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EX-32 - COMPANY CERT - SUNVESTA, INC.exhibit32.htm
EX-31 - COMPANY CERT - SUNVESTA, INC.exhibit31.htm
EX-21 - COMPANY SUBS - SUNVESTA, INC.exhibit21.htm

UNITED STATES

SECURITIES AND EXCHANGE

COMMISSION

Washington, D.C. 20549

(Mark One)

FORM 10-K

 þ     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF1934

For the fiscal year ended December 31, 2016.

 o      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF1934

For the transition period from

to

.

Commission file number: 000-28731

SUNVESTA, INC.

(Exact name of registrant as specified in its charter)

Florida

98-0211356

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

Seestrasse 97, Oberrieden, Switzerland CH-8942

(Address of principal executive offices) (Zip Code)

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

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

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

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

Act. Yes o    No þ

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

Act. Yes o    No þ

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

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

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

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

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

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

Yes þ    No o

Indicate by check  mark  if  disclosure of  delinquent  filers pursuant  to  Item 405  of  Regulation  S-K  (§ 229.405 of  this  chapter)  is

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

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

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

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

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

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

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

affiliates  22,192,297  shares  was  approximately  $2,441,153  based  on  the  based  on  the  average  closing  bid  and  ask  prices

($0.11) for the common stock on March 17, 2017.

At  March  17,  2017,  the  number  of  shares  outstanding  of  the  registrant’s  common  stock,  $0.01  par  value  (the  only  class  of

voting stock), was 101,841,603.

1



TABLE OF CONTENTS

TABLE OF CONTENTS

PART I

Item1.

Business

3

Item 1A.

Risk Factors

12

Item 1B.

Unresolved Staff Comments

12

Item 2.

Properties

13

Item 3.

Legal Proceedings

13

Item 4.

Mine Safety Disclosures

13

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of

14

Equity Securities

Item 6.

Selected Financial Data

15

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of  Operations

16

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

21

Item 8.

Financial Statements and Supplementary Data

21

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

22

Item 9A.

Controls and Procedures

22

Item 9B.

Other Information

24

PART III

Item 10.

Directors, Executive Officers, and Corporate Governance

25

Item 11.

Executive Compensation

29

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

32

Matters

Item 13.

Certain Relationships and Related Transactions, and Director Independence

33

Item 14.

Principal Accountant Fees and Services

34

PART IV

Item 15.

Exhibits, Financial Statement Schedules Form 10-K Summary

35

Signatures

36

2



PART I

ITEM 1.

BUSINESS

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

and its subsidiaries, unless context indicates otherwise.

Corporate History

The Company was incorporated in the State of Florida on September 12, 1989, and acquired SunVesta

Holding AG (“SunVesta AG”) as a wholly-owned subsidiary on August 24, 2007. SunVesta AG was

incorporated in Switzerland on December 18, 2001, and is domiciled in the Canton of Zurich,

Switzerland. SunVesta AG operates through two wholly owned subsidiaries SunVesta España Holding

SL (Spain) which wholly owns SunVesta Costa Rica SA (Costa Rica) the result of the May 2016 merger

of three Costa Rican companies ( SunVesta Costa Rica Limitada, Rich Land Investments Limitada and

Altos del Risco SA) into Altos del Risco SA which was then renamed SunVesta Costa Rica SA and

SunVesta Projects & Management AG .

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

and its telephone number is + 41 43 388 40 60.

The Company’s registered agent is Hubco Registered Agents Services, Inc., located at 155 Office Plaza

Drive, first Floor, Tallahassee, Florida, 32301. Hubco’s telephone number is (800) 443-8177.

SunVesta

Business Overview

We are in the business of developing high-end luxury hotels and resorts in countries that are emerging as

popular tourist destinations. Our intention is to develop luxury hotel products located in countries such as

Costa Rica that are emerging as popular tourist destinations. Our first hospitality 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. All permitting for the project is in place,

including permission to incorporate the beachfront adjacent to the two concessions into the development

and all significant site work completed. Vertical construction is expected to commence at the beginning of

the second quarter of 2017, while the opening of the Paradisus Papagayo Bay Resort & Luxury Villas is

scheduled for the fourth quarter 2018. The estimated commencement of construction and opening dates

are subject to securing sufficient capital commitments to complete the development.

Specifications

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

—eco-luxury all-inclusive resort

—382-keys

—direct beach access

—Nine restaurants and eleven bars and lounges

—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

3



Vista Mar

Family Concierge

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

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

The Family Concierge area will include:

—      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 and villas will

have a full view of the sea. Family Concierge guests will furthermore have access to restaurants,

bars, and lounges. The planned Night Club and the Gabi Club will be located near the beach.

Vista Bahia

Royal Service

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

pools for each Garden Villa and/or a Jacuzzi in every suite.

The Royal Service area will include:

—  108 Junior Suites Grand Deluxe

(43-60* square meters)

—  2 Junior Suites Grand Deluxe for Handicapped Guests

(53* square meters)

—  6 Grand Master Suites

(87* square meters)

—  2 Deluxe Suites Presidential

(60 square meters)

—  1 Grand Presidential Suite (4 bedrooms)

(145* square meters)

—  20 one or two-bedroom Garden Villas

(91–212* square meters)

*  Room size does not include balconies and terraces.

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

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

lounges, fitness equipment, spas and outside massage areas.

4



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

  more than 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

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

—  sthteea2m0rporoivmaste 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 lease

them back to the resort when not occupied by the owners.

Management

Overall project development is led by Hans Rigendinger, our Chairman of the Board and Chief

Executive Officer, Charles Fessel, Project Director Paradisus Papagayo Bay Resort & Luxury Villas

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 Laboratorio

Quattro.

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

Meliá’s five-star all-inclusive luxury hotel brand that is well recognized in the hospitality industry

around the world. Melía was founded in 1956 in Palma de Mallorca, Spain and is today one of the

world’s largest resort hotel chains, as well as Spain’s leading hotel chain for business or leisure.

Melía offers more than 300 hotels in 26 countries over four continents under its Gran Sol Melía,

Sol Melía, ME by Sol Melía, Innside by Sol Melía, Tryp, Sol Melía, Sol Melía Vacation Club, and

Paradisus brands. The Paradisus brand represents all-inclusive luxury resorts with hotels in Mexico

and the Dominican Republic.

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

been delayed to the fourth quarter of 2018, the Company reached an agreement dated April 28, 2016,

to amend the original agreement with Meliá dated March 8, 2011. The current agreement stipulates

the following major conditions:

a.

New completion date: September 15, 2018 (subject to force majeure)

b.

Should the completion not occur by September 15, 2018 and should the Parties not have

agreed in writing an extension to such date, after September 15, 2018 the Owner shall pay

the Manager a daily amount of $ 2,000 as liquidated damages.

c.

Should the completion not occur by November 15, 2018, and should the parties to the

management agreement not agree to an extension, the Company will be obligated to pay

Meliá $5,000,000 as liquidated damages.

5



Additional Concessions

The Company entered into a Purchase and Sale Agreement dated April 24, 2013, with Meridian IBG,

Inc., (“Meridian”) to purchase Marina Rose Ltda. (“Marina Rose”), a Costa Rican company that held

certain concessions located in the Gulf of Papagayo, Guanacaste Province, Costa Rica (“Meridian

Agreement”) for $17,500,000. One of the concessions lies adjacent to the SunVesta Costa Rica SA

concessions (La Punta) and the other is in close proximity.  The Meridian Agreement caused the

Company to enter into a Purchase and Sale Agreement dated April 24, 2013, with RBAT Costa Rica

LLC, an entity controlled by Varde Investment Partners LP (“Varde”) to pay $8,000,000 of the purchase

price payable to Meridian to Varde (“Varde Agreement”). Varde delivered a notice of termination of the

Varde Agreement to the Company on January 4, 2014, and the Company noticed cancellation of the

Meridian Agreement to Meridian on February 24, 2017.

The Meridian Agreement entitled the Company to reimbursement for all amounts paid as deposits against

the purchase of Marina Rose less a liquidated damages penalty of 5% on providing notice of cancellation.

The Varde Agreement entitled the Company to reimbursement for all amounts paid as deposits minus a

non-refundable payment of $300,000 and a 5% liquidated damages penalty on receiving notice of

termination. The Company has delivered notice of its claims for reimbursement to the respective parties.

Swiss Hospitality Project

The Company signed an option agreement dated September 19, 2015, to acquire four existing hotels in

the Canton of Graubünden, Switzerland. Consideration of CHF 300,000 was paid for the option. On May

10, 2016, the Company, QuadEquity Holdings AG (“QuadEquity”) and the seller concluded an

agreement, by which QuadEquity assumed all of the Company’s rights and obligations from the original

contract, in exchange for which assumption QuadEquity paid the Company the amount of $302,000 (CHF

300,000) on June 1, 2016.

Finance

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

of 2018 will require a net investment of approximately $192 million (excluding non-recuperated overhead

expenses), of which approximately $66 million has been expended as of December 31, 2016. We aim to

realize a minimum of $140 million in new funding over the next twelve months. New funding over the

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

necessary, the guaranty agreement borne by certain principal shareholders and participants in

management. Detailed below is a brief description of material debt obligations as of period end.

Bonds

SunVesta AG, has five bond issues outstanding, denominated in either EUR () or Swiss Francs (CHF).

EUR () Bonds

The Company initiated an unsecured EUR bond offering 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 matured on December 2, 2016. We had realized $6,861,936 as of December 31, 2015 and

$7,058,966 as of the maturity date. This bond was substantially repaid, though an amount of $31,541

remained outstanding as of December 31, 2016, pending the receipt of payment instructions from certain

bondholders. At the date of this report $0 remained outstanding.

6



The Company initiated a parallel 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 matured on December 2, 2016. We had realized $1,626,695 as of December 31,

2015 and $1,686,789 as of the maturity date. This bond was substantially repaid, though an amount of

$511,805 remained outstanding as of December 31, 2016, pending the receipt of payment instructions

from certain bondholders. At the date of this report $0 remained outstanding.

Swiss Francs (CHF) Convertible Bonds

The Company initiated a new offering of senior unsecured CHF bonds on October 1, 2015, of up to

CHF 15,000,000 in units of CHF 5,000 that bear interest at 6.00% per annum payable each September

30, over a three-year term that matures on September 30, 2018, which are convertible into shares of

SunVesta Holding AG at CHF 8.00. We had realized $3,015,474 as of December 31, 2016 and

$2,250,048 as of the year ended December 31, 2015.

The Company initiated a parallel offering of senior unsecured CHF bonds on October 1, 2015, of up to

CHF 45,000,000 in units of CHF 5,000 that bear interest at 6.00% per annum payable each September 30,

over a three-year term that matures on September 30, 2018, which are convertible into shares of SunVesta

Holding AG at CHF 8.00. We had realized $34,570,259 as of the year ended December 31, 2016 and

$23,694,423 as of December 31, 2015. Included in these amounts is approximately $6.2 million (CHF

6.32 million), that by agreement with certain bondholders deviated from the standard terms to provide for

repayment by February 28, 2017. As per date of this report, approximately $1.1 million has been repaid,

the remaining amount has been extended until converted into a new planned bond issue during May 2017.

Swiss Francs (CHF) Bonds

The Company initiated a new offering of senior unsecured CHF bonds on September 21, 2016, of up to

CHF 20,000,000 in units of CHF 5,000 that bear interest at 6.50% per annum payable each August 15,

over a four-year term that matures on August 15, 2020. We had realized $15,601,398 as of the year

ended December 31, 2016. At the date of this report CHF Bonds in the amount of $16,602,100 were

outstanding.

The Company initiated a new parallel offering of senior unsecured CHF bonds on September 21, 2016,

of up to CHF 20,000,000 in units of CHF 5,000 that bear interest at 6.50% per annum payable each

August 16, over a four year term that matures on August 15, 2020.  We had realized $961,595 as of the

year ended December 31, 2016.

Aires International Investment, Inc.

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

Investments Inc. (Aires), a company owned by Dr. Rӧssler (a director of the Company). The loan

agreement was amended on May 11, 2012 and on June 21, 2012. On October 31, 2013, the line of

credit agreement was replaced by a new loan agreement, that included the following conditions:

—All existing loan agreements or credit facilities, including amendments, between the Company

and Aires were cancelled and superseded by a new loan agreement.

—The loans are now due not before December 31, 2020.

—Despite the scheduled repayment date, either party has the option to cancel the loan agreement

with a prior notice period of 90 days, requiring repayment of the loans in full.

—Loan amounts outstanding including any additional amounts and additions are subordinated.

—Interest on the loan amounts is 7.25% per annum, which charge is accrued.

7



The Company had borrowed $51,473,793 from Aires as of December 31, 2016 (including accrued interest

of $4,489,666) and $47,198,362 as of December 31, 2015 (excluding accrued interest of $6,370,579 that

was recorded under accrued expenses as per 31 December, 2015.

Loans from Dr. Max Rӧssler and Global Care AG

During 2016, Dr. Max Rössler provided additional financing of approximately $16.7 million for a total

loan balance of approximately $17.1 million.

In April 2016, Global Care AG (a related party controlled by Dr. Max Rössler, himself board member and

related party) assumed a liability of CHF 4.5 million from Aires International Investment Inc., (also a

related party controlled by Dr. Max Rössler). This CHF 4.5 million was subsequently subscribed into

bonds of the CHF-Convertible Bond issue. As this conversion includes a significant conversion option,

the exchange is treated as an extinguishment of debt and an amount of $1,071,317 has been reclassified

in the statement of profit or loss from revaluation of conversion feature to extinguishment of debt.

In June 2016, there were the following changes to the debt structure:

- A liability of CHF 2,656,083 was transferred from Dr. Max Rössler to Global Care AG

- A liability of CHF 1.5 million was transferred from Sportiva participations ag to Global Care AG

– A liability of CHF 1.4 million was transferred from Global Care AG to Dr. Max Rössler.

In December 2016, Dr. Max Rössler subscribed a loan in the amount of CHF 15.2 million into bonds of

the new CHF-Bond issue 2016-2020. As this conversion did not represent a significant change of the

conditions between the old debt and the new debt, the exchange was not treated as an extinguishment of

debt.

Loans to the late Josef Mettler

On September 12, 2016, Josef Mettler, the Company’s former Chief Executive officer, passed away and

companies formerly owned by him are no longer related parties to the company. As of December 31,

2016, there are no receivables and payables to the late Josef Mettler. As of December 31, 2015, there was

a payable to Mr. Mettler of $70,135 (CHF 69,609).

Current account Sportiva participations ag (a Josef Mettler company)

For  the  year  ended  December  31,  2016,  the  Company  owed  nil  to  Sportiva  participations  ag.  As  of

December  31,  2015,  the  payable  balance  amounted  to  $528,660  (CHF  524,695).  The  amount  due  to

Sportiva Participations AG carried an interest rate of 3%.

Loan from Blue Dot SA (formerly DIA S.A)

On March 8, 2013, the Company entered into an interest free loan agreement with Blue Dot SA

(formerly DIA SA) in connection with the purchase of the land concession for the Paradisus Papagayo

Bay Resort & Luxury Villas project held by Altos del Risco SA. The terms of the loan agreement were

amended on March 16, 2015, to extend the due date for said payable until March 2016.

On April 21, 2016, the Company signed a new agreement, which stipulated new payment terms. The total

amount of $2,000,000 is now repayable in four quarterly installments of $500,000 each, starting on

August 21, 2016.

8



On September 21, 2016, the Company signed a new agreement, which stipulated new payment terms.

The total amount of $2,000,000 is now repayable in four quarterly installments of $500,000 each,

starting on November 21, 2016.

As of December 31, 2016, the outstanding balance amounts to $1,500,000.

Timeline

Our expected timeline for developing the Paradisus Papagayo Bay Resort & Luxury Villas has been

extended due to delays associated with administrative hurdles and securing necessary financing for

the development as follows:

—  commence onsite vertical construction at the beginning of the second quarter of 2017

—  complete construction in the fourth quarter of 2018

—  handover to Melía in the fourth quarter of 2018

Competition

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

to the Paradisus Papagayo Bay Resort & Luxury Villas:

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

the consumption habits of prospective clientele

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

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

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

five- star holiday resorts in geographic proximity to our planned location.

Luxury Hotel Resorts

We distinguish between primary and secondary competitors.

Primary competition in Guanacaste Province is comprised of the following properties:

—  Four Seasons Peninsula Papagayo

—  JW Marriot Guanacaste

—  Hilton Papagayo Costa Rica

—  Westin Golf Resort & Spa Playa Conchal

—  Andaz Peninsula Papagayo Resort

—  Dreams Las Mareas Costa Rica

The closest direct and most prominent competition for our Guanacaste property will be the Four Seasons

Hotel.

9



All of our primary competitive establishments have common characteristics with a standard vacation

resort format with much more equipment and many more facilities to offer than hotels based in a city such

as:

—several modules/ lodging buildings around central services

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

—children and entertainment activity areas

—restaurant pool areas with bars and service throughout the day

—large lounges for breakfast, lunch and dinner services

—alternative gastronomic or theme restaurants

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

—Fitness Center, Wellness Center and Spa Areas

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

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

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

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

—the beach front location of the development

environmental integrity in project development and operation

the reputation of the Paradisus brand in the region and internationally

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

competitors including:

—location in one of the most appealing areas worldwide

outstanding product with unique features

superior project development and management agreements that maximize resources and

broaden market penetration

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

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

Villas.

Marketability

Costa Rican Tourism

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

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

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

burgeoning hotel development pipeline and is emerging as a regional hotel investment hot-spot, including

the development of upscale and luxury hotels. This environment provides much fertile ground for real

estate investors and developers to expand their search for profitable growth. Foreign tourism investment

is projected to continue this upward trend over the next several years as demand outpaces the existing

lodging and tourism services supply.

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

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

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

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

Rica reached 2.93 million in 2016, representing an increase of 10 % over 2015.

10



The 2015 Travel and Tourism Competitiveness Index (“TTCI”), indicates that Costa Rica reached the

42ndplace in the world ranking (up 5 places since 2013), classified as the second most competitive among

Latin American countries after Mexico, and ranking sixth in the Americas. Focusing solely on the sub

index measuring natural and cultural resources, Costa Rica ranks 26th worldwide, and 5th when

considering just the natural resources criteria. The TTCI report also notes Costa Rica's other attractions

such as tourism services infrastructure ranking 32nd, qualification of the labour force ranking 37th,

business environment ranking 47th and air transport infrastructure ranking 47th in the world.

