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 March 31, 2015.

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 þ No o

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

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

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

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

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

Act). Yes o No þ

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

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

class of voting stock), at May 20, 2015, was 83,541,603.

1

TABLE OF CONTENTS

PART 1- FINANCIAL INFORMATION

Item1.

Financial Statements:

3

Consolidated Balance Sheets as of March 31, 2015 (Unaudited)  and December 31,

4

2014

Unaudited  Consolidated Statements of Operations and Comprehensive Loss

5

(unaudited) for the three months ended March 31, 2015 and March 31, 2014

amounts

Unaudited  Consolidated Statements of  Stockholders’ Equity (unaudited) for the

6

three months ended March 31, 2015

Unaudited  Consolidated Statements of Cash Flows (unaudited) for the three months

7

ended March 31, 2015 and March 31, 2014

Notes to Unaudited  Consolidated Financial Statements

8

Item 2.

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

34

Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

44

Item 4.

Controls and Procedures

44

PART II-OTHER INFORMATION

Item 1.

Legal Proceedings

45

Item 1A.

Risk Factors

45

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

45

Item 3.

Defaults Upon Senior Securities

46

Item 4.

Mine Safety Disclosures

46

Item 5.

Other Information

46

Item 6.

Exhibits

46

Signatures

47

Index to Exhibits

48

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

March 31, 2015

December 31, 2014

(Unaudited)

Assets

Current assets

Cash and cash equivalents

$

106,445     $

14,347

Receivable from related parties

25,927

27,163

Other assets

278,698

289,156

Total current assets

411,070

330,666

Non-current assets

Property and equipment - net

52,718,276

51,201,352

Deposits related to construction work

817,389

820,565

Debt issuance costs - net

1,458,452

2,006,849

Down payment for property and equipment

2,469,816

2,369,816

Restricted cash

1,688,297

1,684,934

Total non-current assets

59,152,230

58,083,516

Total assets

$

59,563,300

58,414,182

Liabilities and stockholders' equity (deficit)

Bank liabilities

-

153,375

Accounts payable

5,535,450

6,181,057

Accrued expenses

6,842,622

5,444,514

Note payable

2,195,551

3,023,759

Notes payable to related parties

1,239,545

1,162,100

CHF-Bond

28,729,655

25,511,898

Total current liabilities

44,542,823

41,476,703

Non-current liabilities

EUR-Bond

8,355,929

9,057,986

Notes payable to related parties

33,085,285

30,299,312

Other long term debts

64,803

74,837

Pension liabilities

139,998

136,433

Total non-current liabilities

41,646,015

39,568,568

Total liabilities

86,188,838

81,045,271

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; 75,541,600 and

83,541,603 shares issued and outstanding

835,416

835,416

Additional paid-in capital

23,186,390

22,942,486

Accumulated other comprehensive income /loss

215,385

1,265,590

Accumulated deficit

(50,862,729)

(47,674,581)

Total stockholders' equity (deficit)

(26,625,538)

(22,631,089)

Total liabilities and stockholders' equity (deficit)     $

59,563,300

58,414,182

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

4

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 

Three months ended March 31,

 

 

			2015		2014
			(Unaudited)		(Unaudited)
	Revenues
	Revenues, net	$	-		-
	Cost of revenues		-		-
	Gross profit		-		-
	Operating expenses
	General and administrative expenses	$	(1,856,467)		(2,051,992)
	Total operating expenses		(1,856,467)		(2,051,992)
	Loss from operations	$	(1,856,467)		(2,051,992)
	Other income / - expenses
	Interest income		6,784		-
	Interest expense		(1,328,911)		(554,626)
	Amortization of debt issuance costs and commissions		(446,204)		(73,797)
	Exchange differences		463,442		(157,157)
	Other income / - expenses		(25,641)		(58,523)
	Total other income / - expenses	$	(1,330,530)		(844,103)
	Loss before income taxes	$	(3,186,997)		(2,896,095)
	Income Taxes		(1,151)		-
	Net loss	$	(3,188,148)		(2,896,095)
	Comprehensive income /(loss)
	Foreign currency translation		(1,050,205)		(204,812)
	Comprehensive income / (loss)	$	(4,238,353)		(3,100,907)
	Loss per common share
	Basic and diluted	$	(0.03)		(0.03)
	Weighted average common shares
	Basic and diluted		92,607,159		86,247,159

 

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, 2014

$

835,416     $

22,942,486     $

1,265,590     $

(47,674,581)     $

-     $

(22,631,089)

Net loss

-

-

-

(3,188,148)

-

(3,188,148)

Translation adjustments

-

-

(1,050,205)

-

-

(1,050,205)

Stock based compensation

-

243,904

-

-

-

243,904

expense

March 31, 2015

$

835,416     $

23,186,390     $

215,385     $

(50,862,729)     $

-     $

(26,625,538)

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

6

SUNVESTA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		January 1 to March 31, 2015		January 1 to March 31, 2014
		Unaudited		Unaudited
Cash flows from operating activities
Net loss	$	(3,188,148)		(2,896,095)
Adjustments to reconcile net loss to net cash
Depreciation and amortization		16,802		14,194
Amortization of debt issuance cost and commissions		446,204		73,797
Unrealized exchange differences		(551,593)		157,157
Stock compensation expense		243,904		583,592
Increase in pension fund commitments		-		1,010
- Increase / decrease in:
Other current assets		11,590		(38,660)
Accounts payable		(771,197)		(377,411)
Accrued expenses		1,322,708		1,495,718
Net cash used in operating activities		(2,469,730)		(986,698)
Cash flows from investing activities
Receivables from related parties		1,994		-
Purchase of property and equipment		(765,999)		(2,198,136)
Deposits related to construction		3,311		42,461
Down payments for property and equipment		(101,945)		-
Restricted cash		16		-
Net cash used in investing activities		(862,623)		(2,155,675)
Cash flows from financing activities
Decrease in bank liabilities		(153,375)
Proceeds from notes payable related parties		1,294,163		644,767
Repayment of notes payable related parties		-		(594,045)
Proceeds from notes payable		-		2,818,172
Proceeds from bond issuance, net of commissions		2,660,356		5,803,055
Repayment of bonds		-		(4,989,073)
Payment for debt issuance costs		(256,268)		(945,934)
Changes in other debt		(119,601)		-
Purchase/Sale of treasury stock		-		10,300
Net cash provided by financing activities		3,425,275		2,747,242
Effect of exchange rate changes		(824)		8,318
Net increase / - decrease in cash		(92,098)		(386,813)
Cash and cash equivalents, beginning of period		14,347		629,673
Cash and cash equivalents, end of period	$	106,445		242,860
Additional information
Capitalized interest and debt issuance costs for construction (non-cash)		765,000		597,999
Repayment of Specogna Holding AG loan by Aires		707,428		-
Interest paid		160,000

 

 

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

7

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

1.

