Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - SUNVESTA, INC. | Financial_Report.xls |
| EX-31 - SUNVESTA CERTIFICATION - SUNVESTA, INC. | exhibit31.htm |
| EX-32 - SUNVESTA CERTIFICATION - SUNVESTA, INC. | exhibit32.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended June 30, 2014.
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)
011 41 43 388 40 60
(Registrant’s telephone number, including area code)
n/a
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes 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 þNo o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest
practicable date. The number of shares outstanding of the issuer’s common stock, $0.01 par value (the only class
of voting stock), at August 19, 2014, was 83,541,603.
1
TABLE OF CONTENTS
PART 1- FINANCIAL INFORMATION
Item1.
3
Consolidated Balance Sheets as of June 30, 2014 (Unaudited) and December 31,
4
2013
Unaudited Consolidated Statements of Operations and Comprehensive Loss
5
(unaudited) for the three and six months ended June 30, 2014 and June 30, 2013
Unaudited Consolidated Statements of Stockholders’ Equity (Unaudited) for the
6
six months ended June 30, 2014 and June 30,2013
Unaudited Consolidated Statements of Cash Flows (unaudited) for the six months
7
ended June 30, 2014 and June 30, 2013
Notes to Unaudited Consolidated Financial Statements
8
Management’s Discussion and Analysis of Financial Condition and Results of
40
Operations
Quantitative and Qualitative Disclosures about Market Risk
53
Controls and Procedures
54
PART II-OTHER INFORMATION
Legal Proceedings
55
Risk Factors
55
Unregistered Sales of Equity Securities and Use of Proceeds
55
Defaults Upon Senior Securities
55
Mine Safety Disclosures
55
Other Information
55
Exhibits
55
56
57
2
PART I – FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
As used herein, the terms “Company,” “we,” “our,” and “us” refer to SunVesta, Inc., a Florida
corporation, and its predecessors and subsidiaries, unless otherwise indicated. In the opinion of
management, the accompanying unaudited, consolidated financial statements included in this Form 10-Q
reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of
the results of operations for the periods presented. The results of operations for the periods presented are
not necessarily indicative of the results to be expected for the full year.
3
SUNVESTA, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2014
December 31, 2013
(Unaudited)
Assets
Current assets
Cash and cash equivalents
$
361,564 $
629,673
Other assets
429,041
21,255
Receivable from related parties
966,455
-
Total current assets
1,757,060
650,928
Non-current assets
Property and equipment - net
48,700,102
43,372,214
Deposits related to construction work
757,429
650,685
Debt issuance costs - net
2,926,247
1,689,023
Down payment for property and equipment
2,369,816
2,369,816
Restricted cash
1,696,788
1,697,974
Total non-current assets
56,450,382
49,779,712
Total assets
$
58,207,442
50,430,640
Liabilities and stockholders' equity (deficit)
Current liabilities
Accounts payable
6,352,549
7,063,070
Accrued expenses
5,837,909
3,276,506
Note payable
3,546,408
2,000,000
Notes payable to related parties
1,112,810
2,721,445
EUR-Bond
-
5,786,248
Total current liabilities
16,849,676
20,847,269
Non-current liabilities
EUR-Bond
9,756,591
6,757,065
CHF-Bond
20,550,298
8,558,443
Notes payable to related parties
35,026,366
33,409,095
Other long term debts
88,505
30,426
Pension liabilities
91,186
90,524
Total non-current liabilities
65,512,946
48,845,553
Total liabilities
82,362,622
69,692,822
Stockholders' equity (deficit)
Preferred stock, $0.01 par value;
50,000,000 share authorized no shares issued
and outstanding
-
-
Common stock, $0.01 par value;
200,000,000 shares authorized; 83,541,603 and
83,541,603 shares issued and outstanding
835,416
835,416
Additional paid-in capital
22,604,706
21,852,666
Accumulated other comprehensive loss
(2,253,917)
(2,202,914)
Accumulated deficit
(45,341,385)
(39,723,595)
Treasury stock, 0 and 157,220 shares
-
(23,755)
Total stockholders' equity (deficit)
(24,155,180)
(19,262,182)
Total liabilities and stockholders' equity (deficit) $
58,207,442
50,430,640
The accompanying notes are an integral part of these consolidated financial statements.
4
SUNVESTA, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Three months ended June 30,
Six months ended June 30,
2014
2013
2014
2013
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited )
Revenues
Revenues, net
$
-
-
-
-
Cost of revenues
-
-
-
-
Gross profit
-
-
-
-
Operating expenses
General and administrative expenses
$ (1,371,362)
(1,194,746)
(3,423,354)
(2,499,703)
Release of accrual for penalty to Meliá
Hotels & Resorts
-
-
-
1,000,000
Total operating expenses
(1,371,362)
(1,194,746)
(3,423,354)
(1,499,703)
Loss from operations
$ (1,371,362)
(1,194,746)
(3,423,354)
(1,499,703)
Other income / - expenses
Interest income
6,988
6,562
6,990
6,736
Interest expense
(840,851)
(609,356)
(1,395,477)
(1,036,012)
Amortization of debt issuance costs
and commissions
(251,515)
(50,990)
(325,313)
(133,805)
Exchange differences
(245,229)
(231,931)
(402,386)
(88,059)
Change in fair value of conversion
feature
-
36,307
-
(13,874)
Other income / - expenses
(19,726)
(14,149)
(78,250)
(41,181)
Total other income / - expenses
$ (1,350,333)
(863,557)
(2,194,436)
(1,306,195)
Loss before income taxes
$ (2,721,695)
(2,058,303)
(5,617,790)
(2,805,898)
Income Taxes
-
-
-
-
Net loss
$ (2,721,695)
(2,058,303)
(5,617,790)
(2,805,898)
Comprehensive loss
Foreign currency translation
153,809
(100,118)
(51,003)
1,181,288
Comprehensive loss
$ (2,567,886)
(2,158,421)
(5,668,793)
(1,624,610)
Loss per common share
Basic and diluted
$
(0.03)
(0.03)
(0.06)
(0.04)
Weighted average common shares
Basic and diluted
87,041,603
75,541,600
86,646,575
73,396,661
The accompanying notes are an integral part of these consolidated financial statements.
5
SUNVESTA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Common
Additional
Accumulated
Accumulated
Treasury
Total
Stock
Paid in
Other
deficit
Stock
Stockholders’
Capital
Comprehensive
Equity
Income (Loss)
(Deficit)
December 31, 2013
835,416
21,852,666
(2,202,914)
(39,723,595)
(23,755)
(19,262,182)
Net loss
-
-
-
(5,617,790)
-
(5,617,790)
Translation adjustments
-
-
(51,003)
-
-
(51,003)
Stock based
compensation expense
-
765,495
-
-
-
765,495
Sale of treasury stock
-
(13,455)
-
-
23,755
10,300
June 30, 2014
$
835,416 $
22,604,706 $
(2,253,917) $
(45,341,385) $
- $
(24,155,180)
The accompanying notes are an integral part of these consolidated financial statements.
6
SUNVESTA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
January 1 to
January 1 to
June 30, 2014
June 30, 2013
Unaudited
Unaudited
Cash flows from operating activities
Net loss
$
(5,617,790)
(2,805,899)
Adjustments to reconcile net loss to net cash
Depreciation and amortization
28,580
20,158
Release of accrual for penalty to Meliá Hotels & Resorts
-
(1,000,000)
Amortization of debt issuance cost and commissions
325,313
133,805
Stock compensation expense
765,495
460,000
Unrealized exchange differences
(88,072)
88,059
Change in fair value of conversion feature
-
13,874
Increase in pension fund commitments
660
(2,958)
Increase / decrease in:
Other current assets
(407,786)
(5,063)
Accounts payable
(710,521)
1,330,903
Accrued expenses
2,561,402
(387,064)
Net cash used in operating activities
(3,142,719)
(2,154,185)
Cash flows from investing activities
Other receivables from related parties
(966,455)
(618,658)
Purchase of property and equipment
(3,965,275)
(2,838,969)
Deposits related to construction
(106,744)
(507,000)
Down payments for property and equipment
-
(2,800,045)
Restricted cash
-
(1,421,827)
Net cash used in investing activities
(5,038,474)
(8,186,499)
Cash flows from financing activities
Proceeds from notes payable related parties
1,567,271
12,470,718
Repayment of notes payable related parties
(1,618,935)
-
Note payable and other long term debts
1,609,678
-
Proceeds from bond issuance, net of commissions
15,095,202
953,277
Repayments of bonds
(5,729,712)
(2,701,497)
Payment for debt issuance costs
(2,939,537)
(445,630)
Purchase/Sale of treasury stock
10,300
-
Net cash provided by financing activities
7,994,267
10,276,868
Effect of exchange rate changes
(81,183)
(4,222)
Net decrease in cash
(268,109)
(59,594)
Cash and cash equivalents, beginning of period
629,673
260,520
Cash and cash equivalents, end of period
$
361,564
200,926
Additional information
Conversion of note payable to Mr. Rigendinger 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)
1,376,999
824,000
Reclassification loan from Dr. M. Rössler to AIRES loan
-
1,740,796
The accompanying notes are an integral part of these consolidated financial statements.