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

Canada and Mexico which generated approximately 52% (2015: 50%) of all tourists followed by Central

American countries including Guatemala, El Salvador, Panama and Nicaragua, which generated

approximately 25% of the tourists arriving in Costa Rica in 2015. According to official data, the United

States remains the largest source of tourists to Costa Rica with a total of 1,233,277 in 2016 (2015:

1,077,044 ), representing 42.1% (2015: 40.5%) of all visitors. Tourists visiting Costa Rica from European

countries represented approximately 15% of all tourists in 2016 led by the United Kingdom, Germany,

Spain, France and Italy.

Geography

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

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

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

most province of Costa Rica, with the Papagayo Bay a 40-minute flight from San Jose and a half hour

car transfer to the beach. Tourism has emerged as the most lucrative revenue source in the province.

Tourists to the Guanacaste Province of Costa Rica are most often motivated by a desire for favorable

weather and beach conditions. Active tourism – those activities including canopying, trekking, visiting

volcanoes and flora or fauna watching – are secondary considerations.

We believe that our development will be well located as a hospitality property.

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

The Company holds no patents, trademarks, licenses, franchises, or concessions other than having

registered its “SunVesta” trademark in various countries.

The Company is not subject to any labor contracts.

Governmental and Environmental Regulation

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

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

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

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

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

conduct business.

11



Costa Rican National Environmental Office

The Costa Rican National Environmental Office (“SETENA”) created by the Organic Environmental

Law is tasked with administering the process of reviewing and evaluating environmental impact

considerations. Local municipal governments often require a ruling from SETENA before issuing

building permits. Any larger project in Costa Rica must apply for an Environmental Impact Statement

from SETENA before development is permitted. Delays associated with this process would have a

negative impact on the Company’s project in Guanacaste Province.

The Company is not aware of any existing environmental impact issues that could have a material

effect on the development of the Paradisus Papagayo Bay Resort & Luxury Villas.

Costa Rican Sustainable Development

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

country’s national strategies for sustainable development are a broad matrix of policies requiring eco-

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

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

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

sustainable development. This process and other Costa Rican sustainable development policies could

delay or increase the cost of the development of the property.

The Company is not aware of any existing environmental impact issues that could have a material

effect on the development of the Paradisus Papagayo Bay Resort & Luxury Villas.

Climate Change Legislation and Greenhouse Gas Regulation

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

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

emissions of “greenhouse gases” or “GHGs” pursuant to the United Nations Framework Convention

on Climate Change, and the “Kyoto Protocol” to which Costa Rica is a signatory. Greenhouse gas

legislation in Costa Rica could have a material adverse effect on our business, financial condition, and

results of operations. The Company is not aware of any existing environmental impact issues that

could have a material effect on the development of the Paradisus Papagayo Bay Resort & Luxury

Villas.

Employees

The Company is a development stage company and currently has six employees at December 31, 2016

and five employees as of the reporting date. Our management uses consultants, attorneys, and

accountants to assist in the conduct of our business.

ITEM 1A.

RISK FACTORS

Not required of smaller reporting companies.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

Not applicable.

12



ITEM 2.

PROPERTIES

Costa Rican Properties

The Company owns the concession rights for approximately 20 hectares of undeveloped prime land in

Guanacaste Province, Costa Rica. The purchase of the original concession of approximately 8 hectares

was completed for a consideration of $7,000,000. The purchase of the additional 12 hectares was based

on an agreement dated March 22, 2010, with Blue Dot SA (formerly “DIA SA”). The total purchase price

for the concessions was $12,700,000 of which $10,700,000 was paid as of December 31, 2014. The

remaining $2,000,000 of the purchase price was converted into an interest free loan. On September 21,

2016, the Company reached an agreement with Blue Dot SA to pay the $2,000,000 due in four quarterly

installments of $500,000 each, starting on November 21, 2016. The initial quarterly payment has been

made so as of December 31, 2016, the outstanding balance was $1,500,000.

Executive Offices

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

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

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

2016  and  2015,  respectively,  for  the  use  of  these  executive  offices.  We  believe  that  we  have  sufficient

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

ITEM 3.

LEGAL PROCEEDINGS

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

13



PART II

ITEM 5.

MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER

MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s common stock is quoted on the OTCQB, a service maintained by OTC Link under the

symbol “SVSA.” Trading in the common stock over-the-counter market has been limited and sporadic

and the quotations set forth below are not necessarily indicative of actual market conditions. These prices

reflect inter-dealer prices without retail mark-up, mark-down, or commission, and may not necessarily

reflect actual transactions. The high and low bid prices for the common stock for each quarter of the years

ended December 31, 2016 and 2015 are as follows:

Year

Quarter Ended

High

Low

2016

December 31

$0.14

$0.14

September 30

$0.15

$0.15

June 30

$0.32

$0.32

March 31

$0.35

$0.35

2015

December 31

$0.25

$0.15

September 30

$0.25

$0.24

June 30

$0.25

$0.14

March 31

$0.16

$0.06

Capital Stock

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

subject to and qualified by our articles of incorporation and bylaws.

Common Stock

As of December 31, 2016, there were 91 shareholders of record holding 101,841,603 shares of fully paid

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

authorized. The Board of Directors believes that the number of beneficial owners is greater than the

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

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

for each share held of record on all matters submitted to a vote of stockholders. Holders of the common

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

There are no redemption or sinking fund provisions applicable to the common stock.

Preferred Stock

As of December 31, 2016, there were no shares issued and outstanding of the 50,000,000 shares of

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

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

Board of Directors.

Stock Options

As of December 31, 2016, there were 20,000,000 outstanding stock options outstanding, pursuant to the

2013 SunVesta Stock Option Plan, to purchase shares of our common stock at an exercise price of $0.05

per share, none of which have vested as of year-end. The Company had 32,000,000 stock options

outstanding as of December 31, 2015, of which 12,000,000 expired in the current period.

14



Warrants

As of December 31, 2016, we have no outstanding warrants to purchase shares of our common stock.

Dividends

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

in the near future. The payment of dividends on our common stock is within the discretion of the

Board of Directors subject to earnings, capital requirements, financial condition, and other relevant

factors including those contractual restrictions related to certain debt obligations and those limitations

generally imposed by applicable state law.

Transfer Agent and Registrar

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

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

Purchases of Equity Securities made by the Issuer and Affiliated Purchasers

None.

Recent Sales of Unregistered Securities

On November 8, 2016, the Company authorized the issuance of 5,900,000 shares of restricted common

stock valued at $0.15 a share to certain individuals, earned in connection with either employment

agreements or service to the board of directors, in reliance upon the exemptions from registration

provided by Section 4(2) and Regulation S of the Securities Act of 1933, as amended (“Securities Act)

as follows:

Name

Shares

Consideration

Value

Exemption

Josef Mettler (deceased)

3,000,000

Services

$0.15

Section 4 (2)/Reg S

Hans Rigendinger

2,500,000

Services

$0.15

Section 4 (2)/Reg S

José Maria Figueres

200,000

Services

$0.15

Section 4 (2)/Reg S

Howard Glicken

200,000

Services

$0.15

Section 4 (2)

The Company complied with the exemption requirements of Section 4(2) of the Securities Act based on

the following factors: (1) the issuances were isolated private transactions based on service agreements

which did not involve a public offering; (2) the offerees had access to the kind of information which

registration would disclose; (3) the offerees was financially sophisticated; and (4) all of the offerees

serve the Company as either officers or directors or both.

The Company complied with the exemption requirements of Regulation S by having directed no offering

efforts in the United States, by offering securities only to offerees who were outside the United States at

the time of the offering, and ensuring that the offerees to whom the securities were offered and authorized

were non-U.S. offerees with an addresses in a foreign country.

ITEM  6.

SELECTED FINANCIAL DATA

Not required.

15



ITEM  7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

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

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

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

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

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

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

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

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

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

Discussion and Analysis

Our plan of operation through December of 2018 is to develop the Paradisus Papagayo Bay Resort &

Luxury Villas project, the completion of which will require a total net investment of approximately $192

million (excluding non-recuperated overhead expenses and the anticipated $25 million in net proceeds for

the sale of private villas). We aim to secure a minimum of $140 million in new funding over the next

twelve months, though our actual financing requirements may be adjusted to suit that amount realized.

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

shareholder loans and the guaranty agreement if necessary.

Results of Operations

During the year ended December 31, 2016, our operations focused on (i) completing earthwork; (ii)

pursuing additional debt financing; (iii) obtaining government approval to extend the term of the

concessions; and (iv) securing government approval to include beachfront property adjacent to the

project.

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

partners in the form of loans. Capital raised to date has been used to develop the Costa Rican property

including for the purchase of the land concessions, earthwork, and general and administrative costs.

16



Comprehensive Losses

The variance in losses over the comparative annual period is reconciled below:

Comprehensive Loss 2015

(19,218,851)

Variances 2016 from 2015

Decrease in general and administrative

906,873   Increase due to higher consulting

expenses

expenses, project-related expenses and

expenses related to considering a public

listing in Switzerland. This increase was

overcompensated by negative personnel

costs due to a reversal of share-based

payments for the late Josef Mettler

Increase  in impairment expenses

(2,642,556)   Impairment attributed to expenses

related to the purchase of additional

concessions in Costa Rica

Increase  in interest income

22,850   Increase in deposits

Decrease  in interest expenses

692,764   Higher debt and interest,

over compensated by a decrease in

amortization of deferred financing cost.

Decrease  in loss on extinguishment of debt

6,512,812   Less impact from debt extinguishment

in 2016.

Change in fair values of conversion features

2,113,826   Primarily decrease in time value of

conversion feature

Increase  in unrealized exchange gains

1,316,508   Currency fluctuations

Increase in other income / (expenses)

(153,346)   Increase in expenses

Income Taxes

1,151   No income taxes in 2016

Decrease in foreign currency translation losses

666,078   Currency fluctuations

Decrease in actuarial gains / losses

39,151   Changes to actuarial assumptions

Total variances

9,476,111

Comprehensive Loss 2016

(9,742,739)

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

year ended December 31, 2017.

Income Tax Expense (Benefit)

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

and startup costs that will offset future operating profits.

Capital Expenditures

The Company expended a significant amount on capital expenditures for the period from inception to

December 31, 2016 and expects to incur future cash outflows on capital expenditure as discussed in

the "Liquidity and Capital Resources" and the "Going Concern" paragraphs below.

17



Liquidity and Capital Resources

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

in liquidity, capital resources, and stockholders’ equity.

As of December 31, 2016 and 2015, the following were the working capital items:

December 31,

December 31,

2016

2015

Current assets

Cash and cash equivalents

806,440

111,830

Receivable from related parties

49,292

19,945

Other assets

456,099

158,574

Total current assets

1,311,830

290,349

Current liabilities

Bank liabilities

-

179,313

Accounts payable

3,311,512

8,048,608

Accrued expenses

3,160,723

7,831,247

Notes payable

1,500,000

2,736,912

Notes payable to related parties

307,088

1,130,978

Other liabilities

120

-

Bonds

6,687,384

8,347,717

Total current liability

14,966,826

28,274,775

Net working capital

(13,654,996)

(27,984,426)

As of December 31, 2016 and 2015 the following were the items making up the total stockholders’

deficit:

December 31,

December 31,

2016

2015

Assets

Current assets

1,311,830

290,349

Non-current assets

68,354,502

67,007,090

Total assets

69,666,332

67,297,439

Liabilities

Current liabilities

14,966,825

28,274,775

Non-current liabilities

105,872,146

80,287,652

Total liabilities

120,838,971

108,562,427

Total stockholders’ deficit

(51,172,639)

(41,264,988)

The negative working capital of $13,605,935 is of immediate concern. However, based on the guaranty

signed by certain principals, the Company is convinced that it can address liquidity problems.Net cash

flow used in operating activities for the twelve months ended December 31, 2016, was $11,478,901, as

compared to $6,024,873 for the twelve-month period ended December 31, 2015.

The Company expects to use net cash flow in operating activities until the Company completes the

Paradisus Papagayo Bay Resort & Luxury Villas project, which completion is projected for the fourth

quarter of 2018.

Net cash used in investing activities for the twelve months ended December 31, 2016, was $1,737,927 as

compared to $9,178,106 for the twelve-month period ended December 31, 2015. Net cash used in

18



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

purchase of property and equipment, advance payments to subcontractors, and down payments for

property and equipment, offset by deposits related to construction activities and restricted cash. Net cash

used in investing activities in the prior comparable twelve-month period was comprised of receivables

from related parties, purchase of property and equipment, deposits related to construction and restricted

cash.

We expect to continue to use net cash flow in investing activities while in the process of developing the

Paradisus Papagayo Bay Resort & Luxury Villas.

Net cash provided by financing activities for the twelve-month period ended December 31, 2016, was

$13,994,449 as compared to $15,326,185 for the twelve-month period ended December 31, 2015. Net

cash provided by financing activities in the current twelve-month period is comprised of proceeds from

notes payable to related parties, and proceeds from bond issuances net of commissions, offset by the

repayment of notes payable to related parties, the repayment of bank liabilities, the repayment of

outstanding bonds, and the repayment of notes payable and other debt. Net cash provided by financing

activities in the prior comparable twelve-month period was comprised of bank liabilities, notes payable to

related parties, notes payable, and proceeds from bond issuances net of commissions, offset by the

repayment of bonds.

We expect net cash flow provided by financing activities to continue due to the unrealized financing

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

Management believes that cash on hand, 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 formal lines of credit or other bank financing arrangements as of December 31, 2016.

We have commitments that include an award letter issued in favor of certain general contractors together

with purchase orders and related agreements for $130 million as of December 31, 2016, in connection

with the development of the Paradisus Papagayo Bay Resort & Luxury Villas, which commitments are

included in the required estimated net financing of $192 million to complete the project.

We maintain a defined benefit plan that covers all of our Swiss employees as of December 31, 2016.

We have no current plans for significant purchases or sales of plant or equipment as of December 31,

2016, except in connection with the planned construction of the Paradisus Papagayo Bay Resort &

Luxury Villas,

We have no current plans to make any changes in the number of our employees as of December 31, 2016.

Future Financings

The Company is in the process of fulfilling CHF Bond offerings of up to CHF 50,000,000 during the

second quarter of 2017.

The Company will continue to rely on the terms of the Guaranty Agreement as necessary to meet

shortfalls in development financing.

19



Off-Balance Sheet Arrangements

As of December 31, 2016, 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 $212 million (including overhead

expenses).

The project is expected to open in the fourth quarter of 2018. Until the completion of the project,

the following expenditures are estimated to be incurred:

a.      Gross project cost

$

217,000,000

b.      Less: Proceeds from sale of villas

(25,000,000)

c.      Net project cost

192,000,000

d.      Overhead expenses

20,000,000

f

Total, excluding other potential projects

$

212,000,000

Seventy percent of the “Net project cost” is intended to be financed through the issuance of secured

bonds, for which negotiations have been initiated. The remaining thirty percent of the “Net project cost”,

as well as “non-recuperated overhead expenses” and the cost of potential “other projects” are intended to

be financed by the main shareholders or lenders of the project in the absence of alternative financing

commitments, i.e. Zypam Ltd., shareholder and related entity to the late Mr. Josef Mettler, Mr. Hans

Rigendinger, shareholder, Chief Executive Officer and Company Board Member and Dr. Max Rössler,

Company Board Member and controlling shareholder of Aires.

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 guaranty 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.

On September 22, 2015, the signatories to the guaranty formally agreed to maintain the guaranty, as

necessary, until December 31, 2018, after which date the guaranty will expire. 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.

On September 12, 2016, the signatories to the guaranty formally agreed to maintain the guaranty, as

necessary, until completion of the construction of Paradisus Papagayo Bay Resort & Luxury Villas, after

which date the guaranty will expire. The guaranty agreement requires that within 30 days of receiving a

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

Based  on  this  Guaranty  Agreement,  management  believes  that  available  funds  are  sufficient  to  finance

cash  flows  for  the  twelve  months  subsequent  to  December  31,  2016,  and  the  filing  date,  though  future

cash outflows for investing activities will continue to depend on the availability of financing.

20



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

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

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

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

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

Forward-looking statements reflect our current expectations and beliefs regarding our future results of

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

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

are not limited to, statements concerning:

— our anticipated financial performance and business plan

— the sufficiency of existing capital resources

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

— uncertainties related to our future business prospects

— our ability to generate revenues to fund future operations

— the volatility of the stock market

— general economic conditions

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

could cause our actual results to differ materially from those discussed or anticipated elsewhere in this

report. We also wish to advise readers not to place any undue reliance on the forward-looking statements

contained in this report, which reflect our beliefs and expectations only as of the date of this report. We

assume no obligation to update or revise these forward-looking statements to reflect new events or

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

Recent Accounting Pronouncements

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

pronouncements.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

RISK

Not required.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our audited financial statements for the years ended December 31, 2016 and 2015 are attached hereto as

F- 1 through F-50.

Due to rounding, the sum of individual positions may be higher or lower than 100%.

21



SUNVESTA, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

Page

Report of Independent Registered Public Accounting Firm

F-2

Consolidated Balance Sheets

F-3

Consolidated Statements of Comprehensive Loss

F-4

Consolidated Statements of Stockholders’ Deficit

F-5

Consolidated Statements of Cash Flows

F-6

Notes to Consolidated Financial Statements

F-8

F-1



Tel.    +41 44 444 35 55

BDO AG

Fax    +41 44 444 37 66

Fabrikstrasse 50

8031 Zürich

[f10k2016001.jpg]Switzerland

Report of Independent Registered Public Accounting Firm

Board of Directors and

Shareholders SunVesta, Inc.,

Oberrieden, Switzerland

We  have  audited  the  accompanying  consolidated  balance  sheets  of  SunVesta,  Inc.  as  of  December

31,  2016  and  2015  and  the  related  consolidated  statements  of  comprehensive  loss,  stockholders’

deficit,  and  cash  flows  for  each  of  the  two  years  in  the  period  ended  December  31,  2016.  These

financial  statements  are  the  responsibility  of  the  Company’s  management.  Our  responsibility  is  to

express an opinion on these financial statements based on our audits.