CORPORATE INFORMATION

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

AG”)  (collectively  “the  Company”).   SunVesta  AG  holds  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.  The  Company  has  one  major

project  in  Costa  Rica.  Planning  for  this  project  has  been  fully  completed,  all  consents  have

been granted, except that consent required under “Article 21” in connection with access to the

beachfront  associated  with  the  project.  Excavation  work  began  in  March  2013  and  site  work

continues.  The  Company  is  still  in  process  of  completing  the  financing  of  the  project  and  has

not realized revenue to date. Since the financing of the project is not complete, the Company’s

activities are subject to significant risks and uncertainties.

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

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

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, 2014, 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, 2015.

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,   2014,   filed   with   the   Securities   and   Exchange

Commission.

2.

SIGNIFICANT ACCOUNTING POLICIES

New accounting standard updates

In   August   2014,   the   Financial   Accounting   Standards   Board   (FASB)   issued   Accounting

Standards  Updates  (ASU)  2014-15  requiring  an  entity’s  management  to  evaluate  whether

there  are  conditions  or  events,  considered  in  aggregate,  that  raise  substantial  doubt  about

entity’s  ability to  continue  as  a  going concern  within one  year  after  the  date  that  the  financial

statements  are  issued  (or  within  one  year  after  the  date  that  the  financial  statements  are

available  to  be  issued  when  applicable).  The  amendments  to  (ASU)  2014-15  are  effective  for

the annual period ending after December 15, 2016, and for annual periods and interim periods

thereafter.  Early  application  is  permitted.  The  Company  is  in  the  process  of  evaluating  the

prospective impact of (ASU) 2014-15 will have on its balance sheet.

8

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

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 first quarter of 2017.

Until the completion of the project, the following expenditures are estimated to be incurred:

a.      Gross project cost

$

208,000,000

b.      Less: Proceeds from sale of villas

(25,000,000)

c.      Net project cost

183,000,000

d.      Overhead expenses

24,000,000

e.      Less: Recuperated in gross project cost

(12,000,000)

f

Total, excluding other potential projects

$

195,000,000

Sixty  percent  (60%)  of  the  net  project  cost  is  intended  to  be  financed  through  the  issuance  of

secured bonds, for  which negotiations have been initiated. The remaining forty percent  (40%)

of  the  net  project  cost,  as  well  as  non-recuperated  overhead  expenses  are  intended  to  be

financed  by  the  main  shareholders  or  lenders  of  the  project,  i.e.  Zypam  Ltd.,  shareholder  and

related  entity  to  Mr.  Josef  Mettler,  Mr.  Hans  Rigendinger,  shareholder,  Company  Director

and  Chief  Operating  Officer,  Dr.  Max  Rössler,  controlling  shareholder  of  Aires  International

Investment,  Inc.  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   ongoing  capital

requirements.  The  guaranty  agreement  requires  that  within  30  days  of  receiving  a  demand

notice,  the  requested  funds  are  made  available  by  the  guarantors  to  the  Company.  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

March  31,  2015  and  the  filing  date,  though  future  anticipated  cash  outflows  for  investing

activities will continue to depend on the availability of financing.

9

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

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

March 31, 2015

December 31, 2014

original currency

18,491

10,955

73,202

84,135

in $

18,491

11,887

75,912

155

106,445

14,347

USD ($)  =

US Dollar

EURO     =

Euro

CHF

=

Swiss Francs

CRC

=

Costa Rican Colón

5.

RESTRICTED CASH

As of March 31, 2015, the Company has the following restricted cash positions:

March 31,

December 31,

Restricted Cash

2015

2014

$

$

Credit Suisse in favor of

BVK Personalvorsorge des Cantons Zurich

132,635

129,272

HSBC in favor of

Costa Rican Tourism Board

370,000

370,000

Banco Nacional de Costa Rica in favor of the

Costa Rican Environmental Agency – SETENA

622,312

622,312

Banco National de Costa Rica in favor of the Costa

Rican Tourism Board

563,350

563,350

Gross

1,688,297

1,684,934

Restricted   cash   positions   in   favor   of   Costa   Rican   Tourism   Board   and   Costa   Rican

Environmental Agency – SETANA are related to the hotel project in Costa Rica and therefore

their  release  is  not  expected  before  finalization  of  the  corresponding  project.  Due  to  this  fact

these restricted cash positions have been classified as long term.

The  restricted  cash  position in  favor  of  BVK  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.

10

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

6.

PROPERTY & EQUIPMENT

March 31, 2015

December 31, 2014

Land

$

19,700,000

19,700,000

IT Equipment

185,846

185,846

Other equipment and furniture

280,284

277,557

Leasehold improvements

66,617

66,617

Vehicles

139,000

139,000

Construction in-process

32,806,558

31,275,559

Gross

53,178,305

51,644,579

Less accumulated depreciation

(460,029)

(443,227)

Net

$

52,718,276

51,201,352

Depreciation expenses for the period ended

March 31, 2015 and 2014

16,802

14,194

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

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

Tourism  project.  The  land  amounts  to  $19.7  million  comprised  of  $7  million  related  to  the

concession held by Rich Land (~84,000 m2) and $12.7 million held by AdR (~120,000 m2).

The  Rich  Land  concession  is  a  right  to  use  the  property  for  a  specific  period  of  time  of  20

years  from  the  date  of  grant,  which  thereafter  can  be  renewed  at  no  further  cost,  if  the

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

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

also a right to use the property for a specific period of time of 30 years from the date of grant,

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

obligations   and   if   there   is   no   significant   change   in   government   policies.   The   current

concession  expires  in  November  2036.  For  both  properties  concession  extension  requests  for

30  years  (Rich  Land)  and  15.5  years  (AdR)  were  filed  during  third  quarter  2013,  which

requests  have  since  been  updated  to  request  an  additional  50  years  for  each.  These  extension

requests have not been answered as of date of this report.

The  construction  in  process  through  December  31,  2014  and  March  31,  2015,  is  represented

primarily by architectural work related to the hotel  and apartments as well as site work on the

respective properties.

Deposit related to construction work

During  the  quarter  ended  March  31,  2015,  most  of  the  main  earthmoving  groundwork  has

been  completed  for  which  work  the  Company  has  paid  several  deposits  to  contractors.  These

deposits  will  be  offset  against  invoices  for  such  groundwork.  As  of  March  31,  2015  and

December 31, 2014, the Company has deposits of $817,389 and $820,565 respectively, which

have not yet been set off.