7
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
1.
CORPORATE INFORMATION
On August 27, 2007, SunVesta Inc. (SunVesta) acquired SunVesta Holding AG (SunVesta AG)
(collectively the Company). SunVesta AG has as of today five wholly-owned subsidiaries:
SunVesta Projects and Management AG, a Swiss company; Rich Land Investments Limitada, a
Costa Rican company (Rich Land); SunVesta Costa Rica Limitada, a Costa Rican company
(SVCR), Altos del Risco SA, a Costa Rican company (AdR) and Profunda Capital Partners LLC
(Profunda), a US company.
In January 2005, the Company changed its business focus to the development of holiday resorts
and investments in the hospitality and related industry. Actually the Company has one major project
in Costa Rica. For this project planning has been fully completed, all consents have been granted,
excavation work was started at the beginning of March 2013. The Company is still in process of
completing the financing for the project and has therefore not materialized any revenues yet. Due
to the uncompleted financing of the project the Company’s activities are subject to significant risks
and uncertainties.
The accompanying unaudited interim consolidated financial statements have been prepared by
management in accordance with the instructions in Form 10-Q and, therefore, do not include all
information and footnotes required by generally accepted accounting principles and should,
therefore, be read in conjunction with the Company’s Form 10-K, for the year ended December 31,
2013, filed with the Securities and Exchange Commission. These statements do include all normal
recurring adjustments which the Company believes necessary for a fair presentation of the
statements. The interim results of operations are not necessarily indicative of the results to be
expected for the full year ended December 31, 2014.
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).
Except as indicated in the notes below, there have been no other material changes in the information
disclosed in the notes to the financial statements included in the Company’s Form 10-K for the year
ended December 31, 2013, filed with the Securities and Exchange Commission.
8
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
2.
SIGNIFICANT ACCOUNTING POLICIES
New accounting standards - adopted
In June 2014, the FASB released ASU 2014-10 — Accounting Standards Update 2014-10, Income
Taxes Topic 915: Elimination of Certain Financial Reporting Requirements, Including an
Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The amendments
in this Update eliminate the concept of a development stage entity (DSE) from US GAAP. This
change rescinds financial reporting requirements that have historically applied by DSEs such as
labeling financial statements as those of a DSE, providing inception to date information in the
statements of income, cash-flows and shareholder equity and certain specific disclosures. This ASU
has been early adopted by the Company as of April 1, 2014 and therefore for the current period
ended June 30, 2014 as such early adoption is permitted for all financial statements that have not
been issued or made available for issuance. This ASU had impact to the Company’s consolidated
financial statements, as the corresponding inception to date information, labeling financial
statements as those of a DSE, etc. will no longer be provided.
9
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
3.
GOING CONCERN
The Company is currently working on building a hotel in the Papagayo Gulf Tourism Project area
of Guanacaste, Costa Rica.
The project is expected to open in the fourth quarter of 2015 (see also Note 16). Until the
completion of the project, the following expenditures are estimated to be incurred:
Expenditures
$
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” 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 Rӧssler, controlling shareholder of Aires International Investment, Inc. (also refer to Note 9)
and Company director, Mr. Josef Mettler, shareholder, Company director, chief executive officer
and chief financial 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 on-going 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 on-going 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 June 30, 2014 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.
10
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
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
Total
equivalents
June 30, 2014
December 31, 2013
original currency
105,337
7,482 218,276 490,373
in $
105,337
10,212 245,114
901
361,564
629,673
USD ($) =
US Dollar
EURO =
Euro
CHF
=
Swiss Francs
CRC
=
Costa Rican Colón
5.
RESTRICTED CASH
As of June 30, 2014, the Company has the following restricted cash positions:
June 30,
December 31,
Restricted Cash
2014
2013
$
$
Credit Suisse in favor of
BVK Personalvorsorge des Cantons Zurich
143,676
142,657
HSBC in favor of
Costa Rican Tourism Board
370,000
372,205
Banco Nacional de Costa Rica in favor of the
Costa Rican Environmental Agency – SETENA
619,762
619,762
Banco National de Costa Rica in favor of the Costa
Rican Tourism Board
563,350
563,350
Gross
1,696,788
1,697,974
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.
11
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
6.
PROPERTY & EQUIPMENT
June 30, 2014
December 31, 2013
Land
$
19,700,000
19,700,000
IT Equipment
185,846
185,846
Other equipment and furniture
291,420
321,901
Leasehold improvements
66,617
66,617
Vehicles
181,910
74,000
Construction in-process
28,683,641
23,404,599
Gross
49,109,434
43,752,963
Less accumulated depreciation
(409,330)
(380,749)
Net
$
48,700,104
43,372,214
Depreciation expenses for the year
28,580
50,967
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 June 30, 2014 and December 31, 2013, is
represented primarily by architectural work related to the hotel and apartments and also to
construction work, earth movements and retaining walls.
Deposit related to construction work
During the quarter ended June 30, 2014, main earthmoving groundwork has moved forward for
which work the Company has paid several deposits to contractors. These deposits will be offset
against invoices for such groundwork. As of June 30, 2014 and December 31, 2013, the Company
has deposits of $757,429 and $650,685 respectively, which have not been set off.
Guaranty Retention
During the quarter ended June 30, 2014, main earthmoving groundwork has moved forward. Due
to this, the Company received several invoices from contractors. The Company retained some
amounts related to construction work. As soon as the Company officially accepts the corresponding
work retention the retention will be paid. As of June 30, 2014 and December 31, 2013, the Company
had guaranty retention in the amount of $166,610 and $179,719, which is stated in accrued
expenses.
12
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
7.
DOWN PAYMENTS FOR PROPERTY & EQUIPMENT
June 30, 2014
December 31, 2013
La Punta (neighboring piece of land)
$
2,369,816
2,369,816
Hotel Project Atlanta
$
-
1,573,957
Altos del Risco
$
-
-
Gross
$
2,369,816
3,943,773
Write off Hotel Project Atlanta
$
-
(1,573,957)
Total (net)
$
2,369,816
2,369,816
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 was 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 was as follows:
-
$0.5 million is required as a cash payment by May 16, 2012
-
$5.0 million is required as a cash payment by August 31, 2012
-
$5.698 million is required as a cash payment by January 31, 2013
-
Equity is required to be transferred upon final payment
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 to be
defined. Furthermore, all payments by the Company to date and in the future are refundable. 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:
13
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
7.
DOWN PAYMENTS FOR PROPERTY & EQUIPMENT - Continued
Agreement to Purchase a neighboring piece of land - continued
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 which has not been paid as of the date of this and is non-refundable.
-
$1,000,000 on May 31, 2014 which has not been paid as of the date of this and is non-refundable.
-
$1,000,000 on June 30, 2014 which has not been paid as of the date of this and is non-refundable.
-
$1,000,000 on July 31, 2014 which has not been paid as of the date of this and is non-refundable.
$1,130,000 on August 31, 2014 and is non-refundable
$8,130,000 in total to Original Seller
The contract is valid until August 31, 2014 at which point the contractual situation and the
accounting thereof will be reassessed.
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 had no firm financing commitment. Further, an additional amount of
approximately $18 million for renovations would need to be invested in the hotel and entertainment
complex. The Company was in negotiations with various parties to finalize a financing package for
this project but was not been able to conclude the transaction by October 15, 2013. On October 15,
2013, a fifth-amendment to the agreement expired, causing the Company to default. Therefore
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.
14
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
7.
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 had no firm financing commitment. Further, an additional amount of
approximately $18 million for renovations would need to be invested in the hotel and entertainment
complex. The Company was in negotiations with various parties to finalize a financing package for
this project but was not been able to conclude the transaction by October 15, 2013. On October 15,
2013, a fifth-amendment to the agreement expired, causing the Company to default. Therefore
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.
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 $136,500) to settle any further obligation. The
amount of EUR 100,000 (approximately $136,500) has been expensed within the first quarter
2014 and is included in other operating expenses. On April 7, 2014 the amount has been paid to
the counterparty.
15
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
8.
FAIR VALUE MEASUREMENT
The guidance on fair value measurements defines fair value as the exchange price that would be
received for an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants.
