July 4, 2014). The employment contract has

been concluded for three years with an additional bilateral option for another two times two year

periods, but not longer than December 31, 2020. Therefore, in total the Company could be

requested to issue maximal 21,000,000 common shares up to December 31, 2020, to Josef Mettler

related to his retention bonus.

Based on these contracts the Company has included the following stock-based compensation in the

Company’s results:

Stock-based compensation (shares)

December 31, 2013

December 31, 2012

Shares granted

45,000,000 shares

---

Fair Value respectively market price on grant date

$0.0734

---

Shares vested (signing bonus)

11,500,000 shares

---

Unvested shares (retention award)

33,500,000 shares

---

As of December 31, 2013, the Company expects to record compensation expense in the future up to

$2,165,000 as follows:

Stock-based

Year ending December 31,

compensation

2014

2015

2016

2017

2018

2019

2020

(shares)

Unrecognized

compensation

410,000

210,000

105,000

expense

F-34

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

15.

STOCK COMPENSATION - CONTINUED

Stock Options

The Company granted to Hans Rigendinger, in connection with his employment contract,

10,000,000 options on January 1, 2013. Each option entitles Mr. Rigendinger to buy one Company

share at a strike price of $ 0.05. These options will be vested in two identical installments

(installment A and B) of 5,000,000 options.

For installment A, it is required to complete a financing arrangement with a specific counterparty.

As of grant date, the fair value was $300,000. As of July 4, 2013, the Company assessed that this

financing arrangement with the specific counterparty will not be completed. Therefore the

Company assessed the probability of completion to be zero and therefore no expense has been

recognized for the stock options with installment A up to July 4, 2013. On July 4, 2013, the

Company authorized a revised stock option agreement with Hans Rigendinger. This revised

agreement does not longer require that the financing arrangement needs to be concluded with a

specific counterparty. Therefore the options could be vested if such financing arrangement

(so-called main financing arrangement for Paradisus Papagayo Bay Resort & Luxury Villas) has

been concluded with any counterparty. As of date of the revised stock option agreement (July 4,

2013) the fair value was $246,000. As per December 31, 2013, the Company expects the

completion of the main financing by March 31, 2014. Installment A granted to Mr. Rigendinger

was modified on July 4, 2013, since the initial performance condition was improbable to be met.

Since the modification changed the expectation that the options will ultimately vest and no expense

had been recognized for the original award, the fair value of the modified award will be expensed

on a straight line basis over the expected vesting period.

For installment B, it is required that the Company completes the Paradisus Papagayo Bay Resort &

Luxury Villas (see Note 18) by the thereinafter mentioned date of July 1, 2015, and Melía assumes

management responsibilities for the property. As of grant date, the fair value was $340,000. As of

December 31, 2013, the Company assessed that the probability that this performance condition will

be met at 100%. Hence, the fair value of the award will be expensed on a straight-line basis over the

expected vesting-period.

The Company granted to Dr. Max Rössler, in connection with his election to the board of directors,

10,000,000 options on July 3, 2013. Each option entitles Mr. Rössler to buy one Company share at

a strike price of $ 0.05. These options will be vested in two identical installments (installment A

and B) of 5,000,000 options.

For installment A (5,000,000 options), it is required to complete a financing arrangement (main

financing arrangement for Paradisus Papagayo Bay Resort & Luxury Villas). As of grant date, the

fair value was $ 249,835. As of December 31, 2013, the Company expects the completion of the

main financing by March 31, 2014. Hence, the fair value of the award will be expensed on a

straight-line basis over the expected vesting-period.

F-35

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

15.

STOCK COMPENSATION - CONTINUED

Stock Options - Continued

For installment B (5,000,000 options), it is required that the Company completes the Paradisus

Papagayo Bay Resort & Luxury Villas (see Note 18) by the thereinafter mentioned date of July 1,

2015 and Melía assumes management responsibilities for the property. As of grant date the fair

value was $258,210. As of date of December 31, 2013, the Company assessed the probability that

this performance condition will be met at 100%. Hence, the fair value of the award will be

expensed on a straight-line basis over the expected vesting-period.

The Company granted to Josef Mettler, in connection with his employment contract, 12,000,000

options on July 4, 2013. Each option entitles Mr. Mettler to buy one Company share at a strike price

of $ 0.05. These options will be vested in three installments. Installment A includes 3,000,000

options, installment B 4,000,000 options and installment C 5,000,000 options.

For installment A (3,000,000 options), it is required to complete a financing arrangement (bridge

financing). As of grant date the fair value was $149,000. Originally the Company assessed that this

financing arrangement (bridge-financing) should be completed by December 31, 2013. The

Company was requested to reassess the assessment end expects now that this bridge financing

should be finalized by end of March 31, 2014. The corresponding service costs have been

recalculated and will be expensed over the remaining period on a straight-line-basis.

For installment B (4,000,000 options), it is required to complete a financing arrangement (main

financing arrangement for Paradisus Papagayo Bay Resort & Luxury Villas). As of grant date the

fair value was $200,000. As of December 31, 2013, the Company expects the completion of the

main financing by March 31, 2014. Hence, the fair value of the award will be expensed on a

straight-line basis over the expected vesting-period.

For installment C (5,000,000 options), it is required that the Company completes the Paradisus

Papagayo Bay Resort & Luxury Villas (see Note 18) by the thereinafter mentioned date of July 1,

2015 and Melía assumes management responsibilities for the property. As of grant date the fair

value was $258,000. As of date of December 31, 2013, the Company assessed the probability that

this performance condition will be met at 100%. Hence, the fair value of the award will be

expensed on a straight-line basis over the expected vesting-period.

A summary of stock options outstanding as per December 31, 2013 is as follows (for the previous

year no stock options have been granted):

Options outstanding

Number of

Weighted average

Options

exercise price

remaining

contractual life

Outstanding January 1, 2013

Granted

32,000,000

$ 0.05

9.42 years

Exercised

Forfeited or expired

Outstanding December 31, 2013

32,000,000

$ 0.05

9.42 years

Exercisable December 31, 2013

F-36

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

15.