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

Oversight Board (United States). Those standards require that we plan and perform the audit to obtain

reasonable  assurance  about  whether  the  financial  statements  are  free  of  material  misstatement.  The

Company  is  not  required  to  have,  nor  were  we  engaged  to  perform,  an  audit  of  its  internal  control

over financial reporting. Our audits included consideration of internal control over financial reporting

as  a  basis  for  designing  audit  procedures  that  are  appropriate  in  the  circumstances,  but  not  for  the

purpose  of  expressing  an  opinion  on  the  effectiveness   of  the  Company’s  internal  control   over

financial reporting. Accordingly,  we express no such opinion. An audit also includes examining, on a

test  basis,  evidence  supporting  the  amounts  and  disclosures  in  the  financial  statements,  assessing  the

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

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

opinion.

In  our  opinion,  the  consolidated  financial  statements  referred  to  above  present  fairly,  in  all  material

respects, the financial position of SunVesta, Inc. at December 31, 2016 and 2015, and the results of its

operations  and  its  cash  flows  for  each  of  the  two  years  in  the  period  ended  December  31,  2016,  in

conformity with accounting principles generally accepted in the United States of America.

Zürich, March 17, 2017

BDO AG

// Andreas Wyss

// Julian Snow

Andreas Wyss

Julian Snow

F-2



SUNVESTA, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2016

December 31, 2015

Assets

Current assets

Cash and cash equivalents

806,440

111,830

Receivable from related parties

49,292

19,945

Other assets

456,099

158,574

Total current assets

$

1,311,830

290,349

Non-current assets

Property and equipment - net

66,216,658

61,271,424

Deposits related to construction work

190,549

798,874

Notes receivable

280,242

280,242

Down payment for property and equipment

0

2,972,083

Restricted cash

1,667,052

1,684,467

Total non-current assets

$

68,354,502

67,007,090

Total assets

$

69,666,332

67,297,439

Liabilities and stockholders' deficit

Current liabilities

Bank liabilities

-

179,313

Accounts payable

3,311,512

8,048,608

Accrued expenses

3,160,723

7,831,247

Note payable

1,500,000

2,736,912

Notes payable to related parties

307,088

1,130,978

Other liabilities

120

-

Convertible CHF-Bond

6,202,921

0

EUR-Bond

484,463

8,347,717

Total current liabilities

$

14,966,826

28,274,775

Non-current liabilities

Convertible CHF-Bond

31,892,613

25,866,148

CHF-Bond

16,384,893

-

Liability related to conversion feature

5,936,378

6,976,322

Notes payable to related parties

51,473,793

47,198,362

Other long-term debts

-

36,140

Pension liabilities

184,469

210,680

Total non-current liabilities

$

105,872,146

80,287,652

Total liabilities

$

120,838,972

108,562,427

Stockholders' equity

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

authorized, no shares issued and outstanding

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

959,416

959,416

101,841,603 shares issued and outstanding

Additional paid-in capital

23,238,526

23,403,438

Accumulated other comprehensive income / (loss)

2,997,562

1,778,961

Accumulated deficit

(78,368,143)

(67,406,803)

Total stockholders' deficit

$

(51,172,639)

(41,264,988)

Total liabilities and stockholders' deficit

$

69,666,332

67,297,439

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

F-3



SUNVESTA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Years Ended December 31, 2016 and 2015

2016

2015

Revenues

Revenues, net

-

-

Cost of revenues

-

-

Gross profit

$

-

-

Operating Expenses

General and administrative expenses

(5,079,198)

(5,986,071)

Impairment expenses

(2,642,556)

-

Total operating expenses

$

(7,721,754)

(5,986,071)

Income / (loss) from operations

$

(7,721,754)

(5,986,071)

Other income / (expenses)

Interest income

67,808

44,957

Interest expense

(6,883,332)

(7,576,096)

Change in Fair Value of Conversion Feature

2,500,486

386,660

Loss on extinguishment of debt

(1,165,268)

(7,678,080)

Exchange differences

2,502,188

1,185,680

Other income / (expenses)

(261,468)

(108,122)

Total other expenses

$

(3,239,586)

(13,745,000)

Profit/ (loss) before income taxes

(10,961,340)

(19,731,072)

Income Taxes

-

(1,151)

Net income / (loss)

$

(10,961,340)

(19,732,222)

Comprehensive income / (loss)

Foreign currency translation

1,178,721

513,372

Actuarial gains / (losses)

39,880

-

Comprehensive income / (loss)

$

(9,742,739)

(19,218,851)

Earnings / (loss) per common share

Basic and diluted

$

(0.11)

(0.21)

Weighted average common shares

Basic and diluted

100,245,439

94,338,589

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

F-4



SUNVESTA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

Years Ended December 31, 2016 and 2015

Common

Additional

Accumulated

Total

Stock

Paid-in

Other

Accumulated

Treasury

Stockholders’

Capital

Comprehensive

deficit

Stock

Equity

Income (Loss)

(Deficit)

December 31, 2014

$

835,416

$

22,942,486

$

1,265,590

$

(47,674,581)

$

-

$

(22,631,089)

Translation adjustments

-

-

513,372

0

-

513,372

Net loss

-

-

-

(19,732,222)

-

(19,732,222)

Stock based compensation expense

124,000

460,952

-

-

-

584,952

Actuarial gains & losses

-

-

-

-

-

-

December 31, 2015

$

959,416

$

23,403,438

$

1,778,961

$

(67,406,803)

$

-

$

(41,264,988)

Translation adjustments

-

-

1,178,721

(0)

-

1,178,721

Net loss

-

-

-

(10,961,340)

-

(10,961,340)

Stock based compensation expense

-

(164,912)

-

-

-

(164,912)

Actuarial gains & losses

-

-

39,880

-

-

39,880

December 31, 2016

$

959,416

$

23,238,526

$

2,997,562

$

(78,368,143)

$

-

$

(51,172,639)

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

F-5



SUNVESTA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2016 and 2015

2016

2015

Cash flows from operating activities

Net loss

$

(10,961,340)

(19,732,223)

Adjustments to reconcile net loss to net cash

Depreciation and amortization

61,771

67,163

Impairment on Down Payment

2,642,555

-

Amortization of debt issuance costs and commissions

2,588,290

3,428,099

Accrued interest on debt

3,713,440

-

Extinguishment of Debt

1,165,268

7,678,080

Unrealized  exchange differences

(3,004,224)

(1,925,603)

Stock compensation expense

(164,912)

584,952

Increase in pension fund commitments

18,791

74,833

Expenses (+) / Income (-) related to conversion feature

(2,051,203)

(386,660)

- Cash flow impact of increase / decrease in:

Other current assets

846,413

130,582

Accounts payable

(4,335,084)

1,910,735

Accrued expenses

(1,998,668)

2,145,169

Net cash used in operating activities

$

(11,478,901)

(6,024,873)

Cash flow from investing activities

Notes receivable

-

(280,242)

Receivables from related parties

-

(1,507,128)

Payments to acquire property, plant and equipment

(1,455,760)

(6,801,793)

Proceeds from sale of property, plant and equipment

36,578

-

Deposits related to construction

(641,818)

21,811

Payments for down payments for property and equipment

-

(610,810)

Proceeds from down payments for property and equipment

309,023

-

Restricted cash

14,050

56

Loan receivable and participations

1

(31,424)

Net cash used in investing activities

$

(1,737,927)

(9,178,106)

Cash flows from financing activities

Proceeds from bank liabilities

42,047

25,938

Repayments of bank liabilities

(220,100)

-

Proceeds from notes payable related parties

18,456,316

16,359,360

Repayment of notes payable related parties

(3,286,465)

-

Proceeds from (Repayments of) Notes Payable

-

485,665

Proceeds from bond issuance, net of commissions and debt

issuance costs

7,433,328

8,392,693

Repayment of bonds

(7,786,584)

(9,837,471)

Repayments of note payable and other debt

(644,091)

-

Net cash provided by financing activities

$

13,994,449

15,326,185

Effect of exchange rate changes

(83,009)

(25,723)

Net increase / - decrease in cash

694,612

97,483

Cash and cash equivalents, beginning of period

111,830

14,347

Cash and cash equivalents, end of period

$

806,442

111,830

F-6



SUNVESTA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2016 and 2015

Additional information

2016

2015

Capitalized interest and debt issuance costs for construction (non-cash)

3,694,061

3,335,000

Reversal of capitalized payment obligation for construction (non-cash)

451,816

-

Assumption of payables due from AIRES by Global Care AG (non-cash)

7,621,345

-

Conversion of Loans payable to Global Care AG to CHF convertible bonds

4,635,352

-

Assumption of payables due from Global Care AG by Sportiva (non-cash)

1,533,150

-

Conversion of Loan from third party to CHF-Convertible Bond

599,700

-

Assumption of loan due from Global Care AG by Dr. Max Rössler

1,442,253

-

Conversion of Loan from Dr. Max Rössler to CHF-Bond

15,406,139

-

Transfer from EUR-Bond to CHF-Bond

953,683

-

Repayment of Specogna Holding AG loan by Aires

-

707,428

Interest paid

-

2,395,000

Assumption of receivables from Josef Mettler by AIRES (non-cash)

-

1,507,128

Assumption of loans Dr. Max Rössler by AIRES (non-cash)

-

1,551,669

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

F-7



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

1.

CORPORATE INFORMATION

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

AG”). Until  recently, SunVesta AG held 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  SunVesta  Holding  España  SL  (“España”),  a

Spanish  company.  Effective  May  21,  2016  the  three  Costa  Rican  companies  were  merged,

whereby  Altos  del  Risco SA absorbed its  two affiliated companies and  subsequently changed  its

name to SunVesta Costa Rica SA.

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,

and   excavation  work  began   in   March   2013.  The  Company  is   still   in  process   of   securing

financing  for  the  project  and  has  not  realized  revenue  to  date.  Since  the  financing  of  the  project

is not complete, the Company’s activities are subject to significant risks and uncertainties.

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

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

2.

SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The  consolidated  financial  statements  include  those  of  the  Company  and  its  subsidiaries.  One

hundred  percent  of  assets  and  liabilities  as  well  as  revenues  and  expenses  of  all  consolidated

companies  are  included.  Receivables,  payables,  as  well  as  revenues  and  expenses  between

consolidated   companies   are   eliminated.   Unrealized   intercompany   profits,   which   may   be

included  in  assets  as  of  the  end  of  the  respective  periods  are  also  eliminated.  Certain  previously

reported amounts have been reclassified to conform to the current presentation.

Fiscal year

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

Use of estimates

These  consolidated  financial  statements  are  prepared  in  conformity  with  accounting  principles

generally  accepted  in  the  United  States  of  America  (“US  GAAP”)  and  require  management  to

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

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

considerations  also  impact  reported  income  statement  items.  While  the  effective  amounts  may

vary from  the  estimates, management is convinced that all relevant information having an impact

on   the   estimates   have   been   taken   into   consideration   and   are   appropriately   disclosed.

Management   believes   that   the   valuation   of   property   and   equipment   includes   substantial

estimates.

F-8



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

2.

SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Cash and cash equivalents

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

with maturities of less than three months.

Allowance for Doubtful Accounts

Management  makes  ongoing  estimates  relating  to  the  collectability  of  receivable  balances  and

maintains  a  reserve  for  estimated  losses  resulting  from  the  inability  of  counterparties  to  meet

their  financial  obligation  to  us.  As  of  December  31,  2016  and  2015  the  Company does  not  have

any  amounts  reserved  in  the  consolidated  balance  sheet  nor  bad  debt  expense  recorded  in  the

statement of comprehensive loss.

Other assets

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

maturities less than one year.

Property and equipment

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

maintenance  expenses  are  charged  to  the  income  statement  when  incurred.  The  cost  of  fixed

assets,  including  leasehold  improvements  are  capitalized  and  depreciated  over  the  following

useful lives:

—   Land (concessions)

not depreciated

—   IT  equipment

3 years

—   Other equipment and furniture

5 years

—   Leasehold improvements

5 years

—   Vehicles

5 years

—   Project in process

not depreciated until project finished

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

time of disposal.

Project in process relates to costs incurred directly related to the planning and construction of the

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

future hotel and rental operations or the sale of certain apartments. Once the project in process is

finished  the  Company  will  reclassify  the  capitalized  costs  to  corresponding  categories  and

determine the depreciation method and depreciation period.

Interest capitalization

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

construction period, in accordance with ASC 835-20, Capitalization of Interest.

F-9



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

2.

SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

With respect to the construction in  progress,  the Company has capitalized a cumulative  amount

of  $13,059,061 and  $9,365,000 of interest  expense  and  debt  issuance  costs as  of  December 31,

2016 and December 31, 2015, respectively to property and equipment.

Deposits related to construction work

The Company prepays  deposits  for  construction  work,  which  costs  are  capitalized initially and

will be amortized once construction has begun.

Debt issuance cost

The  Company  reclassified  debt  issuance  cost  to  be  presented  net  with  the  issued  debt  as  per

ASU 2015-3. This ASU was applied retrospectively for all periods presented

Down payment for property and equipment

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

property  and  equipment  item  has  been  completely  purchased,  it  will  be  reclassified  to  a

corresponding   subcategory   within   property  and   equipment   and   amortized.   The   Company

assesses regularly if the down payments are recoverable in accordance with ASC 360  Property,

Plant,   and   Equipment.   Should  any  down   payments  due  to  specific  circumstances   not   be

assessed as recoverable, they will be impaired.

Restricted Cash

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

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

nature  of  the  Company’s  underlying  business  it  will  be  determined  whether  a  deposit  is

recorded as a current or non-current asset.

Impairment of Long-Lived Assets

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

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

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

cash  flows  from  the  asset  or  asset  group  are  less  than  its  carrying  amount.  An  impairment  loss

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

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

value  of  the  expected  future  cash  flows  from  the  asset  or  asset  group  discounted  at  a  rate

commensurate with the risk involved.

Income taxes

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

income in any of the jurisdictions in which it operates.

F-10



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

2.

SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

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

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

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

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

foreign subsidiaries.

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

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

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

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

period when the deferred tax assets or tax liabilities are realized.

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

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

evaluating tax positions.

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

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

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

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

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

period  in  which new information is available impacting either the recognition or measurement of

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

as income tax expense.

Concentration of risks

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

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

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

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

equivalents are subject to currency exchange rate fluctuations.

Foreign Currency Translation and Transactions

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

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

operations  of  our  foreign  subsidiaries  are  determined  using  the  currency  of  the  environment  in

which  an  entity  primarily  generates  and  expends  cash  as  the  functional  currency.  Assets  and

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

Statement   of   comprehensive   loss   accounts   are   translated   at   the   average   rate   of   exchange

prevailing  during  the  year.  Translation  adjustments  arising  from  the  use  of  differing  exchange

rates from period to period are included in accumulated other comprehensive income (loss) in

stockholders’ deficit.

F-11



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

2.

SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Gains  and  losses  resulting  from  foreign  currency  transactions  are  included  in  other  income  and

expenses (exchange differences), except intercompany foreign currency transactions that are of a

long-term-investment  nature  which  are included  in accumulated  other  comprehensive  income  in

stockholders’ equity.

Bonds, net of debt issuance costs

Bonds  comprise  of  bonds  payable  in  Euros  (“EUR”)  and  Swiss  Francs  (“CHF”),  which  bear

fixed  interest  rates.  Bonds  are  carried  at  notional  value.  If  a  bond  becomes  repayable  within  the

next  12  months  from  the  balance  sheet  date  on,  such  bond  or  the  corresponding  portion  of  this

bond will be categorized as current. Commissions paid to bondholders themselves are reflected as

debt discounts  and amortized over the term of the bond, based on the “effective interest method”.

The amortization expense is reflected in amortization of debt issuance cost.

Bonds are presented net  of debt issuance costs, that arise as  a result of issuing debt, i.e. the EUR

bonds,  CHF  bonds,  CHF  convertible  bonds  and  the  loan  with  Aires  International  Investments

Inc.  These  costs  are  amortized  over  the  life  of  the  debt  using  the  effective  interest  method.  The

costs  comprise  of  finder's  fees  of  generally  between  three  and  12  percent  of  the  amount  issued

and  costs  incurred  in  connection  with  issuing  the  bonds,  such  as  legal  and  accounting  fees,  and

stamp  duty  taxes.  The  accumulated  amortization  of  debt  issuance  costs  was  $1,242,172  and

$797,857 as of December 31, 2016 and December 31, 2015, respectively.

Pension Plan

The Company maintains a pension plan covering all employees in Switzerland; it 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  statement  of  comprehensive  loss  effects  of  pensions  should  follow  a  similar

pattern. ASC 715 requires recognition of the funded status, or difference between the fair value of

plan  assets  and  the  projected  benefit  obligations  of  the  pension  plan  on  the  balance  sheet,  by

recording a corresponding  expense in the net  loss. If the projected benefit obligation exceeds the

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

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

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

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

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

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

Related parties

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

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

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

venture. Senior management or close family members are also deemed to be related parties.

F-12



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

2.

SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Earnings per Share

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

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

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

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

Additionally,  the  Company's  two  convertible  CHF-Bonds  were  issued  in  October  2015.  These

convertible  CHF  bonds  convert  into  shares  of  Sunvesta  Holding  AG,  the  Company's  wholly

owned subsidiary. The resulting common shares assumed to be converted as of the issuance date

are included in  the denominator  for diluted EPS under the if-converted  method  to the extent  that

their effect is considered dilutive.

Fair Value of Financial Instruments

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

receivables from related parties, bank liabilities, accounts payable to third or related parties, note

payables  to  third  or  related  parties,  bonds  as  well  as  the  conversion  feature  of  the  convertible

bonds.  The  fair  value  of  these  financial  instruments  approximate  their  carrying  value  due  to  the

short maturities of these instruments, unless otherwise explicitly noted.

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

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

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

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

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

to develop its own assumptions.

Stock-based compensation

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

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

recognized  in  earnings  over  the  requisite  service  period  based  on  the  fair  value  of  those  options

and  awards.  For  employees, fair value is estimated at the grant date and for non-employees’ fair

value  is  re-measured   at   each   reporting  date   as   required   by  ASC   718   Compensation-Stock

Compensation,  and  ASC  505-  50  Equity-Based  Payments  to  Non-Employees.  Fair  values  of

awards granted under the share option  plans  are  estimated  using  a  Black-Scholes  option  pricing

model.  The  model’s  input  assumptions  are  determined  based  on  available  internal  and  external

data  sources.  The  risk-free  rate  used  in  the  model  is  based  on  the  US  treasury  rate  for  the

expected  contractual  term.  Expected  volatility  is  based  on  historical  volatilities  of  a  peer  group

of similar companies in the same industry.