This guidance also specifies a fair value hierarchy based upon the observability of inputs used in
valuation techniques. Observable inputs (highest level) reflect market data obtained from
independent sources, while unobservable inputs (lowest level) reflect internally developed market
assumptions. In accordance with this guidance, fair value measurements are classified under the
following hierarchy:
Level 1
Quoted prices for identical instruments in active markets.
Level 2
Quoted process for similar instruments in active markets, quoted prices for identical or similar
instruments in markets that are not active; and model-derived valuations in which significant inputs
or significant value drivers are observable in active markets.
Level 3
Model derived valuations in which one or more significant inputs or significant value-drivers are
unobservable.
When available, 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 non-performance risk. Non-performance 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 non-performance 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 June 30, 2014 and December 31, 2013, respectively, there are no financial assets or liabilities
measured on a recurring basis at fair value.
16
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
8.
FAIR VALUE MEASUREMENT - Continued
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:
—
Cash and cash equivalents – carrying amount approximated fair value.
—
Restricted cash – carrying amount approximated fair value
—
Receivables from related parties (current) – carrying amount approximated fair value due to the short term nature
of the receivables.
—
Accounts Payable – carrying amount approximated fair value.
—
Note payable – carrying amount approximated fair value due to the short term nature of the note payable.
—
Notes payable to related parties - Dr. M. Rӧssler (current) –The fair value was calculated based on the underlying
publically traded shares. However, the Company records the loan at nominal value. The Company does not have
sufficient cash to repurchase the shares as of balance sheet date and hence repay the loans in shares.
—
Notes payable to related parties – (current) – carrying amount approximated fair value due to the short term nature
of the notes payable.
—
EUR– bond (old) – carrying amount approximated fair value due to the short term nature of the EUR-Bond.
—
EUR- bonds – The fair values of the bonds payable are classified as level 3 fair values. The fair values of the bonds
have been determined by discounting cash flow projections discounted at the respective interest rates of 7.25% for
EUR bonds, which represents the current market rate based on the creditworthiness of the Company. Hence, the
carrying values approximate fair value.
—
CHF-bonds – The fair values of the bonds payable are classified as level 3 fair values. The fair values of the bonds
have been determined by discounting cash flow projections discounted at the respective interest rates of 7.25% 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.
17
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
8.
FAIR VALUE MEASUREMENT - Continued
The fair value of our financial instruments is presented in the table below:
June 30, 2014
December 31, 2013
Carrying
Fair Value
Carrying
Fair Value
Fair Value
Amount
Amount
Reference
$
$
$
$
Levels
Cash and cash
equivalents
361,564
361,564
629,673
629,673
1
Note 4
Restricted cash
1,696,788
1,696,788
1,697,974
1,697,974
1
Note 5
Receivables from related
parties – Mettler (current)
851,564
851,564
0
0
3
Note 8
Receivables from related
parties – other (current)
114,891
114,891
0
0
3
Note 8
Accounts Payable
6,352,549
6,352,549
7,063,070
7,063,070
1
-
Note payable
3,546,408
3,546,408
2,000,000
2,000,000
1
Note 15
Notes payable to related
parties – Dr. M. Rӧssler
945,732
857,871
938,890
833,715
1
Note 8
(current)
Notes payable to related
parties – Rigendinger
46,078
46,078
600,000
600,000
3
Note 8
(current)
Notes payable to related
parties – other (current)
121,000
121,000
116,592
116,592
3
Note 8
Notes payable to related
parties – Mettler (current)
0
0
1,065,963
1,065,963
3
Note 8
EUR-bond (old)
0
0
5,786,248
5,786,248
3
Note 10
EUR-bonds
9,756,591
9,756,591
6,757,065
6,757,065
3
Note 10
CHF-bonds
20,550,298
20,550,298
8,558,443
8,558,443
3
Note 10
Notes payable to related
parties – Aires (non-
35,026,366
35,026,366 33,409,095
33,409,095
3
Note 8
current)
18
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
9.
RECEIVABLES FROM AND PAYABLES TO RELATED PARTIES
Advances from (to) related parties are composed as follows:
Receivables
Payables
June 30,
December 31,
June 30,
December 31,
2014
2013
2014
2013
1 Hans Rigendinger
-
-
46,078
600,000
2 Josef Mettler
851,564
-
-
1,065,963
3 Adrian Oehler
-
-
-
39,002
4 Aires International
-
-
35,026,366
33,409,095
5 Dr. Max Rӧssler
-
-
945,732
938,890
6 4f capital ag
114,891
-
-
27,590
7 Akyinyi Interior and
Exterior Decoration
-
-
121,000
50,000
Total excluding interest
966,455
-
36,139,176
36,130,540
Accrued interest
-
-
2,952,783
1,693,166
Total
966,455
-
39,091,959
37,823,707
of which non-current
-
-
35,026,366
33,409,095
Related party
Capacity
Interest Repayment
Rate
Terms
Security
1 Hans Rigendinger Shareholder, COO and Company board member
3%
none
none
2 Josef Mettler
Shareholder, CEO, CFO and Company board member
3%
none
none
3 Adrian Oehler
Shareholder and chairman of the board SunVesta AG
3%
none
none
(up to 1st quarter 2014)
4 Aires International
*** see hereinafter ***
5 Dr. Max Rӧssler
*** see hereinafter ***
6 4f capital ag
Company owned by Josef Mettler (see No. 2)
none
none
none
Akyinyi Interior
7 and Exterior
Company owned by the wife of a Company board
Decoration
member
none
none
none
19
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
9.
RECEIVABLES FROM AND PAYABLE 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. Rӧssler (a board member of the Company). The loan
agreement was amended on May 11, 2012, on June 21, 2012 and on October 31, 2013.
The agreement includes the following main terms:
— All previous 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.
In addition, a fraction of the loan amounting to CHF 10,044,370 that was transferred from SunVesta
Holding AG to the Company as of December 31, 2012, was 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 following covenants have been agreed:
(A) So long as the Company shall have any obligation under this Note, the Company shall not without Aires’
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 Company shall have any obligation under this Note, the Company shall not without Aires’
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
Company or any warrants, rights or options to purchase or acquire any such shares.
20
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
9.
RECEIVABLES FROM AND PAYABLE TO RELATED PARTIES - Continued
Loan agreement Aires International Investment Inc – continued
Additionally another fraction of the loan amounting to CHF 10,000,000 that was transferred from
SunVesta Holding AG to the Company as of December 31, 2013, was clarified in a promissory
note in March 2014, with the main terms being:
— The effective date is December 31, 2013. However, since the promissory note was only signed in March 2014
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 following covenants have been agreed:
(A) So long as the Company shall have any obligation under this Note, the Company shall not without Aires’
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 Company shall have any obligation under this Note, the Company shall not without Aires’
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
Company or any warrants, rights or options to purchase or acquire any such shares.
Due to the transfer of fractions of the loan from SunVesta Holding AG to the Company foreign
exchange gains or losses will be reflected through the income statement rather than in the
comprehensive income (cumulative translation adjustment).
As of June 30, 2014 and December 31, 2013 the Company borrowed CHF 31.22 million
(approximately $35.06 million) respectively CHF 31.12 million (approximately $33.41 million)
from Aires and accrued interest of CHF 2.62 million (approximately $2.94 million) respectively
CHF 1.59 million (approximately $1.69 million).
As of the date of this report the Company has borrowed CHF 31.22 million (approximately $35.06
million) from Aires.
Loan agreement Hans Rigendinger (current)
Hans Rigendinger gave the Company a short term loan based on the guarantee agreement as
described in Note 3. On this current loan, which has been contractually formalized on January 1,
2014, the Company has to pay 3% interest. As per June 30, 2014 and December 31, 2013, $46,078
(CHF 41,032) and $600,000 (CHF 532,300) respectively, of this short term loan remained due.
For the period ended June 30, 2014 and June 30, 2013, the Company expensed interest to Hans
Rigendinger of $7,341 (CHF 6,603) and $0 (CHF 0) related to this current loan.
Additionally Hans Rigendinger and his wife have signed Bonds as per June 30, 2014 and December
31, 2013 in the nominal values of CHF 2,900,000 (approximately $3,256,000) and EUR 780,000
(approximately $1,060,000).
21
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
9.
RECEIVABLES FROM AND PAYABLE TO RELATED PARTIES - Continued
Loans Dr. Max Rӧssler
On June 7, 2012, Dr. Rӧssler (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. Rӧssler
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.
On July 24, 2012, Dr. Rӧssler 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 June 30, 2014, the Company would not have recognized a gain. Therefore the fair
value of the loan is the carrying value of the loan.