Guaranty Retention

During  the  quarter  ended  March  31,  2015,  most  of  the  main  earthmoving  groundwork  has

been  completed.  Due  to  this  development,  the  Company  has  received  several  invoices  from

contractors.  The  Company  has  retained  some  amounts  related  to  construction  work.  As  soon

as  the  Company  releases  the  corresponding  work  retention  the  retention  will  be  paid.  As  of

March  31,  2015  and  December  31,  2014,  the  Company  had  guaranty  retention  in  the  amount

of $70,551 and $0, which is stated in accrued expenses.

11

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

7.

DOWN PAYMENTS FOR PROPERTY & EQUIPMENT

March 31, 2015

December 31, 2014

La Punta (neighboring piece of land)

$

2,469,816

2,369,816

Hotel Project Atlanta

$

-

-

Altos del Risco

$

-

-

Gross

$

2,469,816

2,369,816

Write off Hotel Project Atlanta

$

-

-

Total (net)

$

2,469,816

2,369,816

Agreement to purchase neighboring pieces of land

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

concession  properties  located  at  Polo  Papagayo,  Guanacaste,  Costa  Rica  with  a  total  surface

of approximately 230,000 square meters for $22,895,806, whereof fifty percent was to be paid

in  cash  and  the  other  fifty  percent  through  a  combination  of  a  10  percent  equity  share  in  La

Punta  (the  concession  properties  in  Polo  Papagayo)  and  a  five  percent  in  equity  of  Paradisus

Papagayo  Bay  Resort  &  Luxury  Villas  (currently  under  construction).  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  shares.  The  terms  and  conditions  of  the  cash  payment

were to be defined. Furthermore, all  payments by the Company to date and in the future were

to  be  refundable  in  the  event  the  Company  did  not  complete  the  purchase.  During  the  second

quarter  of  2013,  the  Company  entered  into  a  new  agreement  for  the  purchase  of  the  two

additional  concession  properties.  The  original  contract  as  described  above  was  cancelled  and

replaced by a new contract, which included the following clauses:

-

The total purchase price is $17,500,000 of which $1,369,816 has been paid as of date of the new agreement

and therefore $16,130,184 remained outstanding as per date of the new agreement.

-

Since the original seller of these two additional concession properties at Polo Papagayo, Guanacaste owed a

third party $8,000,000 the Company was to pay $8,000,000 of the purchase price directly to this third party

instead of the original seller. The remaining $8,130,184 was to be paid directly to the original seller of the

concession properties.

-

The payment schedule for these two additional concession properties at Polo Papagayo Guanacaste was as

is detailed hereinafter:

Third Party

-

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

-

$1,000,000 on June 30, 2013, which is refundable and $700,000 of this $1,000,000 was paid on October 29,

2013. The remaining $300,000 has not been paid as of the date of this report.

-

$1,000,000 on July 31, 2013, which is refundable and has not been paid as of the date of this report.

-

$1,000,000 on August 31, 2013 which is refundable and has not been paid as of the date of this report.

-

$1,500,000 on September 30, 2013, which is refundable and has not been paid as of the date of this report.

-

$1,500,000 on October 31, 2013, which is refundable and has not been paid as of the date of this report.

-

$1,700,000 on November 30, 2013, which is refundable and has not been paid as of the date of this report.

$8,000,000 in total to Third Party

12

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

7.

DOWN PAYMENTS FOR PROPERTY & EQUIPMENT - Continued

Original Seller

-

$1,000,000 on January 31, 2014 which has not been paid as of the date of this report and is non-refundable.

-

$1,000,000 on February 28, 2014 which has not been paid as of the date of this report and is non-

refundable.

-

$1,000,000 on March 31, 2014 which has not been paid as of the date of this report and is non-refundable.

-

$1,000,000 on April 30, 2014 which has not been paid as of the date of this report and is non-refundable.

-

$1,000,000 on May 31, 2014 which has not been paid as of the date of this report and is non-refundable.

-

$1,000,000 on June 30, 2014 which has not been paid as of the date of this report and is non-refundable.

-

$1,000,000 on July 31, 2014 which has not been paid as of the date of this report and is non-refundable.

$1,130,184 on August 31, 2014 which has not been paid as of the date of this report and is non-refundable.

$8,130,184 in total to Original Seller

The  Company  had  paid  down-payments  on  the  purchase  of  these  properties  of  $2,469,816  as

of March 31, 2015 and has made an additional refundable payment of $100,000 subsequent to

period end against the purchase price. The Company is in discussions with the Original  Seller

regarding  an  extension  of  the  agreement.  Should  the  Company  not  be  successful  in  obtaining

a  time  extension  for  the  payment  of  the  purchase  price,  it  will  have  to  write-off  $300,000  of

that purchase price already paid.

13

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

8.

FAIR VALUE MEASUREMENT

The  guidance  on  fair  value  measurements  defines  fair  value  as  the  exchange  price  that  would

be  received  for  an  asset  or  paid  to  transfer  a  liability  (an  exit  price)  in  the  principal  or  most

advantageous  market  for  the  asset  or  liability  in  an  orderly  transaction  between  market

participants.  This  guidance  also  specifies  a  fair  value  hierarchy  based  upon  the  observability

of  inputs  used  in  valuation  techniques.  Observable  inputs  (highest  level)  reflect  market  data

obtained from independent sources, while unobservable inputs (lowest level) reflect internally

developed market assumptions. In accordance with this guidance, fair value measurements are

classified under the following hierarchy:

Level 1

Quoted prices for identical instruments in active markets.

Level 2

Quoted  process  for  similar  instruments  in  active  markets,  quoted  prices  for  identical  or  similar

instruments  in  markets  that  are  not  active;  and  model-derived  valuations  in  which  significant

inputs or significant value drivers are observable in active markets.

Level 3

Model  derived  valuations  in  which  one  or  more  significant  inputs  or  significant  value-drivers  are

unobservable.

When  available,  the  Company uses  quoted  market  prices  to  determine  fair  value, and  classify

such  measurements  within  Level  1.  In  some  cases  where  market  prices  are  not  available,  the

Company  makes  use  of  observable  market  based  inputs  to  calculate  fair  value,  in  which  case

the  measurements  are  classified  within  Level  2.  If  quoted  or  observable  market  prices  are  not

available,  fair  value  is  based  upon  internally  developed  models  that  use,  where  possible,

current  market-based parameters such as interest  rates, yield curves and currency rates. These

measurements are classified within Level 3.

Fair value measurements are classified according to the lowest level  input or value-driver  that

is significant to the valuation. A measurement may therefore be classified within Level 3 even

though there may be significant inputs that are readily observable.