F-13



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

2.

SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Derivative Financial Instruments

Derivative  financial  instruments  are  initially  measured  at  fair  value  at  the  contract  date  and  are

subsequently  measured  to  fair  value  at  each  reporting  date.  The  Company's  derivative  financial

instrument  relates  to  the  conversion  feature  bifurcated  from  the  Company's  convertible  CHF

Bond

(Note  12),  is  accounted  for  under  ASC  815  and  recorded  as  Liability  related  to  conversion

feature in the consolidated balance sheets. Changes in the fair value each period (gains or losses)

are  reflected  in  the  statement  of  comprehensive  loss  as  Change  in  Fair  Value  of  Conversion

Feature.

New accounting standards – not adopted

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

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

are  conditions  or  events,  considered  in  aggregate,  that  raise  substantial  doubt  about  entity’s

ability to continue as  a going concern within one  year after  the date  that the  financial statements

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

when applicable). The  amendments to (ASU) 2014-15 are effective for the annual period ending

after December 15, 2016,  and for annual periods and interim periods thereafter. Early application

is  permitted.  The  Company  is  in  the  process  of  evaluating  the  prospective  impact  that  (ASU)

2014-15 will have on its balance sheet.

In   January   2016,   the   Financial   Accounting   Standards   Board   (FASB)   issued   Accounting

Standards Update 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and

Measurement  of Financial Assets and Financial  Liabilities.  The update requires several  changes

with  respect  to  recognition  and  measurement  as  well  as  disclosure  requirements  with  respect  to

financial  instruments).  The  amendments  to  (ASU)  2016-01  are  effective  for  the  annual  period

ending  after  December  15,  2017,  and  for  annual  periods  and  interim  periods  thereafter.  Early

application  is  permitted.  The  Company  is  in  the  process  of  evaluating  the  prospective  impact

that (ASU) 2016-01 will have on its balance sheet.

In   February   2016,   the   Financial   Accounting   Standards   Board   (FASB)   issued   Accounting

Standards  Update  2016-02,  Leases  (Topic  842).  The  standard  requires  the  recognition  of  lease

assets and lease  liabilities by lessees for those leases classified as operating leases. Leases will be

classified  as  either  finance  or  operating,  with  classification  affecting  the  pattern  of  expense

recognition.  The  standard  requires  lessors  to  classify  leases  as  either  sales-type,  finance  or

operating. A  sales-type  lease  occurs if the lessor transfers  all of the risks  and rewards,  as well  as

control  of  the  underlying  asset,  to  the  lessee.  If  risks  and  rewards  are  conveyed  without  the

transfer  of  control,  the  lease  is  treated  as  a  financing  lease.  If  the  lessor  does  not  convey  risks

and  rewards  or  control,  an  operating  lease  results.  The  standard  will  become  effective  for  the

Company  beginning  January  1,  2019.  The  Company  is  currently  assessing  the  impact  adoption

of  this  standard  will  have  on  its  consolidated  results  of  operations,  financial  condition,  cash

flows, and financial statement disclosures.

F-14



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

2.

SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards

Updates   ASU   2016-9,   Compensation—Stock   Compensation   (Topic   718):   Improvements   to

Employee   Share-Based   Payment   Accounting,   requiring   certain   changes   to   recognition   and

measurement   as   well   as   disclosure   of   Share-Based   Payments.   The   standard   will   become

effective  for  the  Company  beginning  January  1,  2017.  The  Company  is  currently  assessing  the

impact  adoption  of  this  standard  will  have  on  its  consolidated  results  of  operations,  financial

condition, cash flows, and financial statement disclosures.

In  June  2016,  the  Financial  Accounting  Standards  Board  (FASB)  issued  Accounting  Standards

Updates  ASU  2016-13,  Financial  Instruments—Credit  Losses  (Topic  326):  Measurement  of

Credit   Losses   on   Financial   Instruments,   requiring   certain   changes   to   the   recognition   and

measurement  as  well  as  disclosure  of  incurred  and  expected  credit  losses.  The  standard  will

become  effective  for  the  Company  beginning  January  1,  2020.  The  Company  is  currently

assessing the impact adoption of this standard will have on its consolidated results of operations,

financial condition, cash flows, and financial statement disclosures.

In   November   2016,  the   Financial  Accounting  Standards  Board  (FASB)  issued  Accounting

Standards  Updates  ASU  2016-18,  requiring  that  restricted  cash  and  restricted  cash  equivalents

be  included  with  cash  and  cash  equivalents  when  reconciling  the  beginning-of-period  and  end-

of-  period  total  cash  amounts  shown  on  the  statement  of  cash  flows.  Consequently,  transfers

between  cash  and  restricted  cash  will  not  be  presented  as  a  separate  line  item  in  the  operating,

investing  or  financing  sections  of  the  cash  flow  statement.  The  amendments  are  effective  for

public  business  entities  for  fiscal  years  beginning after  December  15,  2017,  and  interim periods

within  those  fiscal  years.  The  Company considers  that  ASU  2016-18  will  have  a  limited  impact

on the presentation of the statement of cash flows.

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  2018.

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

a.   Gross project cost

$

217,000,000

b.   Less: Proceeds from sale of villas

(25,000,000)

c.   Net project cost

192,000,000

d.   Overhead expenses

20,000,000

e.   Total, excluding other potential projects

$

212,000,000

Seventy  percent  of  the  Net  project  cost  is  intended  to  be  financed  through  the  issuance  of

secured  bonds,  for  which  negotiations  have  been  initiated.  The  remaining  thirty  percent  of  the

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

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

late   Mr.   Josef   Mettler,   Mr.   Hans   Rigendinger,   shareholder,   Company   Director   and   Chief

Executive  Officer,  Dr.  Max  Rӧssler,  controlling  shareholder  of  Aires  International  Investment,

Inc. and Company Director.

F-15



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

3.

GOING CONCERN - CONTINUED

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

project  entered  into  a  Guaranty  Agreement  in  favor  of  the  Company.  The  purpose  of  the

guaranty  is  to  ensure  that  until  financing  is  secured  for  the  entire  project  that  they  will  act  as

guarantors to creditors to the extent of the project’s ongoing capital requirements. On September

22,  2015,  the  signatories  to the  guaranty formally agreed  to  maintain the  guaranty,  as  necessary,

until December 31, 2018, after which date the guaranty will expire.

On  October  28,  2016,  Hans  Rigendinger  and  Dr.  Max  Rössler  formally  agreed  to  maintain  the

guaranty,  as  necessary,  until  completion  of  the  construction  of  Paradisus  Papagayo  Bay  Resort

& Luxury Villas, after which date the guaranty will expire.

The  Guaranty  Agreement  requires  that  within  30  days  of  receiving  a  demand  notice,  requested

funds   are   made   available   by   the   guarantors   to   the   Company.   Based   on   this   guaranty,

management  believes  that  available  funds  are  sufficient  to  finance  cash  flows  for  the  twelve

months  subsequent  to  December  31,  2015  and  the  filing  date,  though  future  anticipated  cash

outflows for investing activities continue to depend on the availability of financing.

4.

CASH AND CASH EQUIVALENTS

Cash  and  cash  equivalents are  available  to  the  Company without  any restriction  or  limitation  on

withdrawal and/or use of these funds. The Company’s cash equivalents are placed with financial

institutions  that  maintain  high  credit  ratings.  The  carrying  amounts  of  these  assets  approximate

their fair value.

Cash and cash

USD

CHF

Other

Total

Total

equivalents

December 31, 2016

December 31, 2015

original currency

31,670

778,040

14,260

in $

31,670

763,428

11,342

806,440

111,830

USD ($)  =

US Dollar

EURO     =

Euro

CHF

=

Swiss Francs

CRC

=

Costa Rican Colón

F-16



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

5.

RESTRICTED CASH

As of December 31, 2016, the Company has the following restricted cash positions:

Restricted Cash

December 31, 2016

December 31, 2015

$

$

Credit Suisse in favor of BVK pension fund

125,400

128,805

HSBC in favor of Costa Rican Tourism Board

-

370,000

Banco National de Costa Rica in favor of the Costa

Rican Tourism Board

-

563,350

Banco Lafise in favor Costa Rican Tourism Board

933,350

Banco Lafise in favor Costa Rican Environmental

Agency – SETENA

608,302

Banco Nacional de Costa Rica in favor of the Costa

Rican Environmental Agency – SETENA

-

622,311

Gross

1,667,052

1,684,466

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

Agency    SETANA  are  related  to  the  hotel  project  in  Costa  Rica  and  therefore  their  release  is

not  expected  before  finalization  of  the  corresponding  project.  Due  to  this  fact  these  restricted

cash positions have been classified as long term.

The  restricted  cash  position  in  favor  of  BVK  pension  fund  is  a  rental  deposit  related  to  a  long

term  lease contract for office space. Due to this fact this restricted cash position is also classified

as long term.

6.

NOTES RECEIVABLE

On  June  15,  2015,  the  Company  granted  REP  Caribbean  Development  Corporation,  a  third

party,  a  short  term  advance  in  the  amount  of  $250,000.  The  repayment  was  due  on  November

30, 2015, with a fixed interest payment of $5,000. The advance is secured by a non-related Swiss

individual.  On  December  10,  2015,  the  advance  was  increased  by  $25,000.  Including  accrued

interest, the overdue amount at December 31, 2016 was approximately $280,000.

As this commitment has not been executed, REP Caribbean Development Corporation still owes

these funds to the Company.

F-17



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

7.

PROPERTY & EQUIPMENT

December 31, 2016

December 31, 2015

Land

$

19,700,000

19,700,000

IT Equipment

221,060

185,846

Other equipment and furniture

219,734

278,000

Leasehold improvements

74,004

66,617

Vehicles

74,000

139,000

Construction in-process

46,457,172

41,412,351

Gross

66,745,970

61,781,814

Less accumulated depreciation

(529,312)

(510,390)

Net

$

66,216,658

61,271,424

Depreciation expenses for the period ended December 31,

2016 and 2015

61,771

16,802

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

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

m2).

The  $7  million  concession  is  a  right  to  use  the  property  for  a  specific  period  of  time  of  initially

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

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

policies. The current concession was initially set to expire in June 2022.

The  $12.7  million  concession  is  also  a  right  to  use  the  property  for  a  specific  period  of  time  of

initially 30  years from the date of grant, which thereafter can be renewed at no further cost, if the

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

policies. The current concession was initially set to expire in November 2036.

On  July  14,  2015  the  Consejo  del  Polo  de  DesarrolloTuristico  Papagayo  at  ICT  (Council  of

Papagayo  Tourism  Development  Project),  has  unanimously  approved  the  extension  of  both

concessions until 2052.

The  construction  in  process through  December  31,  2016  and  December  31,  2015,  is  represented

primarily by architectural work related to the hotel and apartments as well as construction work.

Deposit related to construction work

For   the   year   ended   December   31,   2016,   the   Company   had   made   deposits   with   several

contractors  to  initiate  earth  moving  groundwork.  These  deposits  will  be  offset  against  invoices

for  such  groundwork  as  completed.  As  of  December  31,  2016  and  2015,  the  Company  has

deposits of $190,549 and $798,874 respectively, which have not been set off.

F-18



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

8.

DOWN PAYMENTS FOR PROPERTY & EQUIPMENT

December 31, 2016

December 31, 2015

La Punta (neighbouring piece of land)

2,669,816

2,669,816

Hotel Engadina

-

302,267

Gross

$

2,669,816

2,972,083

Value adjustment on Down Payment La Punta

(2,669,815)

-

Total (net)

$

0

2,972,083

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,   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  five  percent  in  equity  of  Paradisus  Papagayo

Bay  Resort  &  Luxury  Villas  (currently  under  development).  Both  of  these  are  located  in  Costa

Rica.

On  November  13,  2012,  the  above  agreement  was  amended  to  decrease  the  total  purchase  price

to  $17,200,200  with  no  equity payments.  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 purchase did not close.

During  the  second  quarter  of  2013,  the  Company  entered  into  a  new,  revised  agreement  for  the

purchase  of  the  said  properties.  The  original  agreement  (including  amendments)  as  described

above was cancelled and replaced by a new agreement, 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 revised agreement and therefore $16,130,184 was outstanding as per  the date

of the new, revised agreement.

-      Since  the   original   seller  owes   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  to  the  original

seller.  The  remaining  $8,130,184  on  the  new  agreement  was  to  be  paid  directly  to  the

original seller. Payment schedules were defined.

F-19



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

8.

DOWN PAYMENTS FOR PROPERTY & EQUIPMENT - CONTINUED

As of this balance sheet date, the following is the situation:

(USD)

(USD)

Total

Description

USD

USD

USD

Total commitment

9,500,000

8,000,000

17,500,000

Payments till 31 December, 2016

1,669,816

1,000,000

2,669,816

Thereof refundable:

-1,669,816

-700,000

-2,369,816

thereof non-refundable

0

300,000

300,000

Total outstanding at 31 December,

7,830,184

7,000,000

14,830,184

Thereof overdue

-7,830,184

-7,000,000

-14,830,184

Thereof not overdue

0

0

0

The  Company  has  not  fulfilled  the  terms  of  either  the  agreement  with  the  original  seller  or  the

agreement with the third party seller. Notice of termination of the agreement with the third party

was  received  on  January  4,  2014.  Despite  attempts  to  renegotiate  a  new  agreement  to  purchase

the  additional  concession  properties,  the  Company  noticed  cancellation  of  the  agreement  with

the original seller on February 24, 2017.

The  agreement  with  the  original  seller  entitled  the  Company  to  reimbursement  for  all  amounts

paid as deposits against the purchase of the concessions less a liquidated damages penalty of 5%

in  the  event  that  the  purchase  did  not  close  on  providing  notice  of  cancellation  to  the  original

seller.

The  agreements  with  the  third  party  seller  entitled  the  Company  to  reimbursement  for  all

amounts paid as deposits minus a non-refundable payment of $300,000 and a liquidated damages

penalty of 5% in the event that the purchase did not close on receiving notice of termination.

All  expenses  related  to  the  agreements  with  the  original  seller  and  the  agreement  with  the  third

party seller, were impaired as of December 31, 2016.

Hotel Engadina

This amount of 0 and $ 302,267 as per December 31, 2016 and December 31, 2015 respectively,

related  to a purchase option that  was bought  by QuadEquity Holdings,  a related party during the

year ended December 31, 2016.

F-20



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

9.

FAIR VALUE MEASUREMENT

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

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

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

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

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

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

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

classified under the following hierarchy:

Level 1

Quoted prices for identical instruments in active markets.

Level 2

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

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

inputs or significant value drivers are observable in active markets.

Level 3

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

unobservable.

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

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

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

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

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

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

measurements are classified within Level 3.

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

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

though there may be significant inputs that are readily observable.

Fair  value  measurement  includes  the  consideration  of  nonperformance  risk.  Nonperformance

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

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

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

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

As  of  December  31,  2016  and  December  31,  2015,  respectively,  there  are  no  financial  assets

or  liabilities  measured  on  a  recurring  basis  at  fair  value  with  the  exception  of  the  liability

related to the conversion feature.

F-21



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

9.

FAIR VALUE MEASUREMENT - CONTINUED

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:

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 receivable - carrying amount approximated fair value.

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 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%  and

6.5%  respectively  for  CHF  bonds,  which  represented  the  current  market  rate  based  on  the  creditworthiness  of  the

Company at the date of issue. Hence, the carrying values approximate fair value.

Notes  payable  to  related  parties    Aires  (non-current)    The  fair  values  of  the notes  payable  to  Aires  International

Investments  Inc.  are  classified  as  level  3.  The  fair  values  of  the  notes  were  determined  by  discounting  cash  flow

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

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

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

fair  values  of  the  convertible  bonds  have  been  determined  by  discounting  cash  flow  projections  discounted  at  the

respective interest rates of 6.00% for convertible CHF bonds, which  represents the current  market rate based on  the

creditworthiness of the Company. Hence, the carrying values approximate fair value.

Liability  related  to  conversion  feature  -  The  fair  value  of  the  liability  related  to  conversion  feature  is  classified  as

level 3 in the fair value hierarchy. The fair value of the liability is determined using a Black Scholes model to calculate

the  option  value  at  each  reporting  date  and  multiplied  by  the  number  of  potentially  convertible  shares.  Hence  the

carrying value of the obligation approximates the fair value

F-22



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

9.

FAIR VALUE MEASUREMENT - CONTINUED

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

December 31, 2016

December 31, 2015

Carrying

Fair Value $

Carrying

Fair Value $     Fair Value    Ref-

Amount $

Amount $

Levels

erence

Cash and cash equivalents

806,440

806,440

111,830

111,830

1

Note 4

Restricted cash

1,667,052

1,667,052

1,684,467

1,684,467

1

Note 5

Receivables from related parties –

other (current)

49,292

49,292

19,945

19,945

3

Note 10

Accounts Payable

3,311,512

3,311,512

8,048,608

8,048,608

1

-

Bank liabilities

-

-

179,313

179,313

1

Note 11

Note payable

1,500,000

1,500,000

2,736,912

2,736,912

1

Note 17

Notes payable to related parties –

Dr. M. Rӧssler (current)

-

-

-

-

3

Note 10

Notes payable to related parties –

Rigendinger (current)

-

-

1,973

1,973

3

Note 10

Notes payable to related parties –

other (current)

307,088

307,088

1,129,005

1,129,005

3

Note 10

Notes receivable

280,242

280,242

280,242

280,242

3

EUR-bonds

484,463

484,463

8,488,631

8,488,631

3

Note 12

Convertible CHF-bonds

38,095,533

38,095,533

28,720,443

28,720,443

3

Note 12

CHF-bonds

16,384,893

16,384,893

28,720,443

28,720,443

3

Note 12

Notes payable to related parties –

Aires (non-current)

51,473,793

51,473,793

47,198,362

47,198,362

3

Note 10

Liability related to conversion

feature

5,936,378

5,936,378

6,976,322

6,976,322

3

Note 12

The Company's financial liabilities measured at fair value on a recurring basis consisted of the

liability relates to conversion feature as of the following date:

Balance at December 31, 2015

6,976,322

Additions

449,283

Change in Fair Value of Conversion Feature

(2'500'486)

Extinguishment of debt

1,165,268

FX Revaluation

(154,010)

Balance at December 31, 2016

5,936,378

F-23



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

9.