On August 8, 2012, Dr. Rӧssler 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 June 30, 2014, the Company would have recognized a gain, which
not been recognized by the Company.
On March 1, 2013, Dr. Rӧssler 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 Daetwyler 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 June 30, 2014, the Company would not have recognized a gain.
Therefore the fair value of the loan is the carrying value of the loan.
The previous report stated that the Company and Dr. Rössler agreed that all personally given loans
will be transferred to Aires and the corresponding balances will be added to the existing loan
agreement with Aires. Due to external circumstances (i.e. continued increases in stock exchange
quotations) the parties have cancelled this decision and extended the repayment date instead. This
is now the May 30, 2015, as stipulated in a written declaration by Dr. Rössler, dated June 4, 2014.
22
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
9.
RECEIVABLES FROM AND PAYABLE TO RELATED PARTIES - Continued
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. During period ended June 30, 2014 the loan payable changed into a loan receivable. As
per June 30, 2014 the loan receivable amounts to $851,564 (CHF 741,852). As per December 31,
2013 the loan payable amounted to $1,065,963 (CHF 956,169). Subsequent to period end, as per
August 15, 2014, Dr. Max Rössler assumed the Company’s receivable from Josef Mettler.For the
period ended June 30, 2014 and June 30, 2013, the Company expensed interest to Josef Mettler of
$6,041 (CHF 5,485) and $0 (CHF 0) respectively $1,286 (CHF 1,143) interest income related to
this current loan.
Receivable 4f capital ag (current)
For the period ended June 30, 2014 and June 30, 2013, the Company prepaid commissions to 4f
capital ag of $114,891 and $0. Subsequent to period end, as per August 15, 2014, Dr. Max Rössler
assumed the Company’s receivable from 4f capital ag, indirectly through a transaction with Josef
Mettler.
23
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
10.
RELATED PARTY TRANSACTIONS
Commissions paid to related parties
During the three months periods ended June 30, 2014, and June 30, 2013, the Company paid
commissions to 4f capital ag in the amount of approximately $42,500 and $68,000, respectively
related to financing of the Company. During the six months period ended June 30, 2014 and June
30, 2013 the Company paid commission to 4f capital ag in the amount of approximately $103,000
and $176,000 respectively.
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 three months periods ended June 30, 2014, and June 30, 2013, 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 $30,000 and $30,000 respectively. During the six month periods ended June 30,
2014 and June 30, 2013 the Company paid to Akyinyi Interiors $60,000 and $60,000.
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.
Consulting Fees to Cambridge Limited Corp.
During the three months periods ended June 30, 2014, and June 30, 2013, the Company paid fees
to Cambridge Limited Corp. – a company owned by the father in law of a member of the board of
directors – related to accounting and consulting services rendered in Costa Rica for SunVesta – in
the amount of approximately $43,500 and $0 respectively. During the six month periods ended June
30, 2014 and June 30, 2013 the Company paid to Cambridge Limited Corp. $87,000 and $0.
24
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
11.
BONDS
Description
EUR (€) bond old (repaid)
CHF bond I
Issuer:
SunVesta Holding AG
SunVesta Holding AG
Type of securities:
Bond in accordance with Swiss law
Bond in accordance with Swiss law
Approval by SunVesta AG BOD:
May 12, 2010
June 3, 2011
Volume:
Up to € 25,000,000
Up to CHF 15,000,000
Units:
€1,000
CHF 50,000
Offering period:
11/10/2010 – 04/30/2011
09/01/2011 – 02/28/2012
Due date:
November 30, 2013
August 31, 2015
Issuance price:
100 %
100%
Issuance day:
December 1, 2010
September 1, 2011
Interest rate:
8.25% p.a.
7.25% p.a.
Interest due dates:
November 30 of each year,
August 31 of each year,
the first time November 30, 2011
the first time August 31, 2012
Applicable law:
Swiss
Swiss
Description
EUR (€) bond new I
CHF bond II (parallel)
Issuer:
SunVesta Holding AG
SunVesta Holding AG
Type of securities:
Bond in accordance with Swiss law
Bond in accordance with Swiss law
Approval by SunVesta AG BOD:
October 31, 2013
May 19, 2014
Volume:
Up to €15,000,000
CHF 15’000’000
Units:
€10,000
CHF 10’000
Offering period:
11/07/2013 – 03/31/2014
05/01/2014 – 06/30/2014
Due date:
December 2, 2016
August 31, 2015
Issuance price:
100%
100 %
Issuance day::
December 2, 2013
September 01, 2013 (retroactive)
Interest rate:
7.25% p.a.
7.25 % p.a.
Interest due dates:
December 2, 2013
August 31
Applicable law:
Swiss
Swiss
25
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
11.
BONDS - continued
Description
EUR (€) bond new II (parallel)
Issuer:
SunVesta Holding AG
Type of securities:
Bond in accordance with Swiss law
Approval by SunVesta AG BOD:
May 19, 2014
Volume:
Up to EUR 15’000’000
Units:
EUR 10’000
Offering period:
05/01/14 – 06/30/14
Due date:
December 02, 2016
Issuance price:
100 %
Issuance day::
December 02, 2013 (retroactive)
Interest rate:
7,25 % p.a.
Interest due dates:
December 02
Applicable law:
Swiss
The nominal amounts have changed as follows:
CHF Bond
CHF Bond
CHF BOND I
2014
2013
$
$
Balances January 1
8,558,443
5,689,364
Cash inflows
5,231,203
2,650,882
Cash outflows
-
(52,424)
Foreign currency adjustments
640,839
528,145
Reclassifications to CHF Bond II
(2,358,199)
Sub-total (Fair value)
12,072,286
8,815,967
Discounts (commissions paid to bondholders)
(670,764)
(476,636)
Accumulated amortization of discounts
344,627
219,112
Unamortized discounts
(326,137)
(257,524)
Balances June 30 and December 31
(Carrying value)
11,746,149
8,558,443
The reclassification was made from CHF bond I to CHF bond II. As CHF bond II has identical
terms as CHF bond I, this reclassification is neither an extinguishment nor a modification.
As per date of this report the Company has realized a cumulative amount of
CHF 10.75 million ($12.68 million) related to CHF Bond I.
26
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
11.
BONDS - continued
EUR-Bond
EUR-Bond
(new)
(new)
2014
2013
$
$
Balances January 1, 2014 and December 2, 2013
6,757,065
-
Cash inflows
1,378,650
6,603,097
Cash outflows
-
-
Foreign currency adjustments
-55,571,
153,968
Sub-total (Fair value)
8,080,144
6,757,065
Discounts (commissions paid to bondholders)
(11,927)
-
Amortization of discounts
1,841
-
Unamortized discounts
(10,086)
-
Balances June 30, 2014 and December 31, 2013
(Carrying value)
8,070,058
6,757,065
As per date of this report the Company has realized a cumulative amount of
EUR 5.92 million ($8.08 million) related to the EURO Bond I.
EUR-Bond
EUR-Bond
EURO BOND I
old
old
2014
2013
$
$
Balances January 1
5,786,248
14,216,707
Cash inflows
-
792,740
Cash outflows
(5,729,712)
(9,727,189)
Foreign currency adjustments
(56,536)
503,991
Sub-total (Fair value)
-
5,786,249
Discounts (commissions paid to bondholders)
(248,195)
(248,195)
Amortization of discounts
248,195
248,195
Unamortized discounts
-
-
Balance June 30 and December 31
(Carrying value)
-
5,786,248
On April 7, 2014 the Company was able to repay the last outstanding bond (EUR-Bond “old”) of
EUR 540,000 (approximately $754,000).
27
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
11.
BONDS - Continued
CHF Bond II
CHF Bond II
CHF BOND II
2014
2013
$
$
Balances January 1
-
-
Cash inflows
7,030,371
-
Cash outflows
-
-
Foreign currency adjustments
(10,950)
-
Reclassifications from CHF Bond I
2,358,199
-
Sub-total (Fair value)
9,377,621
-
Discounts (commissions paid to bondholders)
(646,943)
-
Accumulated amortization of discounts
73,471
-
Unamortized discounts
(573,471)
-
Balances June 30 and December 31
(Carrying value)
8,804,149
-
As per date of this report the Company has realized a cumulative amount of
CHF 11.30 million ($12.68 million) related to CHF Bond II.
EUR-Bond
EUR-Bond
EURO BOND NEW II
new II
new II
2014
2013
$
$
Balances January 1
-
-
Cash inflows
1,741,874
-
Cash outflows
-
-
Foreign currency adjustments
(8,246)
-
Sub-total (Fair value)
1,733,628
-
Discounts (commissions paid to bondholders)
(50,555)
-
Amortization of discounts
3,460
-
Unamortized discounts
47,094
-
Balances June 30 and December 31
(Carrying value)
1,686,533
-
As per date of this report the Company has realized a cumulative amount of
EUR 1.27 million ($1.73 million) related to the EURO Bond new II.