Fair  value  measurement  includes  the  consideration  of  nonperformance  risk.  Nonperformance

risk  refers  to  the  risk  that  an  obligation  (either  by  counterparty  or  the  Company)  will  not  be

fulfilled.  For  financial  assets  traded  in  an  active  market  (Level  1),  the  nonperformance  risk  is

included  in  the  market  price.  For  certain  other  financial  assets  and  liabilities  (Level  2  and  3),

the Company’s fair value calculations have been adjusted accordingly.

As  of  March  31,  2015  and  December  31,  2014,  respectively,  there  are  no  financial  assets  or

liabilities measured on a recurring basis at fair value.

In addition to the methods and assumptions to record the fair value of financial instruments as

discussed  above,  the  Company  used  the  following  methods  and  assumptions  to  estimate  the

fair value of our financial instruments:

14

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

8.

FAIR VALUE MEASUREMENT - Continued

—

Cash and cash equivalents – carrying amount approximated fair value.

—

Restricted cash – carrying amount approximated fair value.

—

Receivables  from  related  parties  (current)  –  carrying  amount  approximated  fair  value  due  to  the  short  term  nature

of the receivables.

—

Accounts Payable – carrying amount approximated fair value.

—

Note payable – carrying amount approximated fair value due to the short term nature of the note payable.

—

Bank liabilities - carrying amount approximated fair value due to the short term nature of bank liabilities.

—

Notes  payable  to  related  parties  -  Dr.  M.  Rössler  (current)  –The  fair  value  was  calculated  based  on  the  underlying

publically  traded  shares.  However,  the  Company  records  the  loan  at  nominal  value.  The  Company  does  not  have

sufficient cash to repurchase the shares as of balance sheet date and hence repay the loans in shares.

—

Notes  payable  to  related  parties  – (current)  –  carrying amount  approximated  fair  value  due  to  the  short  term nature

of the notes payable.

—

EUR– bond (old) – carrying amount approximated fair value due to its short term nature

—

EUR- bonds – The fair values of the bonds payable are classified as level 3 fair values. The fair values of the bonds

have  been  determined  by discounting cash  flow  projections  discounted  at  the  respective  interest  rates  of 7.25%  for

EUR  bonds,  which  represents  the  current  market  rate  based  on  the  creditworthiness  of  the  Company.  Hence,  the

carrying values approximate fair value.

—

CHF-bonds – The fair values of the bonds payable are classified as  level 3 fair values. The  fair values of the bonds

have  been  determined  by discounting cash  flow projections discounted  at  the  respective  interest  rates  of 7.25% 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.  are  classified  as  level  3.  The  fair  values  of  the  notes  were  determined  by  discounting  cash  flow

projections  discounted  at  the  respective  interest  rates  of  7.25%,  which  represents  the  current  market  rate  based  on

the creditworthiness of the Company. Hence, the carrying value approximates fair value.

The fair value of our financial instruments is presented in the table below:

March 31, 2015

December 31, 2014

Carrying

Fair Value      Carrying

Fair Value

Fair Value

Amount

Amount

Reference

$

$

$

$

Levels

Cash and cash equivalents

106,445

106,445

14,347

14,347

1

Note 4

Restricted cash

1,688,297

1,688,297

1,684,934

1,684,934

1

Note 5

Receivables from related

parties – other (current)

25,927

25,927

27,163

27,163

3

Note 9

Accounts Payable

5,535,450

5,535,450

6,181,057

6,181,057

1

-

Bank liabilities

-

-

153,375

153,375

1

Note10

Note payable

2,195,551

2,195,551

3,023,759

3,023,759

1

Note 16

Notes payable to related

parties – Dr. M. Rössler

824,213

824,213

803,223

765,890

1

Note 9

(current)

Notes payable to related

parties – Rigendinger

1,964

1,964

1,914

1,914

3

Note 9

(current)

Notes payable to related

parties – other (current)

413,368

413,368

356,963

356,963

3

Note 9

EUR-bonds

8,355,929

8,355,929

9,057,986

9,057,986

3

Note 11

CHF-bonds

28,729,655

28,729,655

25,511,898

25,511,898

3

Note 11

Notes payable to related

parties – Aires (non-

33,085,285

33,085,285     30,299,312

30,299,312

3

Note 9

current)

15

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

9.

RECEIVABLES FROM AND PAYABLES TO RELATED PARTIES

The advances from (to) related parties are composed as follows:

Receivables

Payables

March 31,

December 31,

March 31,

December 31,

2015

2014

2015

2014

1     Hans Rigendinger

-

-

1,964

1,914

2     Aires International

-

-

33,085,285

30,299,312

3     Dr. Max Rössler

-

-

824,213

803,223

4     4f capital ag

-

-

777

-

5     Akyinyi Interior and

Exterior Decoration

-

-

200,000

170,000

6     Global Care AG

-

-

212,589

186,963

7     Geoffrey Long

25,927

27,163

-

-

Total excluding interest

25,927

27,163

34,324,828

31,461,412

Accrued interest

-

-

4,550,817

3,818,494

Total

25,927

27,163

38,875,645

35,279,906

of which non-current

-

-

33,085,285

30,299,312

Related party

Capacity

Interest    Repayment

Rate

Terms

Security

1     Hans Rigendinger     Shareholder, COO and Company board member

3%

none

none

2     Aires International

*** see hereinafter ***

3     Dr. Max Rössler

*** see hereinafter ***

4     4f capital ag

Company owned by Josef Mettler, CEO, CFO and

Company board member

none

none

none

Akyinyi Interior

5     and Exterior

Company owned by the wife of Josef Mettler

none

none

none

Decoration

6     Global Care AG

Company owned by Dr. Max Rössler

none

none

none

7     Geoffrey Long

Head of Accounting “The Americas”

none

none

none

Loan agreement Aires International Investment Inc.

As of March 31, 2015 the Company owes Aires International Inc. the following:

Borrower

Debt instrument

Amount in CHF

Amount in

Annual

Repayment date

denominated in

USD

interest

*

CHF

rate

SunVesta Inc.

Promissory note

10,044,370

10,439,832

7.25 %

Dec 31, 2017

SunVesta Inc.

Promissory note

10,000,000

10,439,832

7.25 %

Dec 31, 2017

SunVesta Inc.

Promissory note

10,000,000

10,439,832

7.25 %

Dec 31, 2017

SunVesta Holding

Loan agreement

1,691,395

1,765,788

7,25%

Dec 31, 2017

Total

33,085,285

*

The notes may be repaid in whole or in part.

16

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

9.