STOCK COMPENSATION - CONTINUED

Stock Options - Continued

The following table depicts the Company’s non-vested options as of December 31, 2013 and

changes during the period:

Non-vested options

Shares under Options

Weighted average grant date

fair value

Non-vested at December 31, 2012

Non-vested-granted

32,000,000

$ 0.052

Vested

Non-vested, forfeited or canceled

Non-vested at December 31, 2013

32,000,000

$ 0.052

Under the provisions of FASB ASC Topic 718, 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 assumption are based on historical and or if available

market information. The following assumptions were used to calculate the compensation expense

and the calculated fair value of stock options granted:

Assumption

December 31, 2013

December 31, 2012

Dividend yield

None

---

Risk-free interest rate used (average)

1.62 %

---

Expected market price volatility

80.00%

---

Average expected life of stock options

5.625 years

---

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.

As of December 31, 2013, the Company had unrecognized compensation expenses related to stock

options currently outstanding, to be recognized in future quarters respectively years as follows:

Stock-based compensation (options)

December 31, 2014

December 31, 2015

Unrecognized compensation expense

670,255

194,331

Summary of share based compensation expense

The Company recorded the following amounts related to stock based compensation expense during

the periods ended December 31, 2013:

Summary of share and option based compensation

December 31, 2013

December 31, 2012

expense

Option grants

837,816

---

Share grants

1,145,000

---

Total (recorded under general & administrative expense)

1,982,816

---

F-37

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

16.

FUTURE LEASE COMMITMENTS

On December 1, 2012, the Company entered into a lease agreement for the premises for its Swiss

office with an unrelated entity. The annual rental expense amounts to approximately $130,000 on a

fixed term expiring on December 31, 2017.

17.

NOTE PAYABLE

As part of the completion of the purchase of AdR (refer to note 6) on March 9, 2013, the parties

have agreed that a remaining part of the purchase price of $2,000,000 are converted into a non

interest bearing and uncollateralized loan payable which will be due for payment on. March 8,

2014.

On February 19, 2014 the Company agreed with the counterparty to prolong the due date for the

note payable up to February, 2015.

18.

OPENING DATE “Paradisus Papagayo Bay Resort & Luxury Villas”

The official opening of the “Paradisius Papagayo Bay Resort & Luxury Villas” has been delayed

by a few months due to geological difficulties encountered during earthwork operations in August

and September 2013. Due to these geological difficulties some rock demolition became necessary.

On September 6, 2013 the Company amended its agreement with Melía (“5th addendum to the

management agreement of March 8, 2011”) to postpone the opening date as follows:

— The construction of the “Paradisus” will be completed by July 1, 2015

— Should the “Paradisus” not be completed by July 1, 2015, (subject to force majeure) and should an extension date

not be agreed, subsequent to July 1, 2015, the Company will be obligated to pay Melía a daily amount of $2,000 as

liquidated damages

— Should the Company be unable to complete the construction of the “Paradisus” by October 1, 2015, Melía, can

terminate the management agreement obligating the Company to compensate Melía in the amount of $5,000,000

unless the respective parties agree to extend such date.

On March 6, 2014 the Company has been forced to postpone the opening date of the “Paradisius

Papagayo Bay Resort & Luxury Villas”. The opening is now expected to be not before the 4^th

Quarter 2015. Reasons for this further postponing are amongst others:

— Major changes within the project, which has been requested by Melía.

— Further geotechnical difficulties.

— Unexpected special permit has been necessary for earth works towards the beach (so-called maritime law 21 in

Costa Rica).

The Company is in negotiations and discussions with Melía to amend the contract and to avoid

potential penalties and compensation as mentioned above.

F-38

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

19.

MANGEMENT AGREEMENT WITH MELÍA HOTELS AND RESORTS

In March 2011, the Company concluded a management agreement for the management of the

planned resort in Guanacaste, Costa Rica. This agreement has included a clause saying that if

SunVesta AG were not able to conclude the purchase of the related property by November 30,

2011, then a penalty of $1 million would become due to Melía. Therefore the Company has

recorded a liability in accrued expenses in the full amount as of December 31, 2011, with the

corresponding expense, which was recorded in general and administrative expense in the year

ended December 31, 2011. On March 3, 2012, the deadline to pay the penalty of $1 million was

extended by Melía. to June 30, 2012. On June 30, 2012 neither the whole penalty nor a part of the

penalty was paid. Therefore the deadline to pay the penalty of $1 million was extended on June 30,

2012 up to August 31, 2012. Neither on August 31, 2012, nor on December 31, 2012, was the

whole penalty or a part of the penalty was paid although the deadline of August 31, 2012, to pay the

penalty of $1 million was expired. Hence, the penalty of $1 million remained in accrued expenses

as of December 31, 2012. On February 5, 2013, the Company extended the deadline to complete

the purchase of the property pursuant to the terms of the management agreement with Melía, to

March 15, 2013, and agreed that the penalty of $1 million would be waived if the purchase was

completed by March 15, 2013. The purchase of the property was finally concluded on March 9,

2013. Since the Company concluded the purchase of the property within the extension period the

penalty otherwise payable to Melía and the corresponding allowance was eliminated as of March 9,

2013. Therefore, the Company has released the accrual of $1 million related to this transaction in

the period ended December 31, 2013.

20.

SEGMENT INFORMATION

The chief operating decision maker (“CODM”) is the Company’s CEO. Neither the CODM nor the

Company’s directors receive disaggregated financial information about the locations in which

project development is occurring. Therefore, the Company considers that it has only one reporting

segment.

The following table presents the Company’s tangible fixed assets by geographic region:

December 31, 2013

December 31, 2012

Location of tangible assets

Switzerland

193,617

207,582

Costa Rica

43,178,597

16,591,958

Total

43,372,214

16,799,540

F-39

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

21.

EARNINGS PER SHARE

Basic earnings per share are the result of dividing the Company’s net income (or net loss) by the

weighted average number of shares outstanding for the contemplated period. Diluted earnings per

share are calculated applying the treasury stock method. When there is a net income dilutive effect

all stock-based compensation awards or participating financial instruments are considered. When

the Company posts a loss, basis loss per share equals diluted loss per share. The following table

depicts how the denominator for the calculation of basic and diluted earnings per share was

determined under the treasury stock method.

Earnings per share

Year Ended

December 31, 2013

December 31, 2012

Company posted

Net loss

Basic weighted average shares outstanding

76,171,495

54,092,186

Dilutive effect of common stock equivalents

None

Dilutive weighted average shares outstanding

76,171,495

54,092,186

The following table shows the number of stock equivalents that were excluded from the

computation of diluted earnings per share for the respective period because the effect would have

been anti-dilutive.