28
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
12.
PENSION PLAN
The Company maintains a pension plan covering all employees in Switzerland; it is considered a
defined benefit plan and accounted in accordance with ASC 715 ("compensation - retirement
benefits"). This model allocates pension costs over the service period of employees in the plan. The
underlying principle is that employees render services rateably over this period, and therefore, the
income statement effects of pensions should follow a similar pattern. ASC 715 requires recognition
of the funded status, or difference between the fair value of plan assets and the projected benefit
obligations of the pension plan on the balance sheet, with a corresponding adjustment to accumulate
other comprehensive income. If the projected benefit obligation exceeds the fair value of plan
assets, then that difference or unfunded status represents the pension liability.
The Company records a net periodic pension cost in the statement of operations. The liabilities and
annual income or expense of the pension plan is determined using methodologies that involve
several actuarial assumptions, the most significant of which are the discount rate and the long-term
rate of asset return (based on the market-related value of assets). The fair values of plan assets are
determined based on prevailing market prices.
Actuarial valuation
Net periodic pension cost has been included in the Company’s results as follows:
Three months
Six months
Three months
Six months
Pension expense
ended June 30, ended June 30, ended June 30, ended June 30,
2014
2014
2013
2013
$
$
$
$
Current service cost
14,147
28,294
13,632
27,265
Net actuarial (gain) loss recognized
(169)
(338)
(268)
(537)
Interest cost
1,494
2,987
1,181
2,362
Expected return on assets
(1,550)
(3,100)
(1,208)
(2,415)
Employee contributions
(5,918)
(11,836)
(5,448)
(10,895)
Net periodic pension cost
8,004
16,007
7,889
15,780
During the three months periods ended June 30, 2014 and June 30, 2013 the Company made cash
contributions of $5,915 and $5,500, respectively, to its defined benefit pension plan.
All of the assets are held under the collective contract by the plan’s re-insurer Company and are
invested in a mix of Swiss and international bond and equity securities within the limits prescribed
by the Swiss Pension Law.
The expected future cash flows to be paid by the Company in respect of employer contributions to
the pension plan for the year ended December 31, 2014 are $11,830.
29
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
13.
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 and board of director’s 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 – Mr. Hans Rigendinger
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.
Share Grants – Dr. Max Rössler
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 Rӧssler in connection with his
election to the board of directors as so-called signing bonus. These shares were officially issued on
October 15, 2013.
Share Grants – Mr. Josef Mettler
On July 4, 2013 the Company granted 5,000,000 common shares, 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.
30
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
13.
STOCK COMPENSATION - Continued
Share Grants – Mr. José María Figueres Olsen
On March 10, 2014, the Company authorized the issuance of 500,000 common shares, valued at
$0.10 which has been the share price and therefore the fair value on grant date, to José María
Figueres Olsen in connection with his appointment to the board of directors. These shares were not
issued as per balance sheet date and also not as per date of this report. Additionally, the Company
agreed to a retention award of 200,000 common shares for each fully completed year of service,
which initial year would be completed on March 10, 2015. Therefore the Company may be
obligated to issue an additional 200,000 common shares on March 10, 2015, to José María Figueres
Olsen related to his retention award.
Share Grants – Mr. Howard M. Glicken
On March 10, 2014, the Company authorized the issuance of 500,000 common shares, valued at
$0.10 which has been the share price and therefore the fair value on grant date, to Howard M.
Glicken in connection with his appointment to the board of directors. These shares were not issued
as per balance sheet date and also not as per date of this report. Additionally, the Company agreed
to a retention award of 200,000 common shares for each fully completed year of service, which
initial year would be completed on March 10, 2015. Therefore the Company may be obligated to
issue an additional 200,000 common shares on March 10, 2015, to Howard M. Glicken related to
his retention award.
Share Grants – Summary
Based on these contracts the Company has included the following stock-based compensation in the
Company’s results:
Stock-based compensation
Three months
Six months
Three months
Six months
(shares)
ended June 30,
ended June 30,
ended June 30,
ended June 30,
2014
2014
2013
2013
Shares granted
46,400,000
46,400,000
16,000,000
16,000,000
shares
shares
shares
shares
Fair Value respectively market
$0.0744
$0.0744
$0.0800
$0.0800
price on grant date
Total maximal expenses
$3,450,000
$3,450,000
$1,280,000
$1,280,000
(2013-2020)
Shares vested
15,000,000
15,000,000 3,500,000 shares 3,500,000 shares
shares
shares
Unvested shares
31,400,000
31,400,000
12,500,000
12,500,000
shares
shares
shares
shares
31
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
13.
STOCK COMPENSATION – Continued
As of June 30, 2014, the Company expects to record compensation expense in the future up to
$1,987,666 as follows:
Year ending December 31,
Stock-based
Through
compensation
December 31,
(shares)
2014
2015
2016
2017
2018
2019
2020
$
$
$
$
$
$
$
Unrecognized
compensation
225,000
417,666
410,000
410,000
210,000
210,000
105,000
expense
Stock Options – Mr. Hans Rigendinger
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, 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. 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 has been expensed on a straight line
basis over the expected vesting period.
For installment B, it was originally required that the Company completes the Paradisus Papagayo
Bay Resort & Luxury Villas (see Note 167) by the thereinafter mentioned date of July 1, 2015, and
Meliá assumes management responsibilities for the property. As of grant date, the fair value was
$340,000. As of March 6, 2014, the Company still assessed the probability that this performance
condition will be met at 100% but as the opening was postponed (see Note 16). The corresponding
relevant date for this performance condition is now the fourth Quarter 2015. Hence, the remaining
fair value of the award will be expensed on a straight-line basis over the recalculated expected
remaining vesting-period.
32
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
13.
STOCK COMPENSATION – Continued
Stock Options – Dr. Max Rӧssler
The Company granted to Dr. Max Rӧssler, in connection with his appointment to the board of
directors, 10,000,000 options on July 3, 2013. Each option entitles Mr. Rӧssler 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. The company has expensed the total fair value on a straight-line basis
over the expected vesting period.
For installment B (5,000,000 options), it is required that the Company completes the Paradisus
Papagayo Bay Resort & Luxury Villas (see Note 16) by the thereinafter mentioned date of July 1,
2015 and Meliá assumes management responsibilities for the property. As of grant date the fair
value was $258,210. As of March 6, 2014, the Company still assesses the probability that this
performance condition will be met at 100% but the opening was postponed (see Note 16). The
corresponding relevant date for this performance condition is now the fourth Quarter 2015. Hence,
the remaining fair value of the award will be expensed on a straight-line basis over the recalculated
expected remaining vesting-period.
Stock Options – Mr. Josef Mettler
The Company granted to 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. The Company has expensed the total fair
value on a straight-line basis over the expected vesting period.
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. The Company has expensed the total fair value on a straight-line basis
over the expected vesting period.
For installment C (5,000,000 options), it is required that the Company completes the Paradisus
Papagayo Bay Resort & Luxury Villas (see Note 16) by the thereinafter mentioned date of July 1,
2015 and Meliá 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%. As of June 30, 2014, the Company still assesses
the probability that this performance condition will be met at 100% as the opening was postponed
(see Note 16). The corresponding relevant date for this performance condition is now the fourth
Quarter 2015. Hence, the fair value of the award will be expensed on a straight-line basis over the
recalculated expected vesting-period.
33
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
13.
STOCK COMPENSATION – Continued
Stock Options – Summary
A summary of stock options outstanding as per June 30, 2014 is as follows (for the previous year
no stock options have been granted):
Options outstanding
Number of
Weighted average
Weighted average
Options
exercise price
remaining
contractual life
Outstanding January 1, 2014
32,000,000
$ 0.05
8.92 years
Granted
-
Exercised
-
Forfeited or expired
-
Outstanding June 30, 2014
32,000,000
$ 0.05
8.92 years
Exercisable June 30, 2014
-
The following table depicts the Company’s non-vested options as of June 30, 2014 and changes
during the period:
Non-vested options
Shares under Options
Weighted average grant date
fair value
Non-vested at December 31, 2013
32,000,000
$ 0.053
Non-vested-granted
-
-
Vested
-
-
Non-vested, forfeited or cancelled
-
-
Non-vested at June 30, 2014
32,000,000
$ 0.053
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
June 30, 2014
June 30, 2013
Dividend yield
None
None
Risk-free interest rate used (average)
1.00%
1.00%
Expected market price volatility
80.00%
80.00%
Average expected life of stock options
6.0 years
6.0 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.