RECEIVABLES FROM AND PAYABLES TO RELATED PARTIES -  Continued

Loans Dr. Max Rössler

As of March 31, 2015 the Company owes Dr. Max Rössler the following:

Debt instrument      Securities

Amount in

Amount in      Annual interest      Repayment date

CHF

USD

rate

Securities

10,000 shares

427,048

442,858

*

May 30, 2015

lending

Schindler

Holding

Securities

700 shares Zug

367,741

381,355

*

May 30, 2015

lending

Estates Holding

Total

794,789

824,213

May 30, 2015

*

The  Company  is  not  required  to  pay  any  interest  and  can  repay  the  loans  either  in

cash or with the delivery of the respective shares.

Loan Global Care AG

During  2014,  Global  Care  AG  loaned  the  Company  $191,849  (CHF  185,000),  which  amount

was  repayable  on  October  31,  2014.  The  loan  includes  a  fixed  interest  payment  of  $20,740

(CHF  20,000).  As  of  the  date  of  this  report,  both  amounts  are  overdue.  According  to  the

agreement, there are no penalties for late payments.

17

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

10.

RELATED PARTY TRANSACTIONS

Commissions paid or payable to related parties

During   the   periods   ended   March   31,   2015,   and   March   31,   2014,   the   Company   paid

commissions to 4f  capital  ag in the amount  of  $29,181 and $60,300, respectively, for  services

related  to  financing  the  Company.  4f  capital  ag  is  a  company  owned  and  directed  by  Mr.

Mettler  (Board  Member  and  CEO  of  the  Company)  that  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.

Hans Rigendinger

In 2013, the Company borrowed $600,000 at 3% interest from Hans Rigendinger. The amount

due to Mr. Rigendinger for this loan at March 31, 2015 was $1,964.

Mr.   Rigendinger   also   held   bonds   denominated   in   Euros   and   Swiss   Francs   valued   at

approximately $3,853,000 as of March 31, 2015 and December 31, 2014.

Service fees paid or payable to Akyinyi Interior and Exterior Decoration

During the periods ended March 31, 2015, and March 31, 2014, the Company paid or accrued

fees to Akyinyi  Interior and Exterior Decoration, which is a company owned by Mr. Mettler’s

wife, for services related to interior design plans for the Papagayo Gulf Tourism project in the

amounts   of   approximately   $30,000   and   $30,000   respectively.   These   costs   have   been

capitalized to property and equipment.

Consulting Fees paid or payable to Cambridge Limited Corp.

During  the  periods  ended  March  31,  2015,  and  March  31,  2014,  the  Company  paid  fees  to

Cambridge  Limited  Corporation,  which  is  a  company  owned  by  Mr.  Mettler’s  father-in-law.

These  fees  related  to  accounting  and  consulting  services  rendered  in  Costa  Rica  for  the

Company in the amount of $43,500 and $43,500 respectively.

11.

BANK LIABLITIES

There  is  no  bank  liability  at  March  31,  2015.  The  bank  liability  at  December  31,  2014,

represented a temporary, secured overdraft facility, bearing an interest rate of 8.9%.

18

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

12.

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

19

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

12.

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

2015

2014

$

$

Balances January 1

10,802,722

8,558,443

Cash inflows

-

5,542,245

Cash outflows

-

-

Foreign currency adjustments

478,058

(953,513)

Reclassifications to CHF Bond II

-

(2,147,983)

Sub-total

12,280,780

10,999,192

Discounts (commissions paid to bondholders)

(670,764)

(670,764)

Accumulated amortization of discounts

536,737

474,294

Unamortized discounts

(134,027)

(196,470)

Balances March 31 and December 31(Carrying

value)

11,146,753

10,802,722

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  10,850,000

million ($10,999,192 million) related to CHF Bond I.

20

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

12.

BONDS - continued

EUR-Bond

EUR-Bond

(new)

(new)

2015

2014

$

$

Balances January 1

7,342,995

6,757,065

Cash inflows

281,754

1,562,402

Cash outflows

-

-

Foreign currency adjustments

(786,771)

(963,896)

Sub-total

6,837,978

7,355,572

Discounts (commissions paid to bondholders)

(23,753)

(17,305)

Amortization of discounts

6,259

4,729

Unamortized discounts

(17,494)

(12,576)

Balances March 31 and December 31(Carrying

value)

6,820,484

7,342,995

As  per  date  of  this  report  the  Company  has  realized  a  cumulative  amount  of  EUR  6,300,000

million ($7,657,650 million) related to the EURO Bond I.

EUR-Bond

EUR-Bond

EURO BOND I

old

old

2015

2014

$

$

Balances January 1

-

5,786,248

Cash inflows

-

-

Cash outflows

-

(5,729,712)

Foreign currency adjustments

-

(56,536)

Sub-total

-

-

Discounts (commissions paid to bondholders)

-

(248,195)

Amortization of discounts

-

248,195

Unamortized discounts

-

-

Balances March 31 and December 31(Carrying

value)

-

-

21

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

12.

BONDS - Continued

CHF Bond II

CHF Bond II

CHF BOND II

2015

2014

$

$

Balances January 1

14,709,176

-

Cash inflows

2,386,697

12,912,402

Cash outflows

-

-

Foreign currency adjustments

950,459

243,843

Reclassifications from CHF Bond I

-

2,147,983

Sub-total

18,046,332

15,304,228

Discounts (commissions paid to bondholders)

(1,121,793)

(1,041,917)

Accumulated amortization of discounts

658,362

446,864

Unamortized discounts

(463,431)

(595,052)

Balances March 31 and December 31(Carrying

value)

17,582,902

14,709,176

As    per    date    of    this    report    the    Company    has    realized    a    cumulative    amount    of

CHF 20,526,203 million ($20,809,464 million) related to CHF Bond II.

EUR-Bond

EUR-Bond

EURO BOND NEW II

new  II

new  II

2015

2014

$

$

Balances January 1

1,714,991

-

Cash inflows

-

1,960,226

Cash outflows

-

-

Foreign currency adjustments

(138,191)

(198,968)

Sub-total

1,576,800

1,761,258

Discounts (commissions paid to bondholders)

(59,740)

(59,740)

Amortization of discounts

18,385

13,473

Unamortized discounts

(41,355)

(46,266)

Balances March 31 and December 31(Carrying

value)

1,535,445

1,714,991

As  per  date  of  this  report  the  Company  has  realized  a  cumulative  amount  of  EUR  1,444.000

million ($1,833,000 million) related to the EURO Bond new II.

22

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

13.

PENSION PLAN

The  Company  maintains  a  pension  plan  covering  all  employees  in  Switzerland.  The  plan  is

considered   a   defined   benefit   plan   and   accounted   for   in   accordance   with   ASC   715

Compensation  -  Retirement  Benefits.  This  model  allocates  pension  costs  over  the  service

period  of  employees  in  the  plan.  The  underlying  principle  is  that  employees  render  services

ratably over this period, and therefore, the income statement effects of pensions should follow

a  similar  pattern.  ASC  715  requires  recognition  of  the  funded  status,  or  difference  between

the  fair  value  of  plan  assets  and  the  projected  benefit  obligations  of  the  pension  plan  on  the

balance  sheet,  with  a  corresponding  adjustment  recorded  in  the  net  loss.  If  the  projected

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

represents the pension liability.