Earnings per share

Year Ended

December 31, 2013

December 31, 2012

Shares to be issued to Mr. Rigendinger in

None

17,949,417

connection with the debt settlement agreement

Conversion feature loan to Aires International

None

13,523,047

Investment Inc.

Shares to Hans Rigendinger (retention bonus)

12,500,000

None

Options to Hans Rigendinger

10,000,000

None

Shares to Josef Mettler (retention bonus)

21,000,000

None

Options to Josef Mettler

12,000,000

None

Options to Dr. M. Rössler

10,000,000

None

Total

65,500,000

31,472,464

Regarding shares to be issued to Mr. Rigendinger in connection with the debt settlement agreement

we refer to Note 11 Related Party Transactions, Debt Settlement Agreements.

Additional information regarding conversion feature loan to Aires International Investment Inc. see

Note 10, Receivables from and payables to related parties.

Detailed information regarding share and option based payments see Note 15 Stock Compensation.

F-40

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

22.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses according consolidated statement of comprehensive loss

include:

General and administrative expenses

December 31, 2013

December 31, 2012

Rental & related expenses

171,200

127,248

Audit

174,344

226,380

Consulting

1,586,226

995,384

Marketing, Investor & public relations

135,681

8,458

Travel expenses

635,382

571,323

Personnel costs including social security’s costs and share

based remuneration

3,268,279

1,403,434

Various other operating expenditures

778,434

1,134,788

Write-off Hotel Project Atlanta

1,573,957

Total according statement of comprehensive loss

8,323,503

4,467,015

F-41

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

23.

SUBSEQUENT EVENTS

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

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

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

except for the below:

Loan agreement Swisshome Real Estate AG

On January 20, 2014, the Company concluded a short term loan agreement with Swisshome Real

Estate AG, Zurich in the amount of CHF 3.0 million (approximately $3.35 million). This short term

loan is repayable on April 30, 2014. Instead of interest Swisshome Real Estate AG will receive a

lump sum of CHF 100,000 (approximately $111,000) as reimbursement, which amount is

equivalent to an approximate effective yearly interest of 11.98%.

Election of directors and share based remuneration

On March 10, 2014, Mr. José Maria Figueres and Mr. Howard M. Glicken were appointed to the

Company’s board of directors. The new board members, Mr. Figueres and Mr. Glicken, entered

with the Company into a compensation arrangement as described hereinafter:

— 500,000 shares of the Company’s restricted common stock to each director

— 200,000 shares of the Company’s restricted common stock on each annual anniversary of services provided to the

board of directors

Credit approval Banco Nacional, San José, Costa Rica

On March 13, 2014, the Company received conditional approval for a credit facility of $50,000,000

from Banco Nacional, San José, Costa Rica, subject to the fulfillment of certain legal and financial

conditions, including but not limited to, increasing the capitalization of AdR to a minimum of $10,000,000.

The Company expects to fulfill all these conditions. The credit facility is expected to be part of a syndicated

loan in the aggregate amount of $100,000,000 which amount may be allocated in equal shares between

Banco de Costa Rica and Banco Nacional. However, we have not received notice of Banco Costa Rica’s

conditional participation. Should we meet the conditions of the loan and the anticipated credit facility made

available to us, we do not expect to be able to draw against same before the middle of 2014.

F-42

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A.

CONTROLS AND PROCEDURES

Management's Annual Report on Internal Control over Financial Reporting

Evaluation of Disclosure Controls and Procedures

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

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

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

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

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

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

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

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

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

this report, that the Company’s disclosure controls and procedures were ineffective in recording,

processing, summarizing, and reporting information required to be disclosed, within the time periods

specified in the Commission’s rules and forms, and such information was not accumulated and

communicated to management, including the chief executive officer and the chief financial officer, to allow

timely decisions regarding required disclosures.

Management’s Report on Internal Control over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control

over financial reporting. The Company’s internal control over financial reporting is a process, under the

supervision of the chief executive officer and the chief financial officer, designed to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of the Company’s financial

statements for external purposes in accordance with United States generally accepted accounting principles

(GAAP). Internal control over financial reporting includes those policies and procedures that:

— pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the

transactions and dispositions of the Company’s assets

— provide reasonable assurance that transactions are recorded as necessary to permit preparation of the

financial statements in accordance with generally accepted accounting principles, and that receipts

and expenditures are being made only in accordance with authorizations of management and the

board of directors

— provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,

use, or disposition of the Company’s assets that could have a material effect on the financial

statements

Due to its inherent limitations, internal control over financial reporting may not prevent or detect

misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk

that controls may become inadequate because of changes in conditions or that the degree of compliance

with the policies or procedures may deteriorate.

The Company’s management conducted an assessment of the effectiveness of our internal control over

financial reporting as of December 31, 2013, based on criteria established in Internal Control – Integrated

Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission,

which assessment identified material weaknesses in internal control over financial reporting.

A material weakness is a control deficiency, or a combination of deficiencies in internal control over

financial reporting that creates a reasonable possibility that a material misstatement in annual or interim

financial statements will not be prevented or detected on a timely basis. Since the assessment of the

effectiveness of our internal control over financial reporting did identify material weaknesses, management

considers its internal control over financial reporting to be ineffective.

The matters involving internal control over financial reporting that our management considered to be

material weaknesses were:

Lack of Appropriate Independent Oversight. The board of directors has not provided an appropriate level

of oversight of the Company’s consolidated financial reporting and procedures for internal control over

financial reporting over the annual period, since it had no independent directors that could have provided an

appropriate level of oversight, including challenging management’s accounting for and reporting of

transactions. Accordingly we determined that this control deficiency as of December 31, 2013, constituted

a material weakness.

Failure to Segregate Duties. Management has not maintained any segregation of duties within the

Company instead relying on a single individual to fill the role of chief executive officer, chief financial

officer and principal accounting officer responsible for a broad range of duties that cannot be reconciled

when necessary with a singular management resource. Accordingly we determined that this control

deficiency as of December 31, 2013, constituted a material weakness.

Insufficient accounting resources. Management had insufficient accounting resources, which also lead to

failure of segregate duties and lack of appropriate independent oversight (as mentioned above).

Accordingly, we determined as of December 31, 2013, that the insufficient accounting resources are part of

the material weaknesses as stated above.