34
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
13.
STOCK COMPENSATION - Continued
Stock Options – Summary - Continued
As of June 30, 2014, the Company had unrecognized compensation expenses related to stock
options currently outstanding, to be recognized in future quarters respectively years as follows:
Through to December
Year ending December 31,
Stock-based compensation (options)
31, 2014
2015
$
$
Unrecognized compensation expense
138,808
277,616
14.
SUMMARY OF SHARE AND OPTION COMPENSATION EXPENSE
The Company recorded the following amounts related to stock based compensation expense during
the periods ended June 30, 2014 respectively June 30, 2013:
Three
Six month
Three
Six month
Summary of share and option
months June
June 30,
months June
June 30,
based compensation expense
30, 2014
2014
30, 2013
2013
$
$
$
$
Share grants (see Note 12 for
112,500
317,333
50,000
380,000
details)
Option grants (see Note 12 for
69,404
448,162
40,000
80,000
details)
Total
(recorded under general &
181,904
765,495
90,000
460,000
administrative expense)
15.
FUTURE LEASE COMMITTMENTS
On December 1, 2012, the Company entered into a lease agreement for the premises for its Swiss
office with an unrelated entity. The annual rental expense amounts to approximately $130,000 on
a fixed term expiring on December 31, 2017.
35
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
16.
NOTE PAYABLE
June 30, 2014
December 31, 2013
$
$
Promissory note
2,000,000
2,000,000
Specogna Holding AG
1,122,965
-
R. Weimar (private investor)
423,443
-
Total
3,546,408
2,000,000
Promissory Note
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 was originally 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 19, 2015.
Specogna Holding AG
On May 15, 2014 the Company entered into a short term loan agreement for CHF 1.0 million
(approximately $ 1.12 million) with Specogna Holding AG. This loan will was repayable on July
31, 2014, and beared a lump remuneration as interest of CHF 30,000 (approximately $33,000). This
loan is secured with individual and joint liability by Dr. Max Rössler, Mr. Josef Mettler and Mr.
Hans Rigendinger (see also Note 8). The loan was repaid on August 7, 2014.
Loan R. Weimar (private investor)
On June 30, 2014 the Company entered into a short term loan agreement for approx.
EUR 310,000 (approx. USD 420,000) with Roland Weimar. This loan is repayable with 5
instalments, (4 times EUR 70,000, 1 time EUR 30,000) the latest one being due on June 1, 2015.
The interest rate is 2 % p.a.
36
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
17.
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. Some rock demolition became necessary. The non-conclusion of
the contemplated financing deal (see also Note 3) has caused a further project delay
.
On June 02, 2014, the Company amended its agreement with Meliá (“6th addendum to the
management agreement of March 8, 2011”) to postpone the opening date as follows:
- The construction of the “Paradisus” will be completed by November 15, 2015
- Should the “Paradisus” not be completed by November 15, 2015, (subject to force majeure)
and should an extension date not be agreed, subsequent to November 15, 2015, the Company
will be obligated to pay Meliá a daily amount of $2,000 as liquidated damages
- Should the Company be unable to complete the construction of the “Paradisus” by February
15, 2016, Meliá, can terminate the management agreement obligating the Company to
compensate Meliá in the amount of $5,000,000 unless the respective parties agree to extend
such date.
18.
MANGEMENT AGREEMENT WITH MELIA HOTELS & 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 Sol Meliá, S.A. 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 Sol Meliá, S.A. 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 Sol Meliá, S.A., 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 Sol Meliá, S.A. and the corresponding allowance was eliminated as of March 9, 2013. Therefore,
the Company released the accrual of $1 million related to this transaction in the three months period
ended March 31, 2013. (Further comments see Note 16 above.)
37
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
19.
EARNINGS PER SHARE
Basic earnings per share are the result of dividing the Company’s net income (or net loss) by the
weighted average number of shares outstanding for the contemplated period. Diluted earnings per
share are calculated applying the treasury stock method. When there is a net income dilutive effect
all stock-based compensation awards or participating financial instruments are considered. When
the Company posts a loss, basic loss per share equals diluted loss per share. The following table
depicts how the denominator for the calculation of basic and diluted earnings per share was
determined under the treasury stock method.
Three-month
Six-month
Three-month
Six-month
Earnings per share
period ended
period ended
period ended
period ended
June 30, 2014
June 30, 2014
June 30, 2013
June, 30 2013
Company posted
Net loss
Net loss
Net loss
Net loss
Basic weighted average shares
outstanding
87,041,603
86,646,575
75,541,600
73,396,661
Dilutive effect of common stock
equivalents
None
None
None
None
Dilutive weighted average shares
outstanding
87,041,603
86,646,575
75,541,600
73,396,661
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.
Three-month
Six-month
Three-month
Six-month
Earnings per share
period ended
period ended
period ended
period ended
June 30, 2014
June 30, 2014
June 30, 2013
June, 30 2013
Conversion feature loan to Aires
International Investment Inc.
-
-
10,818,437
10,818,437
(Options)
Options to Hans Rigendinger
10,000,000
10,000,000
10,000,000
10,000,000
Options to Dr. M. Rӧssler
10,000,000
10,000,000
-
-
Options to Josef Mettler
12,000,000
12,000,000
-
-
Total Options
32,000,000
32,000,000
20,818,437
20,818,437
Shares to Hans Rigendinger
(retention bonus – non vested)
10,000,000
10,000,000
12,500,000
12,500,000
Shares to Josef Mettler (retention
award)
21,000,000
21,000,000
-
-
Shares to Howard M. Glicken
(retention award)
200,000
200,000
-
-
Shares to Jose Maria Figueres
Olsen (retention award)
200,000
200,000
-
-
Total Shares
31,400,000
31,400,000
12,500,000
12,500,000
Total Options and Shares
63,400,000
63,400,000
33,318,437
33,318,437
Additional information regarding “Conversion feature loan to Aires International Investment Inc.
(Options)” see Note 8, receivables from and payables to related parties. For further information
regarding share and option based payments see Note 12 for stock compensation, Note 12 for option
based compensation and Note 13 for a summary of option and share based remuneration.
38
SUNVESTA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
20.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses according consolidated statement of comprehensive loss
include:
Three-month
Six-month
Three-month
Six-month
General and administrative expenses
period ended period ended
period ended
period ended
June 30, 2014 June 30, 2014
June 30, 2013
June, 30 2013
$
$
$
$
Rental & related expenses
44,471
89,106
43,646
80,635
Audit
93,289
183,401
42,463
89,694
Consulting
430,775
1,032,883
393,632
667,028
Marketing, Investor & public relations
28,083
35,945
52,912
52,912
Travel expenses
77,810
182,570
214,171
361,224
Personnel costs including social security’s
costs and share based remuneration
506,603
1,405,081
368,684
1,004,558
Various other operating expenditures
190,331
494,368
79,311
243,652
Total according statement of
comprehensive loss
1,371,362
3,423,534
1,194,746
2,499,703
21.
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:
First North Star AG
On July 11, 2014, the Company entered into a revised agreement with First North Star AG who is
serving as an agent for bond issuances of the Company. Based on this revised agreement First North
Star AG receives 1.25% up to 3.00% in fees for the intermediation of such bonds. Additionally
First North Star AG will receive a bonus one million common shares of the Company if it is able
to intermediate more than CHF 10 million funds to the Company.
As of June 30, 2014, First North Star AG met the CHF 10 million threshold to receive the bonus.
The corresponding fair value of the Company's shares was deemed immaterial and will be recorded
subsequent to period end.
39
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other
parts of this quarterly report contain forward-looking statements that involve risks and uncertainties.
Forward-looking statements can be identified by words such as “anticipates,” “expects,” “believes,”
“plans,” “predicts,” and similar terms. Forward-looking statements are not guarantees of future
performance and our actual results may differ significantly from the results discussed in the forward-
looking statements. Factors that might cause such differences include but are not limited to those
discussed in the subsection entitled Forward-Looking Statements and Factors That May Affect Future
Results and Financial Condition below. The following discussion should be read in conjunction with our
financial statements and notes hereto included in this report. All information presented herein is based on
our three and six month periods ended June 30, 2014 and 2013. Our fiscal year end is December 31.
Discussion and Analysis
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 4th 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.
40
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.