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

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

methodologies  that  involve  several  actuarial  assumptions,  the  most  significant  of  which  are

the  discount  rate  and  the  long-term  rate  of  asset  return  (based  on  the  market-related  value  of

assets). The fair values of plan assets are determined based on prevailing market prices.

Actuarial valuation

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

Three months

Three months

Pension expense

ended

ended

March 31, 2015    March 31, 2014

$

$

Current service cost

14,648

14,147

Net actuarial (gain) loss recognized

-

(169)

Interest cost

1,348

1,494

Expected return on assets

(1,659)

(1,550)

Employee contributions

(5,963)

(5,918)

Net periodic pension cost

8,374

8,004

During  the  three  months  periods  ended  March  31,  2015  and  March  31,  2014  the  Company

made  cash  contributions  of  $5,914  and  $5,915,  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, 2015 are $17,889.

23

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

14.

STOCK COMPENSATION

The Company has included share based compensation based on the Company’s SunVesta Inc.

Stock   Option   Plan   2013   (“the   Plan”)   as   part   of   the   total   remuneration   in   certain   new

employment  and  Board  of  Director’s  contracts.  The  Company  is  authorized  up  to  50,000,000

shares under the Plan.

The  purpose  of  the  Plan  is  to  advance  the  interests  of  the  Company  by  encouraging  its

employees  to  remain associated  with the  Company and assist  the  Company in  building value.

Such  share  based  remuneration  includes  either  shares  or  options  to  acquire  shares  of  the

Company’s common stock.

For  all  employees,  fair  value  is  estimated  at  the  grant  date.  Compensation  costs  for  unvested

shares are expensed over the requisite service period on a straight-line basis.

Share Grants – Mr. Hans Rigendinger

On  January  1,  2013,  the  Company  granted  to  Hans  Rigendinger  3,500,000  common  shares,

valued  at  $0.08  which  was  the  share  price  and  fair  value  of  the  shares  on  the  grant  date.

These  shares  were  granted as  a  signing  bonus  with  the  Company.  Additionally,  the  Company

granted 2,500,000 common shares as a retention award due on each anniversary of his signing

with  the  Company.  The  employment  contract  was  initially  for  three  years  with  an  additional

bilateral  option  for  an  additional  two  years.  Therefore,  the  Company  could  be  required  to

issue  up  to  12,500,000  common  shares  through  January  1,  2018.  The  5,000,000  retention

common shares vested were not issued as of March 31, 2015 and the date of this filing.

Share Grants – Dr. Max Rössler

On  July  3,  2013  the  Company  granted  to  Dr.  Max  Rössler  3,000,000  common  shares,  valued

at  $0.07  which  was  the  share  price  and  fair  value  of  the  shares  on  the  grant  date.  These  were

issued  in  connection  with  his  election  to  the  Board  of  Directors.  These  shares  were  officially

issued on October 15, 2013.

Share Grants – Mr. Josef Mettler

On  July  4,  2013,  the  Company  granted  5,000,000  common  shares  to  Josef  Mettler,  valued  at

$0.07,  which  was  the  share  price  and  fair  value  of  the  shares  on  the  grant  date.  These  shares

were   issued  in   connection   with   his   employment   agreement..   Additionally  the   Company

granted   3,000,000   common   shares   as   a   retention   award   for   each   completed   year   of

employment  (e.g.  first  time  as  per  July  4,  2014).  The  employment  contract  is  for  an  initial

term of three years with an additional bilateral option for  another two, two-year  periods, but a

maximum of December 31, 2020. Therefore, in total the Company could be requested to issue

up  to  21,000,000  common  shares  through  December  31,  2020  related  to  the  retention  bonus.

The 3,000,000 retention common  shares  vested were not  issued as of  March 31, 2015  and the

date of this filing.

24

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

14.

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  was  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. Additionally, on

March  10,  2014,  the  Company  agreed  to  a  retention  award  of  200,000  common  shares  for

each  fully  completed  year  of  service.  The  700,000  shares  were  not  issued  as  of  March  31,

2015, and at the date of this report.

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  was  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. Additionally, on March

10,  2014,  the  Company agreed  to  a  retention  award  of  200,000  common  shares  for  each fully

completed  year  of  service.  The  700,000  shares  were  not  issued  as  of  March  31,  2015,  and  at

the date of this report.

Based  on  these  contracts  the  Company  has  included  the  following  stock-based  compensation

in the Company’s results:

Stock-based compensation

Three months

Three months

(shares)

ended March 31, 2015

ended March 31, 2014

Shares granted

46,400,000 shares

46,400,000 shares

Fair Value respectively

$0.0744

$0.0744

market price on grant date

Total maximal expenses

$3,450,000

$3,450,000

(2013-2020)

Shares vested

20,900,000 shares

15,000,000 shares

Unvested shares

25,900,000 shares

31,400,000 shares

A total of 9,400,000 retention common shares vested were not issued as of March 31, 2015.

25

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

14.

STOCK COMPENSATION – Continued

As of December 31, 2015, the Company expects to record compensation expense in the future

up to $1,762,666 as follows:

Year ending December 31,

Stock-based

Through

compensation

December 31,

(shares)

2015

2016

2017

2018

2019

2020

$

$

$

$

$

$

Unrecognized

compensation

307,500

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.

Installment A is contingent on obtaining a financing arrangement with a specific counterparty.

As  of  the  grant  date,  the  fair  value  was  $300,000.  As  of  July  4,  2013,  the  Company  assessed

that   this   financing   arrangement   with   the   specific   counterparty   will   not   be   completed.

Therefore  the  Company  assessed  the  probability  of  completion  to  be  zero  and  recognized  no

expense.  On  July  4,  2013,  the  Company  authorized  a  revised  stock  option  agreement.  This

removed  the  requirement  for  financing  with  a  specific  counterparty  and  updated  for  any

counterparty.  As  of  date  of  the  revised  stock  option  agreement,  the  fair  value  was  $246,000.

Installment  A  was  modified  on  July  4,  2013,  since  the  initial  performance  condition  was

improbable  to  be  met.  Since  the  modification  changed  the  expectation  that  the  options  will

ultimately  vest  and  no  expense  had  been  recognized  for  the  original  award,  the  fair  value  of

the  modified  award  has  been  expensed  on  a  straight  line  basis  over  the  expected  vesting

period.