US GAAP knowledge. Management has engaged an external consultant to counter the internal lack of US

GAAP knowledge. Nonetheless, internally there is a lack of US GAAP knowledge, therefore, the work of

the external consultant is also affected by the lack of appropriate independent oversight and the failure to

segregate duties. Accordingly, we determined as of December 31, 2013, that the internal lack of US GAAP

knowledge is part of the material weaknesses as stated above.

As a result of the material weaknesses in internal control over financial reporting described above, the

Company’s management has concluded that, as of December 31, 2013, that the Company’s internal control

over financial reporting was not effective based on the criteria in Internal Control – Integrated Framework

issued by the COSO. The Company intends to remedy its material weaknesses by:

— forming an audit committee made up of independent directors that will oversee management

— engaging an individual to serve as chief financial officer and principal accounting officer to segregate

the duties of chief executive officer and chief financial officer

— engaging a new accounting officer that has a working knowledge of GAAP accounting

Since the end of the current reporting period the Company has moved towards overcoming a lack of

independent oversight with the appointment of two new independent members to the board of directors,

who might serve as a basis around which to form an audit committee and expects to segregate the duties of

chief executive officer and chief financial officer in the near term.

This annual report does not include an attestation report of our independent registered public accounting

firm regarding internal control over financial reporting. We were not required to have, nor have we,

engaged our independent registered public accounting firm to perform an audit of internal control over

financial reporting pursuant to the rules of the Commission that permit us to provide only management’s

report in this annual report.

Changes in Internal Controls over Financial Reporting

During the period ended December 31, 2013, there has been no change in internal control over financial

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

financial reporting.

9B.

OTHER INFORMATION

None.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Officers and Directors

The following table sets forth the name, age and position of the director and executive officers of the

Company:

Name

Age

Year

Positions Held

Appointed

Josef Mettler

2008

CEO, CFO, PAO and Director

Hans Rigendinger

2013

COO and Director

Dr. Max Rössler

2013

Director

José Maria Figueres

2014

Director

Howard Glicken

2014

Director

Josef Mettler was appointed chief executive officer, chief financial officer, principal accounting officer,

and director of the Company on September 16, 2008.

Mr. Mettler also serves as a director of SunVesta AG, a wholly owned subsidiary of the Company.

Business Experience

From 1995 until 2005 Mr. Mettler was co-owner and managing director of BonneVille Group AG, a Swiss

company specializing in information technology services. Mr. Mettler was responsible for marketing,

business development, and IT project management. While at BonneVille he co-founded OpenLimit

Holding AG, a Swiss IT company specializing in encryption and digital signature technologies. Between

2005 and 2007 Mr. Mettler formed SunVesta AG and developed the SunVesta business model. In 2008 Mr.

Mettler launched QuadEquity SPC, a private equity hedge fund.

Officer and Director Responsibilities and Qualifications

Mr. Mettler is responsible for the overall management of the Company and is involved in many of its

day-to-day operations, finance and administration.

Mr. Mettler earned a BA in Economics from OEKREAL Business & Management School, Zurich

(Switzerland). He also graduated as a Business Data Processing Specialist.

Other Public Company Directorships in the Last Five Years

None.

Hans Rigendinger was appointed as chief operating officer and as a director on January 1, 2013.

Mr. Rigendinger also serves as a director of SunVesta AG.

Business Experience

Since early 1972 to present, Mr. Rigendinger has led his own engineering firm in the planning and

implementation of a variety of commercial projects employing a staff of up to 40 employees. Over this time

span Mr. Rigendinger and his company have been responsible for the planning and implementation of over

300 bridge structures, approximately 500 buildings and a few dozen large industrial plants. Since 1995, Mr.

Rigendinger has been involved in several real estate projects that have included commercial, residential and

tourist properties. He has also spent the last 15 years supporting the development and expansion of an

industrial waste glass recycling company. Mr. Rigendinger has been actively involved in the development

of SunVesta AG since 2007.

Officer and Director Responsibilities and Qualifications

Mr. Rigendinger’s knowledge, experience and solid know-how in the field of civil engineering and real

estate is extremely valuable to the Company’s operations as it moves forward with the development of the

Paradisus Papagayo Bay Resort & Luxury Villas.

Mr. Rigendinger earned a Masters Degree in Civil Engineering, with an emphasis on supporting structures

and foundations (Civil and Structural Engineering) at the Swiss Federal Institute of Technology in 1969.

Other Public Company Directorships in the Last Five Years

None.

Dr. Max Rössler was appointed as a director of the Company on July 3, 2013.

Dr. Rössler also serves as a director of SunVesta AG.

Business Experience

Dr. Rössler has lectured and been involved in research as a professor at ETH in the fields of applied

mathematics and operations research. During his tenure with ETH, Dr. Rössler began to apply

mathematical methods to problems related to financial investments. Dr. Rössler joined Credit Suisse in

1978 as head analyst of the department for fixed income products. Since 1997, Dr. Rössler has worked with

SUVA (Swiss National Accident Insurance Fund) as a manager of a portion of their fixed-income

investments and currently holds advisory board mandates for two Swiss private banks.

Officer and Director Responsibilities and Qualifications

Dr. Rössler’s knowledge, and experience with fixed income investments is extremely valuable to the

Company’s board of directors as it moves forward with financing its business model.

Dr. Rössler studied mathematics at the Swiss Federal Institute of Technology Zurich (ETH) and

obtained his doctorate at Harvard University.

Other Public Company Directorships in the Last Five Years

None.

José Maria Figueres was appointed as a director of the Company on March 10, 2014.

Business Experience

Following his graduate studies at Harvard, Mr. Figueres was elected as the President of Costa Rica in 1994,

a position in which he served for four years. When his service as President came to an end, Mr. Figueres

was appointed to the board of directors of Terremark Worldwide, Inc., a global IT company that provided

industry managed services such as cloud computing, collocation and web hosting solutions for enterprise IT

infrastructures. A year after joining Terremark, Mr. Figueres joined the World Economic Forum in Davos,

Switzerland. Five years later, Mr. Figueres undertook a one year assignment as managing director of the

Talal Abu-Ghazaleh Organization, a global consulting group headquartered in Amman, Jordon. Between

2006 and 2009, Mr. Figueres served on the International Advisory Board of Abraaj Capital, a private equity

firm with over $6 billion in assets under management. He then went on to join the Advisory Board of Grupo

Arcano, a financial services firm based in Madrid, Spain, a leading boutique for investment banking and

asset management services. Mr. Figueres joined IJ Partners in Geneva, Switzerland, as a managing partner

in 2010. Since 2010, Mr. Figueres has served as the Chairman of the Carbon War Room, an independent

non-profit organization focused on the global transition to a low carbon economy. Mr. Figueres was

appointed President of the Carbon War Room in 2012.