41
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 led 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 Meliá Hotels International (“Meliá ”). “Paradisus” is Meliá ’s
five star all-inclusive luxury hotel brand that is well recognized in the hospitality industry around the
world. Meliá was founded in 1956 in Palma de Mallorca, Spain and is today one of the world’s largest
resort hotel chains, as well as Spain’s leading hotel chain for business or leisure. The company currently
offers more than 300 hotels in 26 countries over four continents under its Gran Sol Meliá , Sol Meliá ,
ME by Sol Meliá , Innside by Sol Meliá , Tryp, Sol Meliá , Sol Meliá Vacation Club, and Paradisus
brands. The Paradisus brand represents all-inclusive luxury resorts with hotels in Mexico and the
Dominican Republic, including:
Paradisus Palma Real (Dominican Republic):
— 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.
42
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 Sol
Meliá until April 30, 2011. Our project is part of Sol Meliá’s master expansion plan, which includes the
opening of two resorts in Playa del Carmen, Mexico in November of 2011. Sol Meliá aims to solidify
Paradisus Resorts as a leader in the luxury all-inclusive market segment with the new properties in Playa
del Carman and our own Paradisus Papagayo Bay 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, Guanacaste. The additional concession properties
with a total surface of approximately 230,000 square meters, 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 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 $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
43
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 and upaid.
— $1,000,000 on May 31, 2014, which is non-refundable and upaid.
— $1,000,000 on June 30, 2014, which is non-refundable and upaid.
— $1,000,000 on July 31, 2014, which is non-refundable and upaid.
— $1,130,000 on August 31, 2014, which is non-refundable
$8,130,000 in total to be paid to Meridian
SunVesta AG had paid down-payments on the purchase of these properties of $2,370,000 as of June 30,
2014 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. 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. On April 7, 2014, the Company paid the EUR
100,000 settlement amount to Fundus which amount (approximately $124,500) has been expensed and
included in other operating expenses.
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 $49 million has been expended as of June 30, 2014. We expect to
realize a minimum of $100 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 four bond issues outstanding as of period end, denominated in either EUR (€) or Swiss
Francs (CHF) and one bond issue that was settled during the period.
44
EUR (€) Bonds
SunVesta AG initiated the a first 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 $754,332 of that amount due for repayment on November 30, 2013. However, on April 7, 2014, the
remaining amount due on the initial Euro bonds was 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 $1,378,650 in the six month period ended June 30, 2014 for a cumulative
amount raised of $7,981,747 as of the date of this report.
SunVesta AG initiated a third offering of unsecured EUR bonds on December 2, 2013 of up to €
15,000,000 in units of € 10,000 that bear interest at 7.25% per annum payable each December 2 over a
three year term that expires on December 2, 2016. SunVesta AG raised $1,741,874 in the six month
period ended June 30, 2014 for a cumulative amount raised of $1,741,874.
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 $5,231,203 in the six month period ended June 30, 2014, for a total cumulative raised of $14,502,426
as of the date of this report.
SunVesta AG initiated a second offering of unsecured CHF bonds on September 1, 2013 of up to CHF
10,000,000 in units of CHF 10,000 that bear interest at 7.25% per annum payable each August 31, over a
two year term that expires on August 31, 2015. SunVesta AG raised $7,030,371 in the six month period
ended June 30, 2014 for a cumulative amount raised of $7,030,371.
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.
45
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.
Effective December 31, 2012, SunVesta AG, Aires and the Company entered into an assignment of debt
agreement, 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
Effective December 31, 2013, SunVesta AG, Aires and the Company entered into an additional
assignment of debt agreement, whereby the parties agreed that a portion of SunVesta AG’s debt to Aires
as of December 31, 2013, in the amount of CHF 10,000,000, including accrued interest, be assumed by
the Company with the following conditions:
— The effective date is December 31, 2013. However, since the promissory note was signed in
March 2014 this is the relevant date for accounting purposes.
— The principal amount together with any interest will 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 it is paid.
— So long as the Company shall have any obligation under this promissory note, it shall not,
without the Aires’ written consent, (a) pay, declare or set apart for such payment, any
dividend or other distribution 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.
So long as the Company shall have any obligation under this promissory note, it shall not,
without the Aires’ written consent, redeem, repurchase or otherwise acquire in any one
transaction or series of related transactions any shares of capital stock of the Company or any
warrants, rights or options to purchase or acquire any such shares.
The Company has borrowed from Aires on a consolidated cumulative basis approximately $35,060,000 as
of June 30, 2014, $33,410,000 as of December 31, 2013, and $10,407,764 as of December 31, 2012.
46
Dr. Max Rӧssler
During 2012 up to the current year end period, SunVesta AG entered into a series of interest free loans
with Dr. Max Rӧssler, 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
Shares
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
Shares
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
The previous report stated that the Company and Dr. Rössler agreed that all personally given loans will be
transferred to Aires and the corresponding balances will be added to the existing loan agreement with
Aires.
Due to external circumstances (i.e. continued increases in stock exchange quotations) the parties have
cancelled this decision and extended the repayment date instead. This is now theMay 30, 2015, as
stipulated in a written declaration by Dr. Rössler, dated June 4, 2014.
Josef Mettler
During the period 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 from Mr. Mettler changed from an amount payable to an amount receivable of
$851,564 as of June 30, 2014. As per August 15, 2014, Dr. Max Rössler absorbed the Company’s
receivable from Josef Mettler.
Hans Rigendinger
During the period ended December 31, 2013, the Company borrowed $600,000 at 3% interest from Hans
Rigendinger pursuant to the terms and conditions of the guaranty agreement dated July 16, 2013. The
amount borrowed with accrued interest was $46,078 as of June 30, 2014.
Additionally Hans Rigendinger and his wife have signed Bonds as per June 30, 2014 and December 31,
2013 in the nominal values of CHF 2,900,000 (approximately $3,256,000) and EUR 780,000
(approximately $1,060,000).
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) repayable on April 30, 2014.
Instead of interest Swisshome Real Estate AG received a lump sum of CHF 100,000 (approximately
$111,000) as consideration for the loan, which amount is equivalent to an approximate effective yearly
interest of 11.98%. The loan (including the lump sum consideration for the loan) was repaid on April 22,
2014.
47
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.
Specogna Holding AG
On May 15, 2014, the Company entered into a short term loan agreement for CHF 1.0 million
(approximately $ 1.12 million) with Specogna Holding AG repayable on July 31, 2014. Instead of interest
Specogna Holding AG will receive a lump sum of CHF 30,000 (approximately $33,800) as consideration
for the loan. This loan has been secured with individual and joint liability by Dr. Rössler, Mr. Mettler and
Mr. Rigendinger. The loan has been repaid on August 07, 2014.
Loan R. Weimar (private investor)
On June 30, 2014 the Company entered into a short term loan agreement for approx. EUR 310,000
(approx. USD 420,000) with Roland Weimar. This loan is repayable with 5 instalments, (4 x EUR
70,000, 1 x EUR 30,000) the latest one being due on June 01, 2015. The interest rate is 2 % p.a.
Timeline
Our expected timeline for developing the Paradisus Papagayo Bay Resort & Luxury Villas is as follows:
— complete architectural plans in the 2nd quarter of 2014
— secure construction loan in the 3rd quarter of 2014
— commence onsite vertical construction in the 3rd quarter of 2014
— complete construction in the 4th quarter of 2015
— handover to Meliá in the 4th quarter of 2015
Discussion and Analysis
Our plan of operation through the fourth quarter 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 $100 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 $22 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 three and six month periods ended June 30, 2014, our operations were focused on (i) finalizing
architectural plans, (ii) obtaining building permits, (iii) progressing earth work excavations on the
Paradisus Papagayo Bay Resort & Luxury Villas property; (iv) negotiating a credit facility with the Banco
National (v) pursuing additional debt and equity financing arrangements including a CHF and EUR bond
offering through SunVesta AG in Europe, and loans from related parties.
48
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 Income/Loss
Comprehensive loss for the three month period ended June 30, 2014, was $2,567,886 as compared to a
comprehensive loss of $2,158,421 for the three month period ended June 30, 2013. The change in
comprehensive loss in the current three month period can be primarily attributed to the increase in interest
expense to $840,851 from $609,356 due to interest accruing on bonds and notes, the increase in
amortization of debt issuance costs to $251,515 from $50,990 and the increase in general and
administrative expenses to $1,371,362 from $1,194,746, which increase is the result of an increase in
rental expenses to $44,471 from $43,646, the increase in audit costs to $93,289 from $42,463, the
increase in consulting expenses to $430,477 from $393,632, the increase in personnel costs to $506,603
from $368,684 and the increase in other operating expenditures to $190,331 from $79,311, offset by a
decrease in marketing expenses to $28,083 from $52,912, and a decrease in travel expenses to $77,810
from $214,171.