For   installment   B,   it   is   required   that   Meliá   Hotels   International   (“Melía”)   assume

management  responsibilities  for  the  Paradisus  Papagayo  Bay  Resort  &  Luxury  Villas  on  the

opening  date.  As  of  the  grant  date,  the  fair  value  was  $340,000  and  the  Company  had

estimated that Meliá would assume responsibility as of July 1, 2015. As of March 6, 2014, the

Company assessed the probability that this performance condition wiould be met at 100%, but

the  actual  date  on  which  this  performance  condition  is  expected  to  be  achieved  has  been

postponed..  As  of  April  14,  2015,  the  estimated  opening  date  was  postponed  to  the  first

quarter  2017.  The  Company  still  assesses  that  the  probability  that  this  performance  condition

will be met  at  100%  as of the new opening date. Hence, the remaining fair  value of  the award

will  be  expensed  on  a  straight-line  basis  over  the  recalculated  expected  remaining  vesting-

period.

26

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

14.

STOCK COMPENSATION – Continued

Stock Options – Dr. Max Rössler

The Company granted to Dr. Max Rössler, in connection with his appointment to the Board of

Directors,  10,000,000  options  on  July  3,  2013.  Each  option  entitles  Dr.  Rössler  to  buy  one

Company  share  at  a  strike  price  of  $0.05.  These  options  will  be  vested  in  two  identical

installments (installment A and B) of 5,000,000 options.

For  installment  A  (5,000,000  options),  it  is  required  to  complete  a  financing  arrangement  for

the  Project.  As  of  grant  date,  the  fair  value  was  $249,835.  The  Company  expensed  the  total

fair value on a straight-line basis over the expected vesting period.

For   installment   B   (5,000,000   options),   it   is   required   that   Meliá   assumes   management

responsibilities  for  Paradisus  Papagayo  Bay  Resort  &  Luxury  Villas  on  the  opening  date.  As

of  the  grant  date  the  fair  value  was  $258,210  and  the  Company  had  estimated  that  Meliá

would  assume  responsibility  as  of  July  1,  2015.  As  of  March  6,  2014  the  Company  assessed

the  probability that  this  performance  condition  wiould be  met  at  100%,  but  the  actual  date  on

which  this  performance  condition  is  expected  to  be  achieved  was  postponed.  As  of  April  14,

2015  the  estimated  opening  date  was  postponed  to  the  first  quarter  2017.  The  Company  still

assesses  the  probability  that  this  performance  condition  will  be  met  at  100%  as  of  the  new

opening date. 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  share  at  a

strike price of $0.05. These options have three different performance conditions.

For   installment   A   (3,000,000   options),   it   is   required   to   complete   a   bridge   financing

arrangement.  As  of  grant  date  the  fair  value  was  $149,000.  The  Company  expensed  the  total

fair value on a straight-line basis over the expected vesting period.

For  installment  B  (4,000,000  options),  it  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   Meliá   assumes   management

responsibilities  for  Paradisus  Papagayo  Bay  Resort  &  Luxury  Villas  on  the  opening  date.  As

of  the  grant  date,  the  fair  value  was  $258,000  and  the  Company  had  estimated  that  Meliá

assumes  responsibility  as  of  July  1,  2015.  As  of  March  6,  2014  the  Company  assessed  the

probability  that  this  performance  condition  would  be  met  at  100%,  but  the  actual  date  on

which  this  performance  condition  is  expected  to  be  achieved  was  postponed.  As  of  April  14,

2015  the  estimated  opening  date  was  postponed  to  the  first  quarter  2017.  The  Company  still

assesses the probability that this performance condition will be met at 100% as of the opening

date.  Hence,  the  remaining  fair  value  of  the  award  will  be  expensed  on  a  straight-line  basis

over the recalculated expected remaining vesting-period.

27

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

14.

STOCK COMPENSATION – Continued

Stock Options – Summary

A summary of stock options outstanding as per March 31, 2015 is as follows:

Options outstanding

Number of

Weighted average

Weighted average

Options

exercise price

remaining

contractual life

Outstanding January 1, 2015

32,000,000

$ 0.05

8.42 years

Granted

-

Exercised

-

Forfeited or expired

-

Outstanding March 31, 2015

32,000,000

$ 0.05

8.17 years

Exercisable March 31, 2015

-

The  following  table  depicts  the  Company’s  non-vested  options  as  of  March  31,  2015  and

changes during the period:

Non-vested options

Shares under Options

Weighted average grant date

fair value

Non-vested at December 31, 2014

32,000,000

$ 0.053

Non-vested-granted

-

-

Vested

-

-

Non-vested, forfeited or cancelled

-

-

Non-vested at March 31, 2015

32,000,000

$ 0.053

Under  the  provisions  of  ASC  718  Compensation  –  Stock  Compensation,  the  Company  is

required  to  measure  and  recognize  compensation  expense  related  to  any  outstanding  and

unvested   stock   options   previously   granted,   and   thereafter   recognize,   in   its   consolidated

financial  statements,  compensation  expense  related  to  any  new  stock  options  granted  after

implementation  using  a  calculated  fair  value  based  option-pricing  model.  The  Company  uses

the  Black-Scholes  option-pricing  model  to  calculate  the  fair  value  of  all  of  its  stock  options

and  its  assumptions  are  based  on  historical  and  available  market  information.  No  stock

options were granted for the periods ended March 31, 2015 and March 31, 2014.

Assumption

March 31, 2015

March 31, 2014

Dividend yield

Risk-free interest rate used (average)

Expected market price volatility

Average expected life of stock options

n.a

n.a

The  computation  of  the  expected  volatility  assumption  used  in  the  Black-Scholes  calculation

for  new  grants  is  based  on  historical  volatilities  of  a  peer  group  of  similar  companies  in  the

same industry. The expected life assumptions are based on underlying contracts.

28

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

14.

STOCK COMPENSATION - Continued

Stock Options – Summary - Continued

As  of  March  31,  2015,  the  Company  had  unrecognized  compensation  expenses  related  to

stock  options  currently  outstanding,  to  be  recognized  in  future  quarters  respectively  years  as

follows:

Through to

Year ending

Year ending

Stock-based compensation (options)

December 31,

December 31,

December 31,

2015

2016

2017

$

$

$

Unrecognized compensation expense

101,214

134,956

33,739

15.

SUMMARY OF SHARE AND OPTION COMPENSATION EXPENSE

The  Company  recorded  the  following  amounts  related  to  stock  based  compensation  expense

during the periods ended March 31, 2015 respectively March 31, 2014:

Three

Three

Summary of share and option

months

months

based compensation expense

March 31,

March 31,

2015

2014

$

$

Share grants (see Note 13 for

210,166

204,834

details)

Option grants (see Note 13 for

33,738

378,758

details)

Total

(recorded under general &

243,904

583,592

administrative expense)

16.