FAIR VALUE MEASUREMENT - CONTINUED

The Company used a Black-Scholes model to value the Liability related to conversion feature as

of December 31, 2016 and December 31, 2015.

The assumptions as of December 31, 2016 are as follows:

Stock Price: CHF 5.08

Annualized Risk Free Rate: .0001% Exercise Price: CHF 8

Annualized Volatility:    80%

Time to Maturity: 1.75 years

The assumptions as of December 31, 2015 were as follows:

Stock Price: CHF 5.08

Annualized Risk Free Rate: .72% Exercise Price: CHF 8

Annualized Volatility:    80% Time to Maturity: 2.75 years

The annualized risk free rate was changed from a US treasury rate to a Swiss treasury rate, as the

underlying basis value are shares in a Swiss company denominated in Swiss Francs.

F-24



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

10.

RELATED PARTY TRANSACTIONS

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

Receivables

Payables

December 31,

December

December 31,

December 31,

2016

31, 2015

2016

2015

Hans Rigendinger

-

-

-

1,973

Aires International

-

-

51,473,793

47,198,362

Akyinyi Interior and Exterior

-

-

Decoration

290,000

290,000

Global Care AG

-

-

-

240,210

Geoffrey Long

-

19,945

-

-

Sportiva participations ag

-

-

-

528,660

Late Josef Mettler

-

-

17,088

70,135

QuadEquity Holdings

-

-

-

-

4f capital ag

-

-

-

-

Dr. Max Rössler

-

-

-

-

Turan Tokay

49,292

-

-

-

Total excluding interest

49,292

19,945

51,780,881

48,329,340

Accrued interest

-

-

-

6,370,579

Total

49,292

19,945

51,780,881

54,699,919

of which non-current

-

-

51,473,793

47,198,362

Related party

Capacity

Interest   Repayment     Security

Rate

Terms

1     Hans Rigendinger     Shareholder, CEO and Company board member

3%

none

none

2     Aires International    Company owned by Dr. Max Rössler, a board member

Akyinyi Interior

3     and Exterior

Company owned by the widow of the late Josef

Decoration

Mettler

none

none

none

4     Global Care AG

Company owned by Dr. Max Rössler, a board

member

none

none

none

5     Geoffrey Long

Head of Accounting “The Americas”

none

none

none

6     Sportiva

Participations AG     Company formerly owned by the late Josef Mettler

3%

none

none

7     Late Josef Mettler     Former shareholder, CEO, CFO and Company board

member

3%

none

none

8     Turan Tokay

Shareholder

3%

none

none

F-25



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

10.

RELATED PARTY TRANSACTIONS - CONTINUED

Loan agreement Aires International Investment Inc.

As of December 31, 2016, 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

10,044,371

9,855,731      7.25 %

After Dec 31, 2020

SunVesta Inc.

Promissory note

10,000,000

9,812,195      7.25 %

After Dec 31, 2020

SunVesta Inc.

Promissory note

10,000,000

9,812,195      7.25 %

After Dec 31, 2020

SunVesta Inc.

Loan agreement

9,675,972

9,605,602      7.25 %

After Dec 31, 2020

SunVesta Holding

Loan agreement

12,625,177

12,388,070      7.25 %

After Dec 31, 2020

Total

51,473,793

*

The notes may be repaid in whole or in part.

Loan due to Global Care AG

In  April  2016,  Global  Care  AG  (a  related  party  controlled  by  Dr.  Max  Rössler,  himself  board

member  and  related  party)  assumed  a  liability  of  CHF  4.5  million  from  Aires  International

Investment  Inc.,  (also a related  party controlled by Dr. Max Rössler). This CHF 4.5  million was

subsequently  subscribed  into  bonds  of  the  CHF-Convertible  Bond  issue.  As  this  conversion

includes  a  significant  conversion  option,  the  exchange  is  treated  as  an  extinguishment  of  debt

and  an  amount  of  $1,071,317  has  been  reclassified  in  the  statement  of  profit  or  loss  from

revaluation  of  conversion  feature  to  extinguishment  of  debt.  In  June  2016,  there  were  the

following changes to the debt structure:

-

A  liability  of  CHF  2,656,083  was  transferred  from  Dr.  Max  Rössler  to  Global  Care  AG

-

A liability of CHF 1.5 million was transferred from Sportiva to Global Care

-

A liability of CHF 1.4 million was transferred from Global Care to Dr. Max Rössler.

In  December  2016,  Dr.  Max  Rössler  subscribed  a  loan  in  the  amount  of  CHF  15.2  million  into

bonds of the new CHF-Bond issue 2016-2020. As this conversion did not represent a significant

change of the conditions between the old debt and the new debt, the exchange was not treated as

an extinguishment of debt.

Receivable from and loans to Josef Mettler

During 2016, the payable to Mr. Mettler in the amount of $70,135 was repaid.

During the third quarter  2016 Josef Mettler  passed away and companies formerly owned by him

are no longer related parties to the Company.

During  the  third  quarter  2016,  $17,775  was  advanced  to  the  late  Josef  Mettler  for  private

expenses.

F-26



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

10.

RELATED PARTY TRANSACTIONS - CONTINUED

Current account Sportiva Participations AG

During  the  period  ended  December  31,  2016  there  were  the  following  movements  on  the  current

account  of  Sportiva  Participations  AG  until  the  death  of  the  late  Josef  Mettler.  At  that  point,

Sportiva Participations AG was no longer a related party.

CHF

USD

Balance December 31, 2015

524,695

528,660

Cash paid to SunVesta

870,000

875,780

Cash received from SunVesta

(2,812,911)

(2,867,777)

Transfers from/(to) other related parties

1,502,026

1,545,020

Interest credited to the account

4,801

4,852

Changes in forreign currency

-

1,976

Transfer to third party upon death of the late Josef Mettler

(88,611)

(88,511)

Balance September 12, 2016

-

-

Commissions paid or payable to related parties

During  the  periods  ended  December  31,  2016,  and  December  31,  2015,  the  Company  paid

commissions  to  4f Capital AG  in  the  amount  of  $0  (up  to  the  death  of  the  late  Josef  Mettler)  and

$253,945,  respectively,  for  services  related  to  financing  of  the  Company.  These  costs  were

capitalized  as  debt  issuance  costs.  4f  Capital  AG  was  a  company owned  and  directed  by the  late

Josef Mettler that received a commission of 1.5% for new funds that the Company receives based

on consulting services rendered by 4f Capital AG.

Service fees paid or payable to Akyinyi Interior and Exterior Decoration

During the year ended December 31, 2016 there were no payments to Akyinyi Interior and Exterior

Decoration  and  during  the  year  ended  December  31,  2015,  $120,000  fees  for  decoration  services

were paid. These costs have been capitalized to property and equipment.

11.

BANK LIABLITIES

The  bank  liabilities  due  at  December  31,  2016  and  2015  in  the  amounts  of  $0  and  $153,375

respectively, represented temporary, secured overdraft facilities, bearing an interest rate of 8.9%.

F-27



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

12.

BONDS

Description

EUR () bond new I

EUR () bond new II

Issuer:

SunVesta Holding AG

SunVesta Holding AG

Type of securities:

Bond in accordance with Swiss

Bond in accordance with

Approval by SunVesta AG

October 31, 2013

May 19, 2014

Volume:

Up to EUR15,000,000

Up to EUR 15,000,000

Units:

EUR10,000

EUR 10,000

Offering period:

11/07/2013 – 03/31/2014

05/01/14 – 06/30/14

Due date:

December 2, 2016

December 02, 2016

Issuance price:

100%

100 %

Issuance day:

December 2, 2013

December 02, 2013

Interest rate:

7.25% p.a.

7.25 % p.a.

Interest due dates:

December 2, 2013

December 02

Applicable law:

Swiss

Swiss

EURO () Bond new I

EURO

EURO

Bond

Bond

(New)

(New)

2016

2015

$

$

Balances January 1

6,871,630

7,355,572

Cash inflows

-

281'754

Cash outflows

(6,736,255)

-

Foreign currency

adjustments

(103,834)

(765'696)

Sub-total

31,541

6,871,630

Discounts (commissions paid to bondholders) and

debt issuance costs

(588,613)

(588,613)

Accumulated amortization of discounts and

debt issuance costs

563,636

432,128

Total accumulated unamortized discounts and

debt issuance costs

(24,977)

(156,485)

Balances December 31 (Carrying value)

6,564

6,715,145

As per date of this report the Company has realized a cumulative amount of EUR 0 related to the

EURO  Bond  I.  This  due  to  the  fact,  that  certain  bondholders  have  not  redeemed  their  principal

amounts up to the date of this report.

F-28



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

12.

BONDS - CONTINUED

EURO () Bond new II

EUR Bond

EUR Bond

new II

new II

2016

2015

$

$

Balances January 1

1,658,300

1,761,258

Cash inflows

-

-

Cash outflows

(159,950)

-

Reclassification from / to Bond

(953,683)

-

Foreign currency adjustments

(32,862)

(102,958)

Sub-total

511,805

1'658,300

Discounts (commissions paid to bondholders) and

debt issuance costs

(174,660)

(174,660)

Accumulated amortization of discounts and

debt issuance costs

140,754

148,932

Total accumulated unamortized discounts and

debt issuance costs

(33,906)

(25,728)

Balances December 31 (Carrying value)

477,899

1,632,572

During  the  year  ended  December  31,  2016,  an  amount  of  $953,683  was  reclassified  to  the  new

parallel  CHF-Bond  III.  Since  the  new  debt  was  not  significantly different  from  the  old  debt,  the

exchange was not treated as an extinguishment of debt.

As per date of this report the Company has realized a cumulative amount of EUR 0 related to the

EURO  Bond  new  II.   This  due  to  the  fact,  that  certain  bondholders  have  not  redeemed  their

principal amounts up to the date of this report.

F-29



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

12.

BONDS - CONTINUED

On September 30, 2015, the Company approved the issuance of two new convertible CHF-

bonds. The major terms and conditions are the following:

Description

Convertible CHF Bond I

Convertible CHF Bond II

Issuer:

SunVesta Holding AG

SunVesta Holding AG

Type of securities:

Senior convertible bonds,

Senior convertible bonds,

convertible into shares of

convertible into shares of

the issuer, in accordance

the issuer, in accordance

with Swiss law

with Swiss law

Approval by SunVesta AG BOD:

September 30, 2015

September 30, 2015

Volume:

Up to CHF 45,000,000

Up to CHF 15,000,000

Denomination:

CHF 5,000

CHF 5,000

Offering period:

October 01, 2015

October 01, 2015

Maturity date:

September 30, 2018

September 30, 2018

Issue price:

100 %

100 %

Redemption price:

100 %

100 %

Issuance date:

October 01, 2015

October 01, 2015

Coupon:

6.00 % p.a.

6.00 % p.a.

Interest due dates:

September 30 of each year,

September 30 of each year,

the first time September 30,

the first time September 30,

2016

2016

Reference price:

CHF 6.50

CHF 6.50

Initial conversion price:

CHF 8.00

CHF 8.00

Applicable law:

Swiss

Swiss

In  October  2015,  Sunvesta  Holding  AG,  a  wholly  owned  subsidiary  of  the  Company  settled

approximately  $27,300,000  worth  of  old  CHF-Bonds  which  had  matured  on  August  31,  2015

and  were  extended  through  September  30,  2015  (i.e.  unpaid).  These  CHF-Bonds  were  rolled

forward/  and  exchanged  for  two  substantially  different  convertible  bonds  of  Sunvesta  Holding

AG.  One  is  a  $45,000,000  Convertible  Bond  and  the  other  a  $15,000,000  Convertible  Bond  as

presented  in  tables  above.  These  new  Convertible  bonds  are  substantially  different  than  the

previous  CHF  bonds  that  matured  in  the  third  quarter  of  2015  and  this  financing  is  therefore

accounted  for  as  an  extinguishment. The  Company has  recorded  a  loss  on  extinguishment  equal

to  the  fair  value  of  the  conversion  feature.  Third  party  issuance  costs  totaling  $3,100,000  at

inception  have  been  capitalized  and  amortized  over  the  life  of  the  bonds  under  the  effective

interest  rate  method.  Finally,  the  change  of  the  fair  value  of  the  liability  related  to  conversion

feature was expensed in the period.

F-30



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

12.

BONDS - CONTINUED

The nominal and carrying amounts have changed as follows:

CHF Bond

CHF Bond

CHF BOND I

2016

2015

$

$

Balances January 1

-

10,999,192

Cash inflows

-

-

Cash outflows

-

(5,913,796)

Foreign currency adjustments

-

159,884

Reclassifications to CHF Bond II

-

-

Reclassifications to Convertible CHF Bond I

-

(2,005,548)

Reclassifications to Convertible CHF Bond II

-

(3,239,732)

Sub-total

-

-

Discounts (commissions paid to bondholders)

-

(670,764)

Accumulated amortization of discounts

-

670,764

Unamortized discounts

-

-

Balances September 30 and December 31

(Carrying value)

-

-

From  the  CHF  Bond  I issue  in  this  roll-forward,  $2,005,548  was  reclassified  to  the  Convertible

CHF  Bond  I  in  the  fourth  quarter  of  2015.  Additionally,  $3,239,732  was  reclassified  to  the

Company's CHF Convertible Bond II.

CHF

CHF Bond II

CHF BOND II

Bond

II

2016

2015

$

$

Balances January 1

-

15,304,228

Cash inflows

-

10,819,209

Cash outflows

-

(3,923,675)

Foreign currency adjustments

-

(51,779)

Reclassifications from CHF Bond I

-

-

Reclassifications to Convertible CHF Bond I

-

(185,127)

Reclassifications to Convertible CHF Bond II

-

(21,962,856)

Sub-total

-

-

Discounts (commissions paid to bondholders)

-

(1,578,825)

Accumulated amortization of discounts

-

1,578,825

Unamortized discounts

-

-

Balances September 30 and December 31 (Carrying

-

-

value)

From  the  CHF  Bond  II  issue  in  this  roll  forward,  $185,127  was  reclassified  to  the  Convertible

CHF  Bond  I  in  the  fourth  quarter  of  2015.  Additionally,  $21,962,856  was  reclassified  to  the

Company's CHF Convertible Bond II.

F-31



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

12.

BONDS - CONTINUED

Convertible CHF BOND I

Convertible

Convertible

CHF Bond I

CHF Bond I

2016

2015

$

$

Balances January 1

2,250,048

-

Cash inflows

1,640,887

100'990

Cash outflows

(103,008)

-

Foreign currency adjustments

(105,058)

(41,617)

Reclassifications to / from Bond (net)

(34,486)

2,190,675

Sub-total

3,648,383

2,250,048

Discounts (commissions paid to bondholders) and debt issuance costs

(136,722)

(136,219)

Accumulated Amortization of discounts and debt issuance costs

117,652

57,896

Reclassification to CHF Bonds

(104,038)

-

Total Accumulated Unamortized discounts and debt issuance costs

(123,108)

(78,323)

Balances December 31 (Carrying value)

3,525,275

2,171,725

Since the new debt was not significantly different from the old debt, the exchange was not treated

as an extinguishment  of debt.  Furthermore,  $599,700 (CHF 600,000) was converted from a loan.

Since the new debt was significantly different  from  the  old  debt,  the  exchange  was  treated  as

an   extinguishment   of   debt   and   an   amount   of  $93,950.87  was  accounted  for  as  a  loss  on

extinguishment of debt.

As per date of this report, the Company has realized a cumulative amount of CHF 3.6 million

($3.5 million) related to the Convertible Bond I.

During  the  year  ended  December  31,  2016,  the  Company  reclassified  $634,186  (CHF  630,000)

from  convertible  CHF  Bond  I  to  convertible  CHF  Bond  II,  together  with  a  corresponding

amount of $104,038 of capitalized debt issuance costs.

F-32



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

12.

BONDS - CONTINUED

Convertible CHF BOND II

Convertible

Convertible

CHF Bond

CHF Bond

II 2016

II 2015

$

$

Balances January 1

26,470,395

-

Cash inflows

7,142,850

1,747,122

Cash outflows

(787,371)

-

Foreign currency adjustments

(1,187,441)

(479,315)

Reclassifications to CHF Bonds

5,131,937

25,202,588

Sub-total

36,770,369

26,470,395

Discounts (commissions paid to bondholders) and debt issuance costs

(4,890,690)

(2,977,065)

Accumulated Amortization of discounts and debt issuance costs

2,586,541

201,093

Reclassification to CHF Bonds

104,038

-

Total Accumulated Unamortized discounts and debt issuance costs

(2,200,111)

(2,775,972)

Balances December 31 (Carrying value)

34,570,259

23,694,423

As  per  date  of  this  report  the  Company has  realized  a  cumulative  amount  of  CHF  33.20  million

($32.7 million) related to the Convertible Bond II.

During  the  year  ended  December  31,  2016,  the  Company  reclassified  $634,186  (CHF  630,000)

from  convertible  CHF  Bond  I  to  convertible  CHF  Bond  II,  together  with  a  corresponding

amount of $104,038 of capitalized debt issuance costs.

In  April  2016,  Global  Care  AG  (a  related  party  controlled  by  Dr.  Max  Rössler,  a  Company

board member and related party) assumed a liability of CHF 4.5 million from Aires International

Investment  Inc.,  (also  a  related  party  controlled  by  Dr.  Rössler).  This  CHF  4.5  million  was

subsequently  subscribed  into  bonds  of  the  CHF  Convertible  Bond  issue.  As  the  conversion

inclues a  significant  conversion option, the exchange is  treated  as  an extinguishment  of debt  and

an amount  of $1,071,317 has  been reclassified  in the statement of profit  or  loss from revaluation

of conversion feature to extinguishment of debt.

Included   in   this   amount   is   approximately   $6.20   million   (CHF   6.32   million),   which,   by

agreement  between  the  Company  and  the  bondholders  and  as  a  deviation  from  the  standard

terms,  was  repayable as of February 28, 2017. As these amounts were due within 12 months from

the reporting date, these funds are classified within current liabilities on the consolidated balance

sheet.

As per date of this report, approximately $1.1 million have been repaid, the remaining amount

was extended under unchanged conditions and are planned to be converted into a new bond issue

during May 2017.

The  Company  initiated  a  new  offering  of  senior  unsecured  CHF  bonds  on  September  21,  2016,

of  up  to  CHF  20,000,000  in  units  of  CHF  5,000  that  bear  interest  at  6.50%  per  annum  payable

each August 15, over a four-year term that matures on August 15, 2020.