Other contributing factors to the change in comprehensive loss in the current three month period from
comprehensive loss in the prior three month period include the increase in loss due to foreign exchange
differences of $245,229 from $231,931, an increase in other expenses to $19,727 from $14,149, and the
decrease to nil from the $36,307 gain associated with the change in fair value conversion feature in the
prior three month period, offset by the increase in interest income to $6,990 from $6,562 and the gain of
$153,809 as compared to a loss of $100,118 due to volatility between Swiss Francs, EURO 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.
Comprehensive loss for the six month period ended June 30, 2014, was $5,668,793 as compared to a
comprehensive loss of $1,624,610 for the six month period ended June 30, 2014. The change in
comprehensive loss in the current six month period can be primarily attributed to the increase in general
and administrative expenses to $3,423,354 from $2,499,703, which increase is the result of an increase in
rental expenses to $89,106 from $80,635, the increase in audit costs to $183,401 from $89,694, the
increase in consulting expenses to $1,032,883 from $667,028, the increase in personnel costs to
$1,405,081 from $1,004,558 and the increase in other operating expenditures to $494,369 from $243,652,
offset by a decrease in marketing expenses to $35,945 from $52,912 and travel expenses to $182,570
from $361,224, a gain of nil related to the release of an accrual for a penalty that was to be paid to Meliá
from $1,000,000, the increase in interest expense to $1,395,477 from $1,036,012, the increase in
amortization of debt issuance costs to $325,313 from $133,805, the increase in foreign exchange
differences to $402,386 from $88,059. Other contributing factors to the change in comprehensive loss in
the current three month period from comprehensive loss in the prior three month period include the
increase in other expenses to $78,250 from $41,181, the transition of foreign currency translation to a loss
of $51,003 from a gain of $1,181,288, offset by the increase in interest income to $6,991 from $6,736 and
the decrease to nil from the $13,874 loss associated with change in fair value of conversion feature.
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.
49
Capital Expenditures
The Company expended a significant amount on capital expenditures for the period from January 1, 2005
to June 30, 2014, 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 experienced significant changes in liquidity, capital resources, and stockholders’ equity
since inception.
As of June 30, 2014, we had a working capital deficit of $15,092,616. We had current assets of
$1,757,060 and total assets of $58,207,442. Our current assets consisted of $361,564 in cash, $429,041 in
other assets and $966,455 as a related party receivable. Our non-current assets consisted of property and
equipment of $48,700,102, deposits related to construction work of $757,429, net debt issuance costs of
$2,926,247, down payments for property and equipment of $2,369,816 and restricted cash of $1,696,788.
We had current liabilities of $16,849,676 and total liabilities of $82,362,622. Our current liabilities
consisted of $6,352,549 in accounts payable, $5,837,909 in accrued expenses, $3,546,408 in a note
payable, and $1,112,810 in notes payable to related parties. Our non-current liabilities consisted of EUR
bond debt of $9,756,591, CHF bond debt of $20,550,298, notes payable to related parties of $35,026,366,
other long term debts of $88,505 and pension liabilities of $91,186. Total stockholders’ deficit in the
Company was $24,155,180 at June 30, 2014.
Net cash used in operating activities for the six months ended June 30, 2014, was $3,142,719 as compared
to $2,154,185 for the six months ended June 30, 2013, which differences reflect the changes in working
capital, and non cash items including stock compensation expenses, depreciation and amortization, and
unrealized exchange differences. Net cash used in operating activities in the current six month period is
comprised of general and administrative expenses that include but are not limited to, personnel costs,
accounting fees, consulting expenses, finder’s fees and professional fees, such as for auditing purposes
and legal consultation, accounts payable and accrued expenses. Net cash used in operating activities in the
prior six month period can also be primarily attributed to changes in general and administrative expenses,
accounts payable and accrued expenses.
We expect to use 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.
Net cash used in investing activities for the six months ended June 30, 2014, was $5,038,474 as compared
to $8,186,499 for the six months ended June 30, 2013. Net cash used in investing activities in the current
six month period can be attributed to receivables from related parties, and the purchase of property and
equipment, offset by net cash provided by investing activities as deposits related to construction. Net cash
used in investing activities in the prior six month period ended June 30, 2013, can be attributed to
receivables from related parties, the purchase of property or equipment, deposits related to construction,
down payments for property and restricted cash.
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.
50
Net cash provided by financing activities for the six months ended June 30, 2014, was $7,944,267 as
compared to $10,276,868 for the six months ended June 30, 2013. Net cash provided by financing
activities in the current six month period can be attributed to proceeds from notes payable to related
parties, note payable, proceeds from SunVesta AG’s bond issuances and the sale of treasury stock, offset
by net cash used in financing activities as the repayment of notes payable to related parties, the repayment
of bonds and the payment of debt issuance costs. Net cash provided by financing activities in the prior six
month period can be attributed to proceeds from notes payable to related parties, and proceeds from
SunVesta AG’s bond issuances, offset by net cash used in financing activities for the repayment of bonds
and the payment of debt issuance costs.
We expect net cash flow provided by financing activities in future periods from those 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 EUR and CHF bond
offerings, 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 June 30, 2014.
We have commitments for executed purchase orders and agreements in the amount of $57 million as of
June 30, 2014, in connection with the development of the Paradisus Papagayo Bay Resort & Luxury
Villas, which commitments are included in the required financing of $185 million to complete the project.
Most material commitments were not contractually agreed as of the end of the period.
The sixth addendum (dated June 2, 2014) to the management agreement with Meliá stipulates that should
the completion of the construction not occur by November 15, 2015, and should an extension date not be
agreed, subsequent to November 15, 2015, Meliá will be entitled to receive a daily amount of $2,000 as
liquidated damages. Should the completion of the construction not occur by February 15, 2016 Meliá 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.
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 $14,000,000 as of June 30, 2014,
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 an employment
agreement with our chief executive officer and chief operating officer as of June 30, 2014.
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 as discussed above.
We have no current plans to make any changes in the number of our employees as of June 30, 2014.
Future Financings
The previously reported financing scheme of a syndicated loan could not be materialized. While Banco de
Costa Rica maintained its contemplated engagement, Banco Nacional withdrew its interest.
Consequently the Company explores new alternatives. Final and formal decisions are expeted to be
received during the 3rd quarter 2014
51
Off-Balance Sheet Arrangements
As of June 30, 2014, 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 “Net Project Cost is expected 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 expected to be financed by the main shareholders of the
project, i.e. Zypam Ltd., shareholder, Mr. Hans Rigendinger, shareholder, director and officer, Mr. Max
Rössler, shareholder, director and majority shareholder of Aires, Mr. Josef Mettler, shareholder, director
and 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 Holding AG has secured financing for
the completion of the project.
Based on this guaranty agreement, management therefore believes that available funds are sufficient to
finance cash flows for the twelve months subsequent to June 30, 2014 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.
52
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. We also wish to
advise readers not to place any undue reliance on the forward-looking statements contained in this report,
which reflect our beliefs and expectations only as of the date of this report. We assume no obligation to
update or revise these forward-looking statements to reflect new events or circumstances or any changes
in our beliefs or expectations, other than as required by law.
Recent Accounting Pronouncements
Please see Note 2 to the accompanying consolidated financial statements for recent accounting
pronouncements.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
53
ITEM 4.
CONTROLS AND PROCEDURES
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 that, due to a lack of independent
oversights, failure to segregate duties and insufficient accounting resources as of the end of the period
covered by this report, 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.
Changes in Internal Control over Financial Reporting
During the period ended June 30, 2014, 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, except the appointment of two independent directors for the purpose of maintaining
appropriate independent oversight of the Company’s consolidated financial reporting and procedures for
internal control over financial reporting, including challenging management’s accounting for and
reporting of transactions.
The Company’s management concluded that an increase in the effectiveness and quality of their internal
controls and procedures should be reached by corresponding internal projects within the remaining
financial year 2014.
54
PART II – OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
None.
ITEM 1A.
RISK FACTORS
Not required of smaller reporting companies.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3.
DEFAULTS ON SENIOR SECURITIES
None.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.
OTHER INFORMATION
None.
ITEM 6.
Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits on page
57 of this Form 10-Q, and are incorporated herein by this reference.
55
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SunVesta, Inc.
Date
/s/ Josef Mettler
August 19, 2014
Josef Mettler
Chief Executive Officer, Chief Financial Officer,
Principal Accounting Officer and Director
/s/ Hans Rigendinger
August 19, 2014
Hans Rigendinger
Chief Operating Officer and Director
56
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
Rӧssler.
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).
10.11*
Assignment of Debt Agreement dated December 31, 2013, between the Company, SunVesta AG and Aires
International Investments, Inc.(incorporated by reference to the Form 10-Q filed with the Commission on
May 20, 2014)
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.
57