Officer and Director Responsibilities and Qualifications

Mr. Figueres’s knowledge, experience and business acumen on a global level in addition to his direct

connection to Costa Rica is extremely valuable to the Company’s board of directors as it moves forward

with its hotel development in Costa Rica.

Mr. Figueres completed his undergraduate studies at the United States Military Academy (West Point) and

completed his Masters Degree in Public Administration at the John F. Kennedy School of Government at

Harvard University.

Other Public Company Directorships in the Last Five Years

None.

Howard H. Glicken was appointed as a director of the Company on March 10, 2014.

Business Experience

Between 1972 and 1981 Mr. Glicken served as the Chief Executive Officer and Chairman of the Board of

MGI Industries, which company controlled the design and manufacture of extrusion tools for the metals

industry in Latin America. Mr. Glicken joined Jillian’s Entertainment Corporation in 1983 to serve as its

Chairman and Chief Executive Officer until 1992. Over this period Jillian’s became one of the largest

United States purchasers of Latin American gold ore. Following his tenure at Jillian’s, Mr. Glicken was

appointed Chairman of the Commonwealth Group, a Washington, D.C. public policy and consulting firm

with extensive business activities in Latin America. Mr. Glicken worked with the Commonwealth Group

until 1996 before forming the America’s Group. He currently serves as Chairman and Chief Executive

Officer of the America’s Group, a Miami based consulting/merchant banking firm focused solely on Latin

America, Mexico and the Caribbean.

Officer and Director Responsibilities and Qualifications

Mr. Glicken years of business and political experience in Latin America is extremely valuable to the

Company’s board of directors as it seeks to garner the attention of those in the region that might assist in the

development of its hotel project in Costa Rica.

Mr. Glicken attended the University of Florida, the American Banking Institute and the Harvard University

Advanced Institute on Negotiation.

Other Public Company Directorships in the Last Five Years

None.

Family Relationships

There are no family relationships between or among the directors or executive officers.

Involvement in Certain Legal Proceedings

During the past ten years there are no events that occurred related to an involvement in legal proceedings

that are material to an evaluation of the ability or integrity of the Company’s directors, or persons

nominated to become directors or executive officers.

Term of Office

Our directors were appointed for a one (1) year term to hold office until the next annual meeting of our

shareholders or until removed from office in accordance with our bylaws. Our officers were appointed by

our board of directors and will hold office until removed by the board.

No other persons are expected to make any significant contributions to the Company’s executive decisions

who are not executive officers or directors of the Company.

Compliance with Section 16(A) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires officers and directors and persons who own

more than ten percent of a registered class of our equity securities to file reports of ownership and changes

in their ownership with the Commission, and forward copies of such filings to us. Based solely upon a

review of Forms 3, 4 and 5 furnished to us, we are not aware of any persons who, during the period ended

December 31, 2013, failed to file, on a timely basis, reports required by Section 16(a) of the Exchange Act

except the following:

Josef Mettler failed to file a Form 4 or Form 5 in connection with changes in stock ownership

Hans Rigendinger failed to file a Form 3, Form 4 or Form 5 in connection with his appointment to the board of

directors and changes in stock ownership

Dr. Max Rössler failed to file a Form 3, Form 4 or Form 5 in connection with his appointment to the

appointment to the board of directors and changes in stock ownership.

Code of Ethics

We have adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-K of the Securities

Exchange Act of 1934 that applies to directors and senior officers, such as the principal executive officer,

principal financial officer, controller, and persons performing similar functions. The Company has

incorporated a copy of its Code of Ethics as Exhibit 14 to this Form 10-K. Further, our Code of Ethics is

available in print, at no charge, to any security holder who requests such information by contacting us.

Board of Directors Committees

The board of directors has not established an audit committee. An audit committee typically reviews, acts

on and reports to the board of directors with respect to various auditing and accounting matters, including

the recommendations and performance of independent auditors, the scope of the annual audits, fees to be

paid to the independent auditors, and internal accounting and financial control policies and procedures.

Certain stock exchanges currently require companies to adopt a formal written charter that establishes an

audit committee that specifies the scope of an audit committee’s responsibilities and the means by which it

carries out those responsibilities. In order to be listed on any of these exchanges, the Company would be

required to establish an audit committee.

The board of directors has not established a compensation committee, nominating committee or compliance

with ethics committee.

Director Compensation

Our directors are currently not reimbursed for out-of-pocket costs incurred in attending meetings though

same are compensated for services as a director of the Company in the form of stock options through our

2013 Stock Option Plan and stock awards. Cash compensation is also paid in certain instances to directors

of our subsidiary companies, including our chief executive officer.

The Company has compensated directors in the past and may adopt additional provisions for compensating

directors for their services in the future.

ITEM 11.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Our chief executive officer has an employment agreement dated July 4, 2013, with the Company pursuant

to which he receives a base salary and is entitled to receive a bonus for his service to the Company in

addition to certain benefits including per diem allowances, car allowances, housing allowances, and

representation allowances. The employment agreement also provides for a signing bonus payable in cash

and Company stock, stock options and an annual retention award. The initial term of the employment

agreement expires on December 31, 2016, and can be renewed for two successive two year terms. The

compensation package is deemed appropriate for our chief executive officer and was approved by the

Company’s board of directors based on compensatory packages similar to other development stage

companies. While we believe that our current approach to executive compensation is appropriate, we

expect to expand our executive compensation program to other individuals as our business warrants.

For the year ended December 31, 2013, $2,998,000 was paid to our chief executive officer of that amount

$432,000 was salary, $72,000 was a signing bonus, $1,820,000 in restricted common stock, $607,000 in

stock options and $67,000 in all other compensation of which $1,000 was for housing benefits in Costa

Rica, $18,000 for out of pocket expenses, and $48,000 was for car allowances.