F-33



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

12.

BONDS - CONTINUED

Description

Convertible CHF Bond III

Issuer:

SunVesta Holding AG

Type of securities:

Senior bonds

Approval by SunVesta AG BOD:

July 7, 2016

Volume:

Up to CHF 20,000,000

Denomination:

CHF 5,000

Offering period:

November 30, 2016

Maturity date:

August 15, 2020

Issue price:

100 %

Redemption price:

100 %

Issuance date:

September 21, 2016

Coupon:

6.50 % p.a.

Interest due dates:

August 15 of each year, the

first time August 15, 2017

Applicable law:

Swiss

We  had  realized  $15,547,647  as  of  the  year  ended  December  31,  2016.  Included  in  this  amount

is  $15,192,404 (CHF 15.2 million)  that  was converted from loans  from related parties.  Since the

new  debt  was  not  significantly  different  from  the  old  debt  and  did  not  include  a  conversion

feature deemed substantive, the exchange was not treated as an extinguishment of debt.

CHF BOND III

CHF

CHF

original

Bond III

Bond III

2016

2015

$

$

Balances January 1

-

Cash inflows

699,650

Cash outflows

-

Foreign currency adjustments

(290,665)

Reclassifications to / from Bonds

15,192,404

Sub-total

15,601,389

Discounts (commissions paid to bondholders) and debt issuance costs

(106,618)

Accumulated Amortization of discounts and debt issuance costs

3,814

Total Accumulated Unamortized discounts and debt issuance costs

(102,804)

Balances December 31 (Carrying value)

15,498,586

As  per  date  of  this  report  the  Company  has  realized  a  cumulative  amount  of  CHF  16.7  million

($16.5  million)  related  to  the  CHF  Bond  III  original.  Within  the  abovementioned  facility,  the

Company initiated a new parallel offering of senior unsecured CHF bonds on September 21,

2016. An amount of $979,510 was reclassified from EUR Bond II.

F-34



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

12.

BONDS - CONTINUED

Since the new debt was not significantly different from the old debt, the exchange was not treated as

an extinguishment of debt. We had realized a cumulative amount of $886,307 as of the year ended

December 31, 2016.

CHF BOND III

CHF Bond III

CHF Bond III

parallel

2016

2015

$

$

Balances January 1

-

Cash inflows

-

Cash outflows

-

Foreign currency

adjustments

(17,915)

Reclassifications to / from Bonds

979,510

Sub-total

961,595

Discounts (commissions paid to bondholders) and debt issuance costs

(79,289)

Accumulated Amortization of discounts and debt issuance costs

4,001

Total Accumulated Unamortized discounts and debt issuance costs

(75,288)

Balances December 31 (Carrying value)

886,307

As per date of this report the Company has realized a cumulative amount of CHF 0.9 million ($0.9

million) related to the CHF Bond III parallel.

F-35



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

13.

INCOME TAXES

The components of loss before income taxes are as follows:

December 31, 2016

December 31, 2015

Domestic

(1,411,971)

(3,863,810)

Foreign

(9,549,369)

(15,867,262)

Loss before income tax

(10,961,340)

(19,731,072)

Income taxes relating to the Company’s operations are as follows:

December 31, 2016

December 31, 2015

Current income taxes

US Federal, state and local

-

-

Foreign

-

(1,151)

Deferred income taxes

-

-

US Federal, state and local

-

-

Foreign

-

-

Income tax expense/recovery

-

(1,151)

Income taxes at the United States federal statutory rate compared to the Company’s income tax

expenses as reported are as follows:

December 31, 2016

December 31, 2015

Net loss before income tax

(10,961,340)

(19,731,072)

Statutory rate

35%

35%

Expected income tax recovery

(3,836,469)

(6,905,875)

Impact on income tax expense/recovery from

Change in valuation allowance

3,518,283

4,979,054

Different tax rates in foreign jurisdictions

921,953

697,632

Expiration of unused tax loss carry forwards

502,483

-

Permanent differences

(645,752)

1,803,538

Difference due to tax review / previous year

(317,710)

(633,957)

adjustments

Others

(142,789)

58,457

Income tax expense

0

(1,151)

F-36



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

13.

INCOME TAXES - CONTINUED

The Company’s deferred tax assets and liabilities consist of the following:

December 31, 2016

December 31, 2015

Deferred tax assets

Tax loss carry forward

20,370,022

17,321,345

Valuation allowance

(20,370,022)

(17,321,345)

Deferred tax assets/liabilities

-

-

As  of  December  31,  2016  and  2015,  there  were  no  known  uncertain  tax  positions.  We  have  not

identified  any  tax  positions  for  which  it  is  reasonably  possible  that  a  significant  change  will

occur during the next 12 months.

Pursuant  to  ASC  740-10-25-3  Income  Taxes,  an  income  tax  provision  has  not  been  made  for

U.S.  or  additional  foreign  taxes  since  none  of  the  subsidiaries  of  the  Company  are  generating

income  nor  are  expected  to  in  the  foreseeable  future.  The  company expects  that  future  earnings

will  be reinvested,  but could  become  subject to additional tax  if they were  remitted  as dividends

or  were  loaned  to  the  Company,  or  if  the  Company  should  sell  or  dispose  of  its  stock  in  the

foreign  subsidiaries.  It  is  not  practical  to  determine  the  deferred  tax  liability,  if  any,  that  might

be  payable  on  foreign  earnings  because  if  the  Company  were  to  repatriate  these  earnings,  the

Company  believes  there  would  be  various  methods  available  to  it,  each  with  different  U.S.  tax

consequences.

The   Company’s   operating   loss   carry   forward   of   all   jurisdictions   expire   according   to   the

following schedule:

Domestic

Foreign

2017

-

5,129,934

2018

-

9,083,582

2019

-

6,215,044

2020

-

2,610,044

2021

-

7,707,090

2022

-

7,458,249

2023

392,931

14,899,080

Beyond 2023

21,177,817

-

Total operating loss carry forwards

$

21,570,748

53,103,23

F-37



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

13.

INCOME TAXES - CONTINUED

The following tax years remain subject to examination:

United States of America

Switzerland

Costa Rica*

2008

YES

NO

N/A

2009

YES

NO

N/A

2010

YES

NO

N/A

2011

YES

NO

N/A

2012

YES

NO

N/A

2013

YES

NO

NO

2014

YES

NO

NO

2015

YES

YES

NO

2016

YES

YES

YES

* The Costa Rican companies are taxable since 2013.

F-38



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

14.

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.

The projected benefit obligation and the fair value of plan assets have changed as follows:

2016

2015

Projected Benefit Obligations beginning of year

$

463,576

352,704

Service cost - current

60,070

56,927

Interest expense

3,698

5,239

Benefit payments and transfers

(102,949)

(12,091)

Actuarial gains/losses

(42,879)

61,864

Currency translation losses

(10,616)

(1,067)

Projected Benefit Obligations end of year

$

370,901

463,576

Fair Asset Values beginning of year

$

252,896

216,271

Expected returns

7,496

6,448

Contributions paid

39,980

46,348

Benefits paid and transfers

(102,949)

(12,091)

Actuarial gains/losses

(5,497)

(3,426)

Currency translation losses

(5,494)

(654)

Fair Asset Value of assets end of year

$

186,432

252,896

Net liabilities

$

(184,469)

(210,680)

F-39



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

14.

PENSION PLAN - CONTINUED

The following were the primary assumptions:

Future  benefits,  to  the  extent  that  they  are  based  on  compensation,  include  salary  increases,  as

presented  above,  consistent  with  past  experiences  and  estimates  of  future  increases  in  the  Swiss

labor market.

December 31, 2016

December 31, 2015

Assumptions at year end

Discount rate

0.60%

0.80%

Expected rate of return on plan assets

3.00%

3.00%

Future salary increases

1.50%

1.50%

Future pension increases

0.00%

0.00%

Net periodic pension costs have been included in the Company’s results as follows:

December 31, 2016

December 31, 2015

Current service cost

60,070

56,927

Net actuarial (gain) loss recorded

2,499

-

Interest cost

3,698

5,239

Expected return on assets

(7,496)

(6,448)

For  the  years  ended  December  31,  2016  and  December  31,  2015  the  Company  made  cash

contributions of $88,312 and $23,000, respectively, to its defined benefit pension plan.

All  of the  assets are  held under  the collective  contract by the plan’s re-insurance Company and

are  invested  in  a  mix  of  Swiss  and  international  bond  and  equity  securities  within  the  limits

prescribed by the Swiss Pension Law.

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

to the pension plan for the year ending December 31, 2017 are $20,000.

F-40



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

15.

STOCK COMPENSATION

The  Company  has  included  share  based  compensation  under  the  SunVesta  Inc.  Stock  Option

Plan  2013  (“the  Plan”)  as  part  of  the  total  remuneration  in  certain  employment  and  Board  of

Director’s  contracts.  The  Company  is  authorized  to  grant  up  to  50,000,000  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 an amount equal to  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.

Share Grants – Dr. Max Rössler

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

$0.07  an  amount  equal  to  the  share  price  and  fair  value  of  the  shares  on  the  grant  date.  These

were  issued  in  connection  with  his  appointment  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,  an  amount  equal  to  the  share  price  and  fair  value  of  the  shares  on  the  grant  date,  in

connection  with  his  employment  agreement.  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  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.

Since  Josef  Mettler  passed  away  during  the  third  quarter  2016,  3,000,000  common  shares  were

issued to his estate as earned compensation as of July 4, 2016. From after this date, the necessary

accrual up until his passing away has been reversed as of December 31, 2016.

F-41



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

15.

STOCK COMPENSATION - CONTINUED

Share Grants – Mr. José María Figueres

On  March  10,  2014,  the  Company  authorized  the  issuance  of  500,000  common  shares,  valued

at  $0.10,  an  amount  equal  to  the  share  price  and  therefore  the  fair  value  on  grant  date,  and  a

retention  award  of  200,000  common  shares  for  each  fully  completed  year  of  service  to  José

María Figueres in connection with his appointment to the Board of Directors.

Share Grants – Mr. Howard M. Glicken

On  March  10,  2014,  the  Company  authorized  the  issuance  of  500,000  common  shares,  valued

at  $0.10,  an  amount  equal  to  the  share  price  and  therefore  the  fair  value  on  grant  date,  and  a

retention  award  of  200,000  common  shares  for  each  fully completed  year  of  service  to  Howard

Glicken in connection with his appointment to the Board of Directors.

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

the Company’s results:

Stock-based compensation (shares)

December 31, 2016

December 31, 2015

Shares granted

46,800,000 shares

46,800,000 shares

Fair Value respectively market price on grant date

$0.0746

$0.0744

Total maximal expenses (2013-2020)

$3,490,000

$3,450,000

Shares vested

29,800,000 shares

23,900,000 shares

Shares forfeited

12,000,000 shares

23,900,000 shares

Unvested shares

5,000,000 shares

22,900,000 shares

As  of  December  31,  2016,  the  Company expects  to  record  compensation  expense  in  the  future

up to $200,000 as follows:

Stock-based

Year ending December 31,

compensation

2017

2018

2019

2020

2021

(shares)

$

$

$

$

$

Unrecognized

compensation

200,000

0

0

0

0

expense

F-42



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

15.

STOCK COMPENSATION - CONTINUED

Stock Options – Mr. Hans Rigendinger

The  Company  granted  to  Hans   Rigendinger,  in   connection   with  his   employment   contract,

10,000,000  stock  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”) assumes management

responsibilities for Paradisus Papagayo Bay Resort & Luxury Villas. As of grant date, the fair

value was $340,000 and the Company estimated that Meliá would assume responsibility as of

July 1, 2015. As of March 6, 2014, the Company still assessed the probability that this

performance condition would be met at 100%, but the date by which the performance condition

would have to be achieved was postponed to the fourth quarter 2015, as the opening date was

postponed. As of the date of this report, the estimated opening date was postponed to the fourth

quarter 2018, as was the required date of the performance condition. The Company still assessed

the probability that this performance condition will be met at 100%. Hence, the remaining fair

value of the award will be expensed on a straight-line basis over the recalculated expected

remaining vesting period.

F-43



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

15.

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 stock options on July 3,  2013.  Each option entitles Dr.  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  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.  As  of  grant  date  the  fair

value  was  $258,210  and  the  Company  estimated  that  Meliá  would  assume  responsibility  as  of

July  1,   2015.   As   of   March   6,   2014   the   Company   still   assesses   the   probability   that   this

performance  condition  would  be  met  at  100%,  but  the  date  by which  the  performance  condition

would  have  to  be  achieved  was  postponed  to  the  fourth  quarter  2015,  as  the  opening  date  was

postponed.  As  of  the  date  of  this  report,  the  estimated opening date  was  postponed  to  the  fourth

quarter 2018,  as was  the required date of the performance condition. The Company still assessed

the  probability that  this  performance  condition  will  be  met  at  100%.  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  the  late  Josef  Mettler,  in  connection  with  his  employment  contract,

12,000,000  stock  options  on  July  4,  2013.  Each  option  entitled  the  late  Mr.  Mettler  to  buy  one

share  at  a  strike  price  of  $0.05.  These  options  had  three  different  performance  conditions.  For

installment A (3,000,000 options), it was 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 was

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  was  required  that  Meliá  assumes  management

responsibilities  for  Paradisus  Papagayo  Bay  Resort  &  Luxury  Villas.  As  of  grant  date,  the  fair

value  was  $258,000  and  the  Company estimated  that  Meliá  assumes  responsibility as  of  July  1,

2015.  As  of  March  6,  2014  the  Company  still  assessed  the  probability  that  this  performance

condition  would  be  met  at  100%,  but  the  date,  up  to  which  the  performance  condition  would

have to be achieved was postponed to the fourth quarter 2015, as the opening date was postponed.

As of the date of this report, the estimated opening date was postponed to the fourth quarter 2018,

as  was  the  required  date  of  the  performance  condition.  Due  to  his  passing  away  during the  third

quarter  2016,  the  probability  that  any  of  the  above  performance  condition  will  be  met  is  0%.

Therefore,  all  previously  recognized  expenses  in  the  amount  of  $561,064    corresponding  to

options  that  have  not  yet  vested  for  all  installments  above–have  been  reversed  as  of  December

31, 2016.

F-44



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

15.

STOCK COMPENSATION - CONTINUED

Summary

A summary of stock options outstanding as per December 31, 2016 is as follows:

Options outstanding

Number of Options

Weighted average

Weighted average

exercise price

remaining

contractual life

Outstanding January 1, 2016

32,000,000

$ 0.05

7.42 years

Granted

0

Exercised

0

Forfeited or expired

(12,000,000)

Outstanding December 31, 2016

20,000,000

$ 0.05

6.38 years

Exercisable December 31, 2016

0

The  following  table  depicts  the  Company’s  non-vested  options  as  of  December  31,  2016  and

changes during the period:

Non-vested options

Shares under

Weighted average

Options

grant date fair

value

Non-vested at January 1, 2016

32,000,000

$ 0.053

Non-vested-granted

-

-

Vested

-

-

Non-vested, forfeited or cancelled

(12,000,000)

-

Non-vested at December 31, 2016

20,000,000

$ 0.075

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

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

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

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

using  a  calculated  fair  value  based  option-pricing  model.  The  Company  uses  the  Black-Scholes

option- pricing model to calculate the fair value of all of its stock options and its assumptions are

based  on  historical  and  available  market  information.  The  following  assumptions  were  used  to

calculate the compensation expense and the calculated fair value of stock options granted:

Assumption

December 31, 2016

December 31, 2015

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.

F-45



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

15.

STOCK COMPENSATION - CONTINUED

As  of  December  31,  2016,  the  Company  had  unrecognized  compensation  expenses  related  to

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

follows:

Stock-based compensation (options)

Through to December

Through to December

31, 2017

31, 2018

$

$

Unrecognized compensation expense

40,964

30,723

16.

SUMMARY OF STOCK AND OPTION COMPENSATION EXPENSE

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

during the periods ended December 31, 2016 and December 31, 2015:

Summary of share and option based compensation expense

December

31,

December 31, 2015

2016

$

$

Expense related to option grants

(509,912)

134,952

Expense related to share grants

345,000

450,000

Total (recorded under general & administrative expense)

(164,912)

584,952

17.

FUTURE LEASE COMMITMENTS

On  December  1,  2012,  the  Company  entered  into  a  lease  agreement  for  the  premises  for  its

Swiss  office  with  an  unrelated  entity.  The  annual  rental  expense  amounts  to  approximately

$130,000 on a fixed  term expiring on December  31, 2017. The company has  been  invited by the

landlord to discuss a continuation or termination of the rental agreement. The objective is to come

to decisions before the middle of the calendar year 2017.

December 31,

December 31,

Future lease commitments

2016

2015

$

$

2016

0

130,000

2017

130,000

130,000

F-46



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

18.

NOTES PAYABLE

December 31, 2016

December 31, 2015

$

$

Promissory note

1,500,000

2,000,000

Specogna Holding AG

-

60,'743

R. Weimar (private investor)

-

131,169

Total

1,500,000

2,736,912

Promissory Note

As  part  of  the  completion  of  the  purchase  of  SunVesta  Costa  Rica  SA  (former  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 through March 16, 2016.

On April 21,  2016, the Company signed a new agreement,  which stipulated new payment  terms.

The  total  amount  of  $2,000,000  was  then  repayable  in  four  quarterly  installments  of  $500,000

each, starting on August 21, 2016.

On  September  19,  2016,  the  Company  signed  a  new  agreement,  which  stipulated  that  the  first

quarterly  repayment  of  $500,000  was  due  on  November  21,  2016,  only  and  not  on  August  21,

2016.

Loans Specogna Holding AG

On   December   31,   2015,   the   Company   entered   into   a   short   term   loan   agreement   for

approximately  $607,000  with  Specogna  Holding  AG  repayable  on  February  29,  2016,  with  an

interest  payment  of  8  %  per  annum.  The  loan  was  secured  personally  and  jointly  by  Dr.  Max

Rössler, the late Mr. Josef Mettler and Mr. Hans Rigendinger.

During  the  year  ended  December  31,  2016,  this  loan  has  been  converted  into  convertible  bonds.

Since the  new debt  was  significantly different  from  the  old  debt,  the  exchange  was  treated  as  an

extinguishment   of   debt   and   an   amount   of   $93,950.87   was   accounted   for   as   a   loss   on

extinguishment of debt.