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.

December 31,

December 31,

Future lease commitments

2015

2014

$

$

2015

97,500

97,500

2016

130,000

130,000

2017

130,000

130,000

2018

-

-

2019

-

-

29

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

17.

NOTE PAYABLE

March 31, 2015

December 31, 2014

$

$

Promissory note

2,000,000

2,000,000

Specogna Holding AG

-

707,428

R. Weimar (private investor)

219,500

316,331

Total

2,195,551

3,023,759

Promissory Note

As  part  of  the  completion  of  the  purchase  of  Altos  del  Risco  on  March  9,  2013,  the  parties

agreed  that  $2,000,000  of  the  purchase  price  would  be   converted  into  a  non-interest  bearing

and  uncollateralized  loan  payable,  which  was  originally  due  for  payment  on  March  8,  2014,

then   extended   to   March   8,   2015.   On   March   16,   2015   the   Company   agreed   with   the

counterparty to extend the due date to March 16, 2016.

Loans Specogna Holding AG

On May 15, 2014 the Company entered into a short  term loan agreement  for  CHF 1.0  million

($1.01  million)  with  Specogna  Holding  AG.  This  loan  was  repayable  on  July  31,  2014,  and

beared  a  lump  remuneration  as  interest  of  CHF  30,000  (approximately  $30,300).  This  loan

was repaid in 2014.

On September 16, 2014, the Company entered into a short term loan agreement for

approximately $736,000 with Specogna Holding AG (“Specogna“) repayable on October 31,

2014, with a fixed interest payment of approximately $32,000. The loan was secured

personally and jointly by Dr. Max Rössler, Mr. Josef Mettler and Mr. Hans Rigendinger. The

amounts due to Specogna were repaid on March 24, 2015 by Aires on behalf of SunVesta

AG, with no penalties incurred.

Loan R. Weimar (private investor)

On May 23, 2014, the Company entered into a short term loan agreement for approximately

$376,800 with Roland Weimar (“Weimar”). The loan was repayable in five instalments, (four

payments of $84,700, one payment of $38,000), with the initial payment due on June 2, 2014

and the latest paymentdue on June 1, 2015. The interest rate is 2 % per annum. The Company

repaid $157,300 as of the filing date of this report, whereas $290,000 should have been

repaid. The agreement does not stipulate any repercussions for the late payments.

30

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

18.

OPENING DATE “PARADISUS PAPAGAYO BAY RESORT & LUXURY VILLAS”

On  June  2,  2014,  the  Company  amended  its  agreement  with  Meliá  (“Sixth  addendum  to  the

management agreement of March 8, 2011”) to postpone the opening date as follows:

-      The construction of the “Paradisus” will be completed by November 15, 2015

-      Should the “Paradisus” not be completed by November 15, 2015, (subject to force

majeure) and should an extension date not be agreed, subsequent to November 15,

2015, the Company will be obligated to pay Meliá  a daily amount of $2,000 as

liquidated damages.

-      Should the Company be unable to complete the construction of the “Paradisus” by

February 15, 2016, Meliá, can terminate the management agreement obligating the

Company to compensate Meliá in the amount of $5,000,000 unless the respective

parties agree to extend such date.

Since   the   completion   date   for   the   Paradisus   Papagayo   Bay   Resort   &   Luxury   Villas

development  is  now  anticipated  for  the  first  quarter  of  2017,  the  Company  is  in  discussions

with  Meliá  regarding  another  addendum  that  would  allow  an  extension  of  the  deadlines

stipulated  in  the  Sixth  Addendum.  Should  the  Company not  be  successful,  the  penalty would

be $5,000,000.

31

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

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

Three-month

Earnings per share

period ended

period ended

March 31, 2015     March 31, 2014

Company posted

Net loss

Net loss

Basic weighted average shares

outstanding

92,607,159

86,247,159

Dilutive effect of common stock

equivalents

None

None

Dilutive weighted average shares

outstanding

92,607,159

86,247,159

A  total  of  9,400,000  common  shares  vested  were  not  issued  as  per  balance  sheet  date  and

included in the basic weighted average shares outstanding.

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

Three-month

Earnings per share

period ended

period ended

March 31, 2015     March 31, 2014

Options to Hans Rigendinger

10,000,000

10,000,000

Options to Dr. M. Rössler

10,000,000

10,000,000

Options to Josef Mettler

12,000,000

12,000,000

Total Options

32,000,000

32,000,000

Shares to Hans Rigendinger

7,500,000

10,000,000

(retention bonus – non vested)

Shares to Josef Mettler (retention

18,000,000

21,000,000

award)

Shares to Howard Glicken and

400,000

1,000,000

José Maria Figueres (retention

award)

Total Shares

25,900,000

32,000,000

Total Options and Shares

57,900,000

64,000,00

32

SUNVESTA, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

20.

GENERAL AND ADMINISTRATIVE EXPENSES

General  and  administrative  expenses  according consolidated  statement  of  comprehensive loss

include:

Three-month

period ended

Three-month

General and administrative expenses

March 31,

period ended

2015

March 31, 2014

$

$

Rental & related expenses

(51,682)

(44,636)

Audit

(49,809)

(90,112)

Consulting

(275,338)

(602,106)

Marketing, Investor & public relations

(14,641)

(7,863)

Travel expenses

(174,932)

(104,759)

Personnel costs including social security’s

costs and share based remuneration

(1,201,168)

(898,478)

Various other operating expenditures

(88,897)

(304,038)

Total according statements of

comprehensive loss

(1,856,467)

(2,051,992)

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:

The status of financing the project is as follows:

On  March  10,  2015,  the  Company  executed  a  letter  of  engagement  with  ISM  Capital  LLP,  a

London  based  investment  firm,  for  the  purpose  of  conducting  a  $100  million  asset  backed

bond  issuance.  Despite  the  firm’s  commitment  to  identify  investors,  the  success  of  this

proposed   bond   issuance   for   the   amount   contemplated   or   any   lesser   amount,   does   not

guarantee that all or part of the amount offered will be subscribed.

The  Company  is  also  in  negotiations  to  secure  a  $40  million  credit  facility  from  certain

general  contractors that  would be involved in the construction of  the Paradisus Papagayo Bay

Resort  &  Luxury  Villas.  The  terms  of  this  credit  facility  are  being  discussed  and  would

complement amounts realized through ISM.

We are also in process of determining the means by which the Company can retire the current

CHF-bond  that  matures  on  August  31,  2015,  which  may  include  additional  debt  or  equity

financings.

33