For the year ended December 31, 2012, $500,000 was paid to our chief executive officer of which $390,000

was in salary, $39,000 was in housing benefits in Costa Rica, $20,000 for out of pocket expenses, $39,000

was for car allowances and $12,000 was for serving on the board of directors of SunVesta AG and

SunVesta Projects & Management AG.

The increase in 2013 annual compensation over that compensation realized by our chief executive officer in

2012 can be primarily attributed to the fair value attributed to non-cash items such as restricted common

stock and stock options.

Our chief operating officer has an employment agreement dated December 31, 2012, with the Company

pursuant to which he receives a base salary and is entitled to receive a bonus for his service to the Company

in addition to certain benefits including per diem allowances, car allowances, housing allowances, and

representation allowances. The employment agreement also provides for a signing bonus payable in

Company stock, stock options and an annual retention award. The initial term of the employment

agreement expires on December 31, 2015, and can be renewed for two successive one year terms. The

compensation package is deemed appropriate for our chief operating officer and was approved by the

Company’s board of directors based on compensatory packages similar to other development stage

companies.

For the year ended December 31, 2013, $2,196,000 was paid to our chief operating officer of that amount

$240,000 was salary, $1,280,000 in restricted common stock, $640,000 in stock options and $36,000 in all

other compensation all of which was for car allowance.

The 2013 annual compensation realized by our chief operating officer in 2013 can be primarily attributed to

the fair value attributed of non-cash items such as restricted common stock and stock options.

While we believe that our current approach to executive compensation is appropriate at this time, we expect

to expand our executive compensation program to other individuals as our business warrants.

The following table provides summary information for the years ended December 31, 2013 and 2012

concerning cash and non-cash compensation paid or accrued by the Company to or on behalf of (i) the chief

executive officer and (ii) any other employee to receive compensation in excess of $100,000:

Executive Summary Compensation Table

Name and

Year

Salary

Bonus

Stock

Option

Non-Equity

Change in

All Other

Total

Principal

($)

Awards

Incentive Plan

Pension Value

Compensation

($)

Position

($)

($)⁽¹⁾

Compensation

and

($)

Nonqualified

Deferred

Compensation

($)

Josef Mettler

2013

432,000

72,000

1,820,000 607,000

67,000 2,998,000

CEO, CFO,

2012

390,000

110,000

500,000

PAO

Hans

2013

240,000

1,280,000 640,000

36,000 2,196,000

Rigendinger

2012

COO

⁽¹⁾ See Note 15 to the audited financial statements included in this Form 10-K for the year ended December 31, 2013, for further

information concerning the Company’s reliance on the Black Sholes option-pricing model to calculate the fair value of stock

options

Outstanding Equity Awards

The following table provides summary information for the period ended December 31, 2013 concerning

unexercised options, stock that has not vested, and equity incentive plan awards by the Company to or on

behalf of (i) the chief executive officer and chief financial officer and (ii) the three most highly

compensated individuals whose total compensation exceeds $100,000:

Outstanding Equity Awards at Fiscal Year-End

Option awards

Stock awards

Numb

Equity

er of

Equity

incentive

incentive plan

plan

Equity

awards:

units

Market

incentive plan market or

Number of

number of

value of awards:

payout value

securities

stock

shares or number of

of unearned

underlying

that

units of

unearned

shares, units

unexercised unexercised

unexercised Option

have

stock that shares, units or or other rights

options

unearned

exercise Option

not

have not other rights that that have not

($)

options

price

expiration vested vested

have not vested vested

Name

exercisable unexercisable

($)

date

($)

Josef Mettler

0 12,000,000⁽¹⁾

0.05 July 3, 2023

- 2,100,000

21,000,000⁽³⁾

Hans

Rigendinger

0 10,000,000⁽²⁾

0.05 December

31, 2022

- 1,250,000 12,500,000⁽⁴⁾

⁽¹⁾ Mr. Mettler’s stock options vest on the completion of certain business development milestones as follows: 3,000,000 stock

option on that date on which the Company or a related entity completes a bridge financing for the Papagayo Bay Resort & Luxury

Villas; 4,000,000 stock options on that date on which the Company or related entity completes a financing sufficient to complete the

Papagayo Bay Resort & Luxury Villas; and 5,000,000 stock options on that date on which Mélia assumes management

responsibility for the Papagayo Bay Resort & Luxury Villas.

⁽²⁾ Mr. Rigendinger’s stock options vest on the completion of certain business development milestones as follows: 5,000,000

stock options on that date on which the Company or related entity completes a financing sufficient to complete the Papagayo Bay

Resort & Luxury Villas; and 5,000,000 stock options on that date on which Mélia assumes management responsibility for the

Papagayo Bay Resort & Luxury Villas.

⁽³⁾ Mr. Mettler’s equity incentive shares are characterized as a retention award of which 3,000,000 shares are earned on each

anniversary of his term of employment over an initial term of three years that will automatically renew for two successive two

year terms to a maximum of 21,000,000 shares subject to earlier termination.

⁽⁴⁾ Mr. Rigendinger’s equity incentive shares are characterized as a retention award of which 2,500,000 shares are earned on each

anniversary of his term of employment over an initial term of three years that will automatically renew for two successive one

year terms to a maximum of 12,500,000 shares subject to earlier termination.

⁽⁵⁾ The per share value at December 31, 2013 was $0.10.

2013 SunVesta Stock Option Plan

Our board of directors adopted and approved the 2013 SunVesta Stock Option Plan (“Plan”) on January 1,

2013, which provides for the granting and issuance of up to 50,000,000 million shares of our common

stock. The Company has granted 32,000,000 stock options from the Plan at a $0.05 exercise price per

share for ten years. The Stock Option Plan has 18,000,000 options available for future grant.

Our board of directors administers our Plan, however, they may delegate this authority to a committee

formed to perform the administration function of the Plan. The board of directors or a committee of the

board has the authority to construe and interpret provisions of the Plan as well as to determine the terms of

an award. Our board of directors may amend or modify the Plan at any time. However, no amendment or

modification shall adversely affect the rights and obligations with respect to outstanding awards unless the

holder consents to that amendment or modification.