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. The loan was repayable in five installments, (four

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

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

repaid  $22,683  during  the  first  quarter  2016,  $34,015  was  transferred  to  another  liability in  the

second  quarter  and  $66,946  was  repaid  in  the  third  quarter  of  2016.  The  agreement  does  not

stipulate any repercussions for late payments.

On October 4, 2016 the entire amount - including interest - was repaid.

F-47



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

19.

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.

Dated April 27,  2016 a  seventh addendum was signed between the Company and Melía with the

following major conditions:

a.

New completion date: September 15, 2018 (subject to force majeure)

b.

Should  the  completion  not occur by September  15, 2018  and should the  parties not  have

agreed  in  writing  an  extension  to  such  date,  after  September  15,  2018,  the  Company

shall pay Melía a daily amount of $2,000 as liquidated damages.

c.

Should  the  completion  not  occur  by  November  15,  2018,  Melía  shall  be  entitled  to

terminate the agreement unless the parties agree in writing to extend the completion date

and the Company shall be obliged to pay Melía $5,000,000 as liquidated damages  solely

to compensate the Manager.

20.

SEGMENT INFORMATION

The chief  operating decision  maker  (“CODM”)  is  the Company’s  CEO.  Neither  the  CODM  nor

the  Company’s  directors  receive  disaggregated  financial  information  about  the  locations  in

which  project  development  is  occurring.  Therefore,  the  Company  considers  that  it  has  only  one

reporting segment.

The following table presents the Company’s tangible fixed assets by geographic region:

December 31, 2016

December 31, 2015

Location of tangible assets

Switzerland

$

37,286

76,573

Costa Rica

66,179,372

61,194,851

Total

$

66,216,658

61,271,424

F-48



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

21.

EARNINGS PER SHARE

Basic earnings per share are the result of dividing the Company’s net income (or net loss) by the

weighted  average  number  of  shares  outstanding  for  the  contemplated  period.  Diluted  earnings

per  share are  calculated applying the  treasury stock method. When there is  a net income  dilutive

effect all stock-based compensation awards or participating financial instruments are considered.

When the Company posts a loss, basic loss per share equals diluted loss per share. The following

table depicts how the denominator for the calculation of basic and diluted earnings per share was

determined under the treasury stock method.

Earnings per share

Year Ended

Year Ended

December 31, 2016

December 31, 2015

Company posted

Net loss

Net loss

Basic weighted average shares outstanding

100,245,439

94,338,589

Dilutive effect of common stock equivalents

None

None

Dilutive weighted average shares outstanding

100,245,439

94,338,589

The   following   table   shows   the  number  of   stock   equivalents   that   were   excluded   from   the

computation  of  diluted  earnings  per  share  for  the  respective  period  because  the  effect  would

have been anti-dilutive.

Earnings per share

Year Ended

Year Ended

December 31, 2016

December 31, 2015

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

0

12,000,000

Total Options

20,000,000

32,000,000

Shares to Hans Rigendinger

5,000,000

7,500,000

(retention bonus – non vested)

Shares to Josef Mettler

0

15,000,000

(retention award – non vested)

Shares to Howard Glicken and José Maria Figueres

400,000

400,000

(retention award – non vested)

Shares associated with Convertible CHF Bonds

4,358,840

3,558,068

Total Shares

9,758,840

26,458,068

Total Options and Shares

29,758,840

58,458,068

Options related to Convertible CHF bonds: Each bond in the principal amount of CHF 5,000 can

be  converted  on  any  business  day  during  the  conversion  period  into  625  common  shares  of

SunVesta Holding AG at a conversion price equal to CHF 8.

F-49



SUNVESTA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

22.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses according consolidated statement of comprehensive loss

include:

Twelve-month

Twelve-month

period ended

period ended

December 31,

December 31,

2016

2015

$

$

Rental & related expenses

188,094

194,982

Audit

291,218

267'087

Consulting

2,519,305

1,379,976

Marketing, Investor & public relations

92,362

127,458

Travel expenses

332,781

561,803

Personnel costs including social security costs

and share based remuneration

1,017,705

2,636,788

Expense for penalty on management agreement

-

-

Various other operating expenditures

637,731

817,977

Total according statement of

comprehensive loss

$

5,079,198

5,986,072

23.

SUBSEQUENT EVENTS

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

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

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

statements, except for the below:

-      Since period end an amount of approximately $6.20  million (CHF 6.32 million) relating to

the  Convertible  CHF  Bonds  was  repayable  as  of  February  28,  2017.  As  per  date  of  this

report,  approximately  $1.1  million  has  been  repaid;  the  remaining  amount  was  extended

under  unchanged  conditions  and  is  expected  to  be  converted  into  a  new  bond  issue  during

May 2017.

-      Since  period  end  the  Company  has  noticed  cancellation  of  the  Meridian  Agreement  in

connection  with  the  intended  purchase  of  the  additional  concession  properties  and  is

seeking reimbursement for certain amounts paid as deposits.

 

-          Based on the terms of the Settlement Agreement with Concreta S.R.L., the previous interior design firm engaged for the Paradisus Papagayo Bay Resort & Luxury Villas, the Company will pay $600,000 to Concreta S.R.L. on March 20th, 2017, in full and final settlement of outstanding issues.

F-50



ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A.

CONTROLS AND PROCEDURES

Management's Annual Report on Internal Control over Financial Reporting

Evaluation of Disclosure Controls and Procedures

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

management, with the participation of the Chief Executive Officer and Chief Financial Officer, of the

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

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

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

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

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

the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required

disclosures.

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

this report, that the Company’s disclosure controls and procedures were ineffective in recording,

processing, summarizing, and reporting information required to be disclosed, within the time periods

specified in the Commission’s rules and forms, and such information was not accumulated and

communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to

allow timely decisions regarding required disclosures.

Management’s Report on Internal Control over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal

control over financial reporting. The Company’s internal control over financial reporting is a process,

under the supervision of the Chief Executive Officer and the Chief Financial Officer, designed to provide

reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s

financial statements for external purposes in accordance with United States generally accepted accounting

principles (GAAP). Internal control over financial reporting includes those policies and procedures  that:

  pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the

transactions and dispositions of the Company’s assets

  provide reasonable assurance that transactions are recorded as necessary to permit preparation of

the financial statements in accordance with generally accepted accounting principles, and that

receipts and expenditures are being made only in accordance with authorizations of management

and the Board of Directors

  provide reasonable assurance regarding prevention or timely detection of unauthorized

acquisition, use, or disposition of the Company’s assets that could have a material effect on the

financial statements

Due to its inherent limitations, internal control over financial reporting may not prevent or detect

misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the

risk that controls may become inadequate because of changes in conditions or that the degree of

compliance with the policies or procedures may deteriorate.

22



The Company’s management conducted an assessment of the effectiveness of our internal control over

financial reporting as of December 31, 2016, based on criteria established in Internal Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (COSO) of the

Treadway Commission, which assessment identified material weaknesses in internal control over

financial reporting.

A material weakness is a control deficiency, or a combination of deficiencies in internal control over

financial reporting that creates a reasonable possibility that a material misstatement in annual or interim

financial statements will not be prevented or detected on a timely basis. Since the assessment of the

effectiveness of our internal control over financial reporting did identify material weaknesses,

management considers its internal control over financial reporting to be ineffective.

The matters involving internal control over financial reporting that our management considered to be

material weaknesses were:

Lack of Appropriate Independent Oversight. The Board of Directors has not provided an appropriate

level of oversight over the Company’s consolidated financial reporting and procedures for internal

control, which oversight might include challenging management’s accounting for and reporting of

transactions. Accordingly, we determined that this control deficiency as of December 31, 2016,

constituted a material weakness.

Failure to Segregate Duties. The Board of Directors has not maintained any segregation of duties within

the Company’s management, instead relying on a single individual to fill the role of chief executive

officer, chief financial officer and principal accounting officer, responsible for a broad range of duties

that cannot be properly reconciled with a singular management resource.  Accordingly, we determined

that this control deficiency as of December 31, 2016, constituted a material weakness.

As a result of the material weaknesses in internal control over financial reporting described above, the

Company’s management has concluded that as of December 31, 2016, that the Company’s internal

control over financial reporting was not effective based on the criteria in Internal Control – Integrated

Framework (2013) issued by the COSO. The Company intends to remedy its material weaknesses by:

  Appointing an independent director to complete the composition of the audit committee to

  ceonmgapgriinsge aonnliyndniovnid-muaalntaogeseriravledaisrecchtoierfs ftionaonvceirasleeofmficaenragaenmd epnritncipal accounting officer to

segregate the duties of chief executive officer and chief financial officer

Management has initiated a search for an individual that would serve as an independent member of the

board of directors. The intention being that once appointed, the new independent director would also

serve on the Company’s audit committee to remedy concerns over the apparent lack of appropriate

oversight over financial reporting and procedures for internal control.

The Company also expects to segregate the duties of chief executive officer and chief financial officer

by appointing an additional individual to management that would serve as chief financial officer and

principal accounting officer alongside our chief executive officer to bolster internal controls.

This annual report does not include an attestation report of our independent registered public accounting

firm regarding internal control over financial reporting. We were not required to have, nor have we,

engaged our independent registered public accounting firm to perform an audit of internal control over

financial reporting pursuant to the rules of the Commission that permit us to provide only management’s

report in this annual report.

23



Changes in Internal Controls over Financial Reporting

During  the  quarter  ended  December  31,  2016,  there  has  been  no  change  in  internal  control  over

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

control over financial reporting.

9B.

OTHER INFORMATION

None.

24



PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Officers and Directors

The following table sets forth the name, age and position of the director and executive officers of the

Company:

Name

Age

Year

Positions Held

Appointed

Hans Rigendinger

71

2013

CEO, CFO, COO and Director

Dr. Max Rӧssler

77

2013

Director

José Maria

Figueres

63

2014

Director

Howard Glicken

74

2014

Director

Hans Rigendinger was first appointed as Chief Operating Officer and as a director on January 1, 2013.

He assumed the responsibilities of Chief Executive Officer, Chief Financial Officer and Principal

Accounting Officer on an interim basis at the bequest of the Company’s Board of Directors on August

18, 2016, on the death of its former chief executive officer. Mr. Rigendinger was further confirmed by

the Board of Directors as Chief Executive Officer, Chief Financial Officer and Principal Accounting

Officer on December 6, 2016.

Mr. Rigendinger also serves as an officer and director of SunVesta AG.

Business Experience

Since early 1972 to present, Mr. Rigendinger has led his own engineering firm in the planning and

implementation of a variety of commercial projects employing a staff of up to 40 employees. Over this

time span Mr. Rigendinger and his company have been responsible for the planning and implementation

of over 300 bridge structures, approximately 500 buildings and a few dozen large industrial plants. Since

1995, Mr. Rigendinger has been involved in several real estate projects that have included commercial,

residential and tourist properties. He has also spent the last 15 years supporting the development and

expansion of an industrial waste glass recycling company.

Officer and Director Responsibilities and Qualifications

Mr. Rigendinger’s knowledge, experience and solid know-how in the field of civil engineering and real

estate is extremely valuable to the Company’s operations as it moves forward with the development of

the Paradisus Papagayo Bay Resort & Luxury Villas.

Mr. Rigendinger earned a Master’s Degree in Civil Engineering, with an emphasis on supporting

structures and foundations (Civil and Structural Engineering) at the Swiss Federal Institute of

Technology in 1969.

Other Public Company Directorships in the Last Five Years

None.

Dr. Max Rӧssler was appointed as a director of the Company on July 3,

25



2013. Dr. Rӧssler also serves as a director of SunVesta AG.

Business Experience

Dr. Rӧssler has lectured and been involved in research as a professor at ETH in the fields of applied

mathematics and operations research. During his tenure with ETH, Dr. Rӧssler began to apply

mathematical methods to problems related to financial investments. Dr. Rӧssler joined Credit Suisse in

1978 as head analyst of the department for fixed income products. Since 1997, Dr. Rӧssler has worked

with SUVA (Swiss National Accident Insurance Fund) as a manager of a portion of their fixed-income

investments and currently holds advisory board mandates for two Swiss private banks.

Officer and Director Responsibilities and Qualifications

Dr. Rössler’s knowledge, and experience with fixed income investments is extremely valuable to the

Company’s Board of Directors as it moves forward with financing its business model.

Dr. Rössler studied mathematics at the Swiss Federal Institute of Technology Zurich (ETH) and earned

his doctorate at Harvard University.

Other Public Company Directorships in the Last Five Years

None.

José Maria Figueres was appointed as a director of the Company on March 10, 2014.

Business Experience

Following his graduate studies at Harvard, Mr. Figueres was elected as the President of Costa Rica in

1994, a position in which he served for four years. When his service as President came to an end, Mr.

Figueres was appointed to the Board of Directors of Terremark Worldwide, Inc., a global IT company

that provided industry managed services such as cloud computing, collocation and web hosting

solutions for enterprise IT infrastructures. A year after joining Terremark, Mr. Figueres joined the

World Economic Forum in Davos, Switzerland. Five  years later, Mr. Figueres undertook a one year

assignment as managing director of the Talal Abu-Ghazaleh Organization, a global consulting group

headquartered in Amman, Jordon. Between 2006 and 2009, Mr. Figueres served on the International

Advisory Board of Abraaj Capital, a private equity firm with over $6 billion in assets under

management. He then went on to join the Advisory Board of Grupo Arcano, a financial services firm

based in Madrid, Spain, a leading boutique for investment banking and asset management services. Mr.

Figueres joined IJ Partners in Geneva, Switzerland, as a managing partner in 2010. Since 2010, Mr.

Figueres has served as the Chairman of the Carbon War Room, an independent non-profit organization

focused on the global transition to a low carbon economy. Mr. Figueres was appointed President of the

Carbon War Room in 2012.

Officer and Director Responsibilities and Qualifications

Mr. Figueres’s knowledge, experience and business acumen on a global level in addition to his direct

connection to Costa Rica is extremely valuable to the Company’s Board of Directors as it moves

forward with its hotel development in Costa Rica.

26



Mr. Figueres completed his undergraduate studies at the United States Military Academy (West Point)

and completed his Master’s Degree in Public Administration at the John F. Kennedy School of

Government at Harvard University.

Other Public Company Directorships in the Last Five Years

None.

Howard H. Glicken was appointed as a director of the Company on March 10, 2014.

Business Experience

Between 1972 and 1981 Mr. Glicken served as the Chief Executive Officer and Chairman of the Board

of MGI Industries, which company controlled the design and manufacture of extrusion tools for the

metals industry in Latin America. Mr. Glicken joined Jillian’s Entertainment Corporation in 1983 to

serve as its Chairman and Chief Executive Officer until 1992. Over this period Jillian’s became one of

the largest United States purchasers of Latin American gold ore. Following his tenure at Jillian’s, Mr.

Glicken was appointed Chairman of the Commonwealth Group, a Washington, D.C. public policy and

consulting firm with extensive business activities in Latin America. Mr. Glicken worked with the

Commonwealth Group until 1996 before forming the America’s Group. He currently serves as Chairman

and Chief Executive Officer of the America’s Group, a Miami based consulting/merchant banking firm

focused solely on Latin America, Mexico and the Caribbean.

Officer and Director Responsibilities and Qualifications

Mr. Glicken years of business and political experience in Latin America is extremely valuable to the

Company’s Board of Directors as it seeks to garner the attention of those in the region that might assist

in the development of its hotel project in Costa Rica.

Mr. Glicken attended the University of Florida, the American Banking Institute and the Harvard

University Advanced Institute on Negotiation.

Other Public Company Directorships in the Last Five Years

None.

Family Relationships

There are no family relationships between or among the directors or executive officers.

Involvement in Certain Legal Proceedings

During the past ten years there are no events that occurred related to an involvement in legal proceedings

that are material to an evaluation of the ability or integrity of the Company’s directors, or persons

nominated to become directors or executive officers.

Term of Office

Our directors were appointed for a one (1) year term to hold office until the next annual meeting of our

shareholders or until removed from office in accordance with our bylaws.

27



Our officers were appointed by our Board of Directors and will hold office until the expiration of their

employment contracts or removal by the board.

No other persons are expected to make any significant contributions to the Company’s executive

decisions who are not executive officers or directors of the Company.

Compliance with Section 16(A) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires officers and directors and persons who

own more than ten percent of a registered class of our equity securities to file reports of ownership and

changes in their ownership with the Commission, and forward copies of such filings to us. Based solely

upon a review of Forms 3, 4 and 5 furnished to us, we are unaware of any persons who, during the

period ended December 31, 2016, failed to file reports required by Section 16(a) of the Exchange Act.

Code of Ethics

We have adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-K of the

Securities Exchange Act of 1934 that applies to directors and senior officers, such as the principal

executive officer, principal financial officer, controller, and persons performing similar functions. The

Company has incorporated a copy of its Code of Ethics as Exhibit 14 to this Form 10-K. Further, our

Code of Ethics is available in print, at no charge, to any security holder who requests such information

by contacting us.

Board of Directors Committees

The Board of Directors has formed an audit committee and adopted an audit charter. The audit

committee is comprised of two independent directors and is presently seeking to identify a third

independent director to complete its composition in order to fulfill its mandate.

An audit committee typically reviews, acts on and reports to the Board of Directors with respect to

various auditing and accounting matters, including the recommendations and performance of

independent auditors, the scope of the annual audits, fees paid to the independent auditors, and internal

accounting and financial control policies and procedures.

The Board of Directors has not established a compensation committee, nominating committee or

compliance and ethics committee.

Director Compensation

Directors are reimbursed for out-of-pocket costs incurred in attending meetings and compensated for

services as directors of the Company in the form of stock options or stock awards. Cash compensation is

also paid in certain instances to directors of the Company’s subsidiary companies, including to our Chief

Executive Officer who also serves as a director of SunVesta AG.

The Company has compensated directors in the past and may adopt additional provisions for

compensating directors for their services in the future.

28



ITEM 11.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Chief Executive officer, Chief Financial Officer and Principal Accounting Officer – Hans Rigendinger

Our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer has an

employment agreement dated December 31, 2012, with the Company and an employment agreement

dated January 17, 2013, with SunVesta AG, pursuant to which he receives a base salary and is entitled to

receive a bonus for his service to the Company in addition to certain benefits including per diem

allowances, car allowances, housing allowances, and representation allowances. The employment

agreement with the Company also provides for a signing bonus payable in Company stock, stock options

and an annual retention award. The initial term of the employment agreement expired on December 31,

2015, and has been renewed for two successive one year terms. The compensation package is deemed

appropriate and was approved by the Company’s Board of Directors.