We have no agreement that provides for payments to our chief executive officer or chief operating officer

at, following, or in connection with his resignation or retirement except any accrued obligations and the

continuation of health insurance or pension benefits. However, both employment agreements do provide for

a severance payment in the event of a change of control, a change in our officer’s responsibilities within the

Company, either before or after a change in control, and their resignation for what is defined in his

employment agreement as “good reason”

We do maintain a pension plan covering all employees in Switzerland. Our model allocates pension costs

over the service period of employees eligible for the plan.

The following table provides summary information for the year ended December 31, 2013, concerning cash

and non-cash compensation paid or accrued by the Company to or on behalf of its directors.

Director Summary Compensation Table

Name

Fees earned

Stock

Option

Non-equity

Nonqualified

All other

Total

or paid in

awards

Awards

incentive plan

deferred

compensation

($)

cash

($)

($)⁽¹⁾

compensation

($)

Josef Mettler

Hans Rigendinger

Dr. Max Rössler

- 210,000

508,045

718,045

⁽¹⁾ Dr. Rössler’s stock options vest on the completion of certain business development milestones as follows: 5,000,000 stock

options on that date on which the Company or related entity completes a financing sufficient to complete the Papagayo Bay

Resort & Luxury Villas; and 5,000,000 stock options on that date on which Mélia assumes management responsibility for the

Papagayo Bay Resort & Luxury Villas.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information concerning the ownership of the Company’s 83,581,445

shares of common stock issued and outstanding as of December 31, 2013 with respect to: (i) all directors;

(ii) each person known by us to be the beneficial owner of more than five percent of our common stock; and

(iii) our directors and executive officers as a group.

	*Title of Class*	*Number of Shares*	*Percent of* *Class*
Joseph Mettler CEO, CFO, PAO and Director 97 Seestrasse, CH-8942 Oberrieden, Switzerland	Common	8,191,514⁽¹⁾	9.8%
Hans Rigendinger COO and Director 97 Seestrasse, CH-8942 Oberrieden, Switzerland	Common	22,716,084⁽²⁾	27.2%
Dr. Max Rössler Director 97 Seestrasse, CH-8942 Oberrieden, Switzerland	Common	3,000,000⁽³⁾	3.6%
José Maria Figueres Director 97 Seestrasse, CH-8942 Oberrieden, Switzerland	Common	0⁽⁴⁾	0.0%
Howard M. Glicken Director 97 Seestrasse, CH-8942 Oberrieden, Switzerland	Common	0⁽⁵⁾	0.0%
*Officer and directors (5) as a group*	*Common*	*33,907,598*	*40.6%*
Zypam Ltd. Jasmin Court 35A, Regent Street P.O. Box 1777, Belize City, Belize	Common	2,418,180	2.9%

⁽¹⁾ Common stock attributed to Mr. Mettler includes 2,418,180 shares attributed to Zypam Ltd., a related entity. Mr. Mettler also

holds 12,000,000 unvested stock options granted pursuant to the 2013 SunVesta Stock Option Plan, to purchase additional shares of

the Company’s common stock at an exercise price of $0.05, subject to vesting based on the achievement of certain milestones tied

to the development of the Paradisus Papagayo Bay Resort & Luxury Villas and the right to earn up to an additional 21,000,000

shares as a retention award of 3,000,000 shares issued on each anniversary of his employment agreement to earlier termination.

⁽²⁾ Mr. Rigendinger also holds 10,000,000 unvested stock options granted pursuant to the 2013 SunVesta Stock Option Plan, to

purchase additional shares of the Company’s common stock at an exercise price of $0.05, subject to vesting based on the

achievement of certain milestones tied to the development of the Paradisus Papagayo Bay Resort & Luxury Villas and the right to

earn up to an additional 12,500,000 shares as a retention award of 2,500,000 shares issued on each anniversary of his employment

subject to earlier termination.

⁽³⁾ Dr. Rössler also holds 10,000,000 unvested stock options granted pursuant to the 2013 SunVesta Stock Option Plan, to purchase

additional shares of the Company’s common stock at an exercise price of $0.05, subject to vesting based on the achievement of

certain milestones tied to the development of the Paradisus Papagayo Bay Resort & Luxury Villas.

⁽⁴⁾ José Maria Figueres was appointed to the Company’s board of directors on March 10, 2014, subsequent to annual period end.

Mr. Figueres was issued 500,000 shares of the Company’s common stock in connection with that appointment and the right to earn

an additional 200,000 shares on each anniversary of service as a director.

⁵⁾ Howard M. Glicken was appointed to the Company’s board of directors on March 10, 2014, subsequent to annual period end.

Mr. Glicken was issued 500,000 restricted common shares of the Company’s common stock in connection with that appointment

and the right to earn an additional 200,000 shares on each anniversary of service as a director.

⁽

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND

DIRECTOR INDEPENDENCE

Neither our directors or executive officers, nor any proposed nominee for election as a director, nor any

person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights

attached to all of our outstanding shares, nor any members of the immediate family (including spouse,

parents, children, siblings, and in−laws) of any of the foregoing persons has any material interest, direct or

indirect, in any transaction since the beginning of our last fiscal year or in any presently proposed

transaction which, in either case, has or will materially affect us except as follows:

On January 1, 2013, the Company made effective an employment agreement with Hans Rigendinger in

connection with this engagement as chief operating officer for an initial three year term and his appointment

to the Company’s board of directors. The compensatory terms of the employment agreement include a

signing bonus of 3,500,000 shares, a base salary of $60,000 per annum, a retention bonus of 2,500,000

shares payable earned on each anniversary of his term of employment over an initial term of three years that

will automatically renew for two successive one year terms to a maximum of 12,500,000 shares subject to

earlier termination and a grant of 10,000,000 stock options with an exercise price of $0.05 that vest

according to the achievement of certain milestones tied to the development of the Paradisus Papagayo Bay

Resort & Luxury Villas.

On July 3, 2013, the Company authorized the issuance of 3,000,000 common shares and the grant of

10,000,000 stock options with an exercise price of $0.05 that vest according to the achievement of certain

milestones tied to the development of the Paradisus Papagayo Bay Resort & Luxury Villas to Dr. Max

Rössler in connection with his appointment to the board of directors.

On July 4, 2013, the Company entered into an employment agreement with Josef Mettler in connection with

this engagement as chief operating officer for an initial four year term. The compensatory terms of the

employment agreement include a signing bonus of 5,000,000 shares, a base salary of $144,000 per annum,

a retention bonus of 3,000,000 shares payable earned on each anniversary of his term of employment over

an initial term of three years that will automatically renew for two successive two year terms to a maximum

of 21,000,000 shares subject to earlier termination and a grant of 12,000,000 stock options with an exercise

price of $0.05 that vest according to the achievement of certain milestones tied to the development of the

Paradisus Papagayo Bay Resort & Luxury Villas.

Over our last fiscal year, the Company paid fees of approximately $291,740 to 4f Capital AG for

commission based financing services rendered by an entity related to Josef Mettler, one of our directors and

chief executive officer.

Over our last fiscal year, the Company paid fees of approximately $120,000 to Akyinyi Interiors and

Exterior Decoration for interior design based consulting services rendered by an entity related to the wife of

Josef Mettler, one of our directors and chief executive officer.

Over the last fiscal year, the Company borrowed $1,065,693 from Josef Mettler at 3% interest on the terms

and conditions of a guaranty agreement to which Mr. Mettler was a signatory in July of 2012. The loan is

expected to be short term with $659,814 due as of the filing date of this report.

Director Independence

The Company is quoted on the Over the Counter Pink Sheets inter-dealer quotation system, which does not

have director independence requirements. However, for purposes of determining director independence, we

have applied the definitions set out in NASDAQ Rule 4200(a)(15). NASDAQ Rule 4200(a)(15) states that

a director is not considered to be independent if he or she is also an executive officer or employee of the

corporation. Accordingly, as of December 31, 2013, we did not consider any of our directors independent

since two are executive officers and one has loaned certain amounts to the Company over time.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fees and Services

BDO Visura International AG (“BDO”) has provided audits of our annual financial statements and a review

of our quarterly financial statements for the periods ended December 31, 2013 and December 31, 2012

respectively. The following is an aggregate of fees billed during each of the last fiscal years for professional

services rendered by each of our principal accountants.

BDO Fees and Services

2013

Audit fees

262,169

Audit-related fees

Tax fees - preparation and filing of three major tax-related forms and tax planning.

All other fees - other services provided by our principal accountants.

Total fees paid or accrued to our principal accountants

262,169

BDO Fees and Services

2012

Audit fees

211,000

Audit-related fees

Tax fees - preparation and filing of three major tax-related forms and tax planning.

All other fees - other services provided by our principal accountants.

Total fees paid or accrued to our principal accountants

211,000

Audit Committee Pre-Approval

We do not have a standing audit committee. Therefore, all services provided to us by BDO, as detailed

above, were pre-approved by our board of directors. BDO performed all work with their permanent

full-time employees.

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Consolidated Financial Statements

The following documents are filed under “Item 8. Financial Statements and Supplementary Data,” pages

F-1 through F-42, and are included as part of this Form 10-K:

Financial Statements of the Company for the years ended December 31, 2013 and 2012:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Stockholders’ Equity (Deficit)

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

(b) Exhibits

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

page 39 of this Form 10-K, and are incorporated herein by this reference.

(c) Financial Statement Schedules

We are not filing any financial statement schedules as part of this Form 10-K because such schedules are

either not applicable or the required information is included in the financial statements or notes thereto.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant

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

SUNVESTA, INC.

Date

/s/ Josef Mettler

April 15, 2014

Josef Mettler

Chief Executive Officer, Chief Financial Officer

Principal Accounting Officer and Director

/s/ Hans Rigendinger

April 15, 2014

Hans Rigendinger

Chief Operating Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by

the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Josef Mettler

Director, Chief Executive Officer,

April 15, 2014

Josef Mettler

Chief Financial Officer, and

Principal Accounting Officer

/s/ Hans Rigendinger

Director, Chief Operating Officer

April 15, 2014

Hans Rigendinger

/s/ Max Rössler

Director

April 15, 2014

Dr. Max Rössler

INDEX TO EXHIBITS

Exhibit

Description

3.1.1*

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

December 31, 1999).

3.1.2*

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

Commission on April 9, 2003).

3.1.3*

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

Commission on November 17, 2003).

3.1.4*

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

on September 27, 2007).

3.2.1*

Bylaws (incorporated by reference from the Form 10-SB filed with the Commission on December 31, 1999).

3.2.2*

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

17, 2003).

10.1*

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

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

Commission on June 21, 2007).

10.2*

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

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

10.3*

Debt Settlement Agreement dated March 1, 2010, between the Company and Zypam, Ltd. (incorporated by

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

10.4*

Debt Settlement Agreement dated March 1, 2010, between the Company and Hans Rigendinger (incorporated

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

10.5*

Guaranty Agreement dated July 16, 2012, between SunVesta AG, Josef Mettler, Hans Rigendinger and Max

Rössler.

10.6*

Employment Agreement dated January 1, 2013 between the Company and Hans Rigendinger (incorporated by

reference to the Form 8-K filed with the Commission on February 4, 2013.

10.7*

Employment Agreement dated July 4, 2013 between the Company and Josef Mettler (incorporated by reference

to the Form 10-Q filed with the Commission on October 10, 2013).

10.8*

Assignment of Debt Agreement dated December 31, 2012, between the Company, SunVesta AG and Aires

International Investments, Inc. (incorporated by reference to the Form 10-Q filed with the Commission on

December 13, 2013).

10.9*

Debt Settlement Agreement dated December 31, 2012, between the Company and Hans Rigendinger

(incorporated by reference to the Form 10-Q filed with the Commission on December 13, 2013).

10.10*

Loan Agreement dated October 31, 2013, between SunVesta AG and Aires International Investments, Inc.

(incorporated by reference to the Form 10-Q filed with the Commission on December 13, 2013).

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 the Company (incorporated by reference from the Form 10-K filed with the Commission on

June 20, 2013).

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.

99*

SunVesta, Inc. 2013 Stock Option Plan (incorporated by reference to the Form 10-Q filed with the Commission

on October 10, 2013).

101. INS

XBRL Instance Document^†

101. PRE

XBRL Taxonomy Extension Presentation Linkbase^†

101. LAB

XBRL Taxonomy Extension Label Linkbase^†

101. DEF

XBRL Taxonomy Extension Label Linkbase^†

101. CAL

XBRL Taxonomy Extension Label Linkbase^†

101. SCH

XBRL Taxonomy Extension Schema^†

Incorporated by reference to previous filings of the Company.

^†

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

Attached files

Stock widget

Investing forum

SUNVESTA, INC. Reports