For the year ended December 31, 2016, $296,000 was paid to or accrued for our Chief Executive Officer,

of which $240,000 was salary, $36,000 was a car allowance and $20,000 was board of directors’ fees for

services provided to both SunVesta AG and SunVesta Projects & Management AG.

For  the  year  ended  December  31,  2015,  $296,000  was  paid  to  or  accrued  for  our  Chief  Executive

Officer,  of  which  $240,000  was  salary,  $36,000  was  a  car  allowance  and  $20,000  was  board  of

directors’ fees for service to both SunVesta AG and SunVesta Projects & Management AG.

Former Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer Josef Mettler

Our former chief executive officer had an employment agreement dated July 4, 2013, that included an

addendum dated March 6, 2015, with the Company and an employment agreement dated January 5, 2011,

with SunVesta AG. His employment agreements entitled him to base salaries, bonuses for his service in

addition to certain benefits including per diem allowances, car allowances, housing allowances, and

representation allowances. The employment agreement with the Company also provided for a signing

bonus payable in cash and Company stock, stock options and an annual retention award payable in stock.

The Company employment agreement expired on the death of Mr. Mettler.

For the year ended December 31, 2016, $491,625 was paid or accrued to our former chief executive

officer of which $399,000 was salary and $92,625 was other compensation of which $14,250 was out of

pocket expenses, $38,000 was car allowances, $28,500 was a living away allowance, $0 and $11,875 was

board of directors fees for services provided to both SunVesta AG and SunVesta Projects & Management

AG.

For the year ended December 31, 2015, $1,697,445 was paid or accrued to our chief executive officer of

which $504,000 was salary, $822,500 was a bonus, and $370,945 was other compensation of

which$18,000 was out of pocket expenses, $48,000 was car allowances, $36,000 was a living away

allowance, $253,945 were commissions and $15,000 was board of directors fees for services provided to

both SunVesta AG and SunVesta Projects & Management AG.

Summary

The following table provides summary information for the years ended December 31, 2015 and 2014

concerning cash and non-cash compensation paid or accrued by the Company to or on behalf of (i) the

chief executive officer and (ii) any other employee to receive compensation in excess of $100,000:

29



Executive Summary Compensation Table

Name  and

Year

Salary

Bonus

Stock

Option

Non-Equity

Change in

All Other

Total

Principal

($)

($)

Awards

Awards

Incentive Plan

Pension Value

Compensation

($)

Position

($)

($)(1)

Compensation

and

($)

($)

Nonqualified

Deferred

Compensation

($)

Josef Mettler

Former

2016

399,000

-

-

-

-

-

92,625

491,625

CEO, CFO,

2015

504,000

822,500

-

-

-

-

370,945      1,697,445

PAO

Hans

Rigendinger

2016

240,000

-

-

-

-

-

56,000

296,000

CEO, CFO,

2015

240,000

-

-

-

-

-

56,000

296,000

COO

(1)  See Note 14  to the audited financial statements included in this Form 10-K for the year  ended December 31, 2016, for

further information  concerning the Company’s reliance on the Black Sholes option-pricing model to calculate the fair

value of stock options

Outstanding Equity Awards

The following table provides summary information for the period ended December 31, 2016, concerning

unexercised options, stock that has not vested, and equity incentive plan awards by the Company to or on

behalf of (i) the chief executive officer and chief financial officer and (ii) the three most highly

compensated individuals whose total compensation exceeds $100,000:

Outstanding Equity Awards at Fiscal Year-End

Option awards

Stock awards

Equity

incentive

plan

Equity

awards:

incentive

Number

Equity

market or

plan

of

incentive plan    payout

awards:

shares

Market

awards:

value of

Number of

number of

or units

value of

number of

unearned

securities

Number of

securities

of stock      shares or

unearned

shares,

underlying

securities

underlying

that

units of

shares, units or  units or

unexercised     underlying

unexercised     Option

have

stock that      other rights

other rights

options

unexercised

unearned

exercise     Option

not

have not

that have not      that have

(#)

options

options

price

expiration    vested

vested(3)

vested

not vested

Name

exercisable      (#) exercisable

(#)

($)

date

(#)

($)

(#)

($)

Hans

Rigendinger

0     10,000,000(1)

-

0.05   December

31, 2022

-

0.14     10,000,000(2)

-

(1) Mr. Rigendinger’s stock options vest on the completion of certain business development milestones as follows:

5,000,000 stock options on that date on which the Company or related entity completes a financing sufficient to complete

the Papagayo Bay Resort & Luxury Villas; and 5,000,000 stock options on that date on which Meliá assumes

management responsibility for the Papagayo Bay Resort & Luxury Villas.

(2) Mr. Rigendinger’s equity incentive shares are characterized as a retention award of which 2,500,000 shares are earned

on each anniversary of his term of employment over an initial term of three years that will automatically renew for two

successive one year terms to a maximum of 12,500,000 shares subject to earlier termination.

(3) The per share value at December 31, 2016, was $0.14.

30



2013 SunVesta Stock Option Plan

The Board of Directors adopted the 2013 SunVesta Stock Option Plan (“Plan”) on January 1, 2013, which

provides for the granting and issuance of up to 50,000,000 million shares of the Company’s common

stock. The Company granted 32,000,000 stock options from the Plan at a $0.05 exercise price per share

for ten years of which stock options had expired as of December 31, 2016, subsequent to the death of the

Company’s former chief executive officer. The Stock Option Plan has therefore 30,000,000 options

available for future grant.

Our Board of Directors administers the Plan, however, it may delegate this authority to a committee

formed to perform the administrative function of the Plan. The Board of Directors or a committee of the

Board has the authority to construe and interpret provisions of the Plan as well as to determine the terms

of an award. Our Board of Directors may amend or modify the Plan at any time. However, no amendment

or modification shall adversely affect the rights and obligations with respect to outstanding awards unless

the holders consent to any amendment or modification.

We have no agreement that provides for payments to our Chief Executive Officer at, following, or in

connection with his resignation or retirement except any accrued obligations and the continuation of

health insurance or pension benefits. However, our Chief Executive Officer’s employment agreements do

provide for a severance payment in the event of a change of control, or a change in our officer’s

responsibilities within the Company, either before or after a change in control, and his resignation for

what is defined in his employment agreement as “good reason”

We do maintain a pension plan covering all employees in Switzerland. Our model allocates pension costs

over the service period of employees eligible for the plan.

The following table provides summary information for the year ended December 31, 2016, concerning

cash and non-cash compensation paid or accrued by the Company to or on behalf of its non-executive

directors.

Director Summary Compensation Table

Name

Fees

Stock

Option

Non-equity

Nonqualified

All other

Total

earned or

awards

Awards

incentive plan

deferred

compensation

($)

paid in

($)

($)

compensation

compensation

($)

cash

($)

($)

($)

Dr. Max Rӧssler

-

-

-

-

-

-

-

Jose Maria Figueres

-      20,000

-

-

-

-

20,000

Howard H. Glicken

-      20,000

-

-

-

-

20,000

31



ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information concerning the ownership of the Company’s

101,841,603 shares of common stock issued and outstanding as of March 17, 2017 with respect to: (i) all

directors; (ii) each person known by us to be the beneficial owner of more than five percent of our

common stock; and (iii) our directors and executive officers as a group.

Names and Addresses of Managers and

Beneficial Owners

Title of Class

Number of Shares

Note

Percent of Class

Hans Rigendinger

CEO, CFO, PAO and Director

97 Seestrasse, CH-8942

Common

35,078,860

1

34.44%

Oberrieden, Switzerland

Dr. Max Rössler

Director

97 Seestrasse, CH-8942

Common

11,000,000

2

10.80%

Oberrieden, Switzerland

José Maria Figueres

Director

Apartado Postal 1957-1000

Common

900,000

3

0.88%

San Jose, Costa Rica

Howard M. Glicken

Director

441 Palermo Avenue

Common

900,000

4

0.88%

Carol Gables, Florida 33134

Officer and directors (4) as a group

Common

47,878,860

47.01%

Josef Mettler (deceased)

Muhlebachstrasse 20

Common

31,770,446

5

31.20%

6341 Baar, Switzerland

(1) Mr. Rigendinger also holds 10,000,000 unvested stock options granted pursuant to the 2013 SunVesta Stock Option Plan, to

purchase additional shares of the Company’s common stock at an exercise price of $0.05, subject to vesting based on the

achievement of certain milestones tied to the development of the Paradisus Papagayo Bay Resort & Luxury Villas and the right

to earn up to an additional 5,000,000 shares as a retention award of 2,500,000 shares issued on  each anniversary of his

employment subject to earlier termination.

(2) Dr. Rӧssler also holds 10,000,000 unvested stock options granted pursuant to the 2013 SunVesta Stock Option Plan, to

purchase additional shares of the Company’s common stock at an exercise price of $0.05, subject to vesting based on the

achievement of certain milestones tied to the development of the Paradisus Papagayo Bay Resort & Luxury Villas.

(3) José Maria Figueres can earn an additional 200,000 shares on each anniversary of service as a director.

(4)  Howard M. Glicken can earn an additional 200,000 shares on each anniversary of service as a director.

(5)  Common stock attributed to Mr. Mettler’s estate includes 16,264,334 shares held by Zypam Ltd., 175,000 shares held by

Viridium Business Ltd, 405,000 shares held by Kirga Real Estate & Finance (Int.) Ltd,, 77,778 shares held by

HTVAktiengesllschaft, and  75,000 shares held by Chocura Real Estate Inc., all of which are relatedcompanies.

32



ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

AND DIRECTOR INDEPENDENCE

Neither our directors or executive officers, nor any proposed nominee for election as a director, nor any

person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights

attached to all of our outstanding shares, nor any members of the immediate family (including spouse,

parents, children, siblings, and inlaws) of any of the foregoing persons has any material interest, direct

or indirect, in any transaction since the beginning of our last fiscal year or in any presently proposed

transaction which, in either case, has or will materially affect us except as follows:

Aires International Investments, Inc.

Over the last fiscal year, the Company increased its loan obligation to Aires International Investments,

Inc., a company owned by Dr. Rӧssler (a director of the Company), to $51,473,793 from $47,198,362 as

of December 31, 2015.

Dr. Max Rössler

Dr. Max Rössler provided financing of approximately $16,700,000 for a total loan balance of

approximately $17.1 million, of which approximately $15.2 million were subscribed into convertible

CHF Bonds during the year ended December 31, 2016.

Global Care AG

During 2016, Global Care AG, a company owned by Dr. Rössler, assumed a liability in the amount of

$4,635,352 (CHF 4,500,000) from Aires that was subsequently converted into convertible CHF Bonds in

a modification of the debt.

Sportiva participations ag

During  the  period  ended  December  31,  2016  there  were  the  following  movements  on  the  current  account

of Sportiva  participations ag until the  death  of  Josef Mettler.  At  that point, Sportiva participations  ag  was

no longer a related party.

CHF

USD

Balance December 31, 2015

524,695

528,660

Cash paid to SunVesta

870,000

875,780

Cash received from SunVesta

(2,812,911)      (2,867,777)

Transfers from/(to) other related parties

1,502,026

1,545,020

Interest credited to the account

4,801

4,852

Changes in forreign currency

-

1,976

Transfer to third party upon death of Josef Mettler

(88,611)

(88,511)

Balance September 12, 2016

-

-

Director Independence

The Company is quoted on the Over the Counter inter-dealer quotation system, which does not have

director independence requirements. However, for purposes of determining director independence, we

have applied the definitions set out in NASDAQ Rule 4200(a)(15) which states that a director is not

considered to be independent if he or she is also an executive officer or employee of the corporation.

Accordingly, as of December 31, 2016, we consider two of our directors independent, neither of whom is

employed by the Company.

33



ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fees and Services

BDO AG (“BDO”) has provided audits of our annual financial statements and a review of our quarterly

financial statements for the periods ended December 31, 2016 and December 31, 2015 respectively. The

following is an aggregate of fees billed during each of the last fiscal years for professional services

rendered by each of our principal accountants.

BDO Fees and Services

2016

Audit fees

$

288,2101)

Audit-related fees

-

Tax fees - preparation and filing of three major tax-related forms and tax

planning.

-

All other fees - other services provided by our principal accountants.

-

Total fees paid or accrued to our principal accountants

$

288,210

BDO Fees and Services

2015

Audit fees

$

255,114

Audit-related fees

-

Tax fees - preparation and filing of three major tax-related forms and tax

planning.

-

All other fees - other services provided by our principal accountants.

-

Total fees paid or accrued to our principal accountants

$

255,114

1) This amount includes the audit fees for the standalone consolidated financial statements of the

SunVesta Holding AG subgroup and the audit of the standalone Costa Rica subgroup.

Audit Committee Pre-Approval

We do have a standing audit committee, however all services provided to us by BDO, as detailed above,

were pre-approved by our Board of Directors. BDO performed all work with their permanent full-time

employees.

34



PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)   Consolidated Financial Statements

The following documents are filed under “Item 8. Financial Statements and Supplementary Data,” pages

F-1 through F-50, and are included as part of this Form 10-K:

Financial Statements of the Company for the years ended December 31, 2016 and 2015:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated  Statements  of  Comprehensive  Loss

Consolidated Statements of Stockholders’ Deficit

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

(b) Exhibits

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

page 37 of this Form 10-K, and are incorporated herein by this reference.

(c) Financial Statement Schedules

We are not filing any financial statement schedules as part of this Form 10-K because such schedules are

either not applicable or the required information is included in the financial statements or notes thereto.

ITEM 16.

FORM 10-K SUMMARY

None.

35



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant

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

SUNVESTA, INC.

Date

/s/ Hans Rigendinger

March 17, 2017

Hans Rigendinger

Chief Executive Officer, Chief Financial Officer

and Principal Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below

by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Hans Rigendinger

Director

March 17, 2017

Hans Rigendinger

/s/ Dr. Max Rössler

Director

March 17, 2017

Dr. Max Rössler

/s/ Howard H. Glicken

Director

March 17, 2017

Howard H. Glicken

37



INDEX TO EXHIBITS

Exhibit

Description

3.1.1   *

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

December 31, 1999).

3.1.2   *

Amended Articles of Incorporation (incorporated by reference from the Form 10-KSB filedwith 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 withthe

Commission on September 27, 2007).

3.2.1*

Bylaws (incorporated by reference from the Form 10-SB filed with the Commission on December31, 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 theCompany 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 InvestmentsLimitada.

10.3   *

Debt Settlement Agreement dated March 1, 2010, between the Companyand 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, Mr. Mettler, Mr. Rigendinger and  Dr.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 andHans 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 InternationalInvestments, 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

(incorporated by reference to the Form 10-Q filed with the Commission on May 20,2014).

10.12   *

Assignment of Debt Agreement dated December 31, 2014, between the Company, SunVesta AG and Aires

International Investments, Inc. (incorporated by reference to the Form 10-Q filed with the Commission on

August 19, 2015).

10.13   *

Addendum to Employment Agreement dated March 6, 2015, between the Company andJosef Mettler

(incorporated by reference to the Form 10-Q filed with the Commission on May 5, 2015).

14*

Code of Business Conduct and Ethics adopted on July 16, 2015 (incorporated by reference to theForm 10-Q

filed with the Commission on August 19, 2015).

21

Subsidiaries of the Company

31

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.

32

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-Qfiled 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” andnot “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.

38



Exhibit 21

SUBSIDIARIES OF SUNVESTA, INC.

SunVesta

Inc.

USA

SunVesta

Holding AG

Switzerland

SunVesta

SunVesta

Projects & Management AG

Holding España SL

Switzerland

Spain

SunVesta

Costa Rica SA

Costa Rica

1



Exhibit 31

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS

AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

OF 2002

I, Hans Rigendinger, certify that:

1. I have reviewed this report on Form 10-K of SunVesta, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to

state a material fact necessary to make the statements made, in light of the circumstances under which

such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this

report, fairly present in all material respects the financial condition, results of operations and cash flows

of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining

disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and

internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-

15(f) for the registrant and have:

a)    Designed such disclosure controls and procedures, or caused such disclosure controls and

procedures to be designed under our supervision, to ensure that material information relating

to the registrant, including its consolidated subsidiaries, is made known to us by others within

those entities, particularly during the period in which this report is being prepared;

b)    Designed such internal control over financial reporting, or caused such internal control

over financial reporting to be designed under our supervision, to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of financial

statements for external purposes in accordance with generally accepted accounting

principles;

c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented

in this report our conclusions about the effectiveness of the disclosure controls and procedures,

as of the end of the period covered by this report based on such evaluation; and

d)    Disclosed in this report any change in the registrant’s internal control over financial reporting

that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal

quarter in the case of an annual report) that has materially affected, or is reasonably likely to

materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation

of internal control over financial reporting, to the registrant's auditors and the audit committee of the

registrant's Board of Directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal

controls over financial reporting which are reasonably likely to adversely affect the registrant's

ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who

have a significant role in the registrant's internal controls over financial reporting.

Date: March 17, 2017

/s/ Hans Rigendinger

Hans Rigendinger

Chief Executive Officer and Chief Financial Officer

1



Exhibit 32

CERTIFICATION OF 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

In connection with the report on Form 10-K of SunVesta, Inc. for the annual period ended December 31,

2016, as filed with the Securities and Exchange Commission on the date hereof, I, Hans Rigendinger, do

hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of

2002, that, to the best of my knowledge and belief:

(1)  This report fully complies with the requirements of section 13(a) or 15(d) of the

Securities Exchange Act of 1934; and

(2)  The information contained in this report fairly represents, in all material respects, the financial

condition of the registrant at the end of the period covered by this report and results of

operations of the registrant for the period covered by this report.

Date: March 17, 2017

/s/ Hans Rigendinger

Hans Rigendinger

Chief Executive Officer and Chief Financial Officer

This certification accompanies this report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and

shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the

registrant for the purposes of §18 of the Securities Exchange Act of 1934, as amended. This

certification shall not be incorporated by reference into any filing under the Securities Act of 1933, as

amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date

of this report), irrespective of any general incorporation language contained in such filing.

A  signed  original  of  this  written  statement  required  by  §906  has  been  provided  to  the  registrant  and

will  be  retained  by  the  registrant  and  furnished  to  the  Securities  and  Exchange  Commission  or  its

staff upon request.

1