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EX-32.1 - CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. FILED HEREWITH. - SWISSINSO HOLDING INC.f10q0912ex32i_swissinso.htm
EX-31.2 - CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. FILED HEREWITH. - SWISSINSO HOLDING INC.f10q0912ex31ii_swissinso.htm
EX-32.2 - CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. FILED HEREWITH. - SWISSINSO HOLDING INC.f10q0912ex32ii_swissinso.htm
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EX-31.1 - CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. FILED HEREWITH. - SWISSINSO HOLDING INC.f10q0912ex31i_swissinso.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x           QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012
 
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o            For the transition period from _____ to _____

Commission File Number: 333-151909

SWISSINSO HOLDING INC.
(Exact Name of Registrant as Specified in its Charter)

Delaware
(State or Other Jurisdiction of Incorporation or Organization)
90-0620127
(I.R.S. Employer ID Number)

PSE – Parc Scientifique de l’EPFL
Route J.D. Colladon
Building D – 3rd Floor
1015 Lausanne, Switzerland
(Address of Principal Executive Offices)

(011) 41 21 693 8640
(Registrant’s Telephone Number, Including Area Code)
 
________________________________________________________________
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x 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 (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  
o  
Accelerated filer
o
Non-accelerated filer
o  
Smaller reporting company
x
(Do not check if a smaller reporting company)
  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No x

As of November 21, 2012, there were outstanding 101,169,293 shares of Common Stock, par value $0.0001 per share.
 
 


 
 
 
 
 
IMPORTANT PREFATORY NOTE

The registrant is filing this Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 on the date hereof in reliance on the Order of the Securities and Exchange Commission under Section 17A and Section 36 of the Securities Exchange Act of 1934 granting exemptions from specified provisions of the Exchange Act and certain rules thereunder.  Due to the disruption in communications, transportation, electricity, facilities and available professional advisors caused by Hurricane Sandy and its aftermath, the registrant was unable to file its Quarterly Report on Form 10-Q for the three months ended September 30, 2012 within the prescribed time period without unreasonable effort and expense.
 
 
2

 

TABLE OF CONTENTS

 
Page
PART I   FINANCIAL INFORMATION
 
   
Item 1. Financial Statements.
F-1
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
4
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
6
   
Item 4.  Controls and Procedures.
6
   
PART II  OTHER INFORMATION
 
   
Item 1. Legal Proceedings.
7
   
Item 1A. Risk Factors.
7
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
7
   
Item 3. Defaults Upon Senior Securities.
7
   
Item 4.  Mine Safety Disclosures.
7
   
Item 5. Other Information.
7
   
Item 6.  Exhibits.
8
 
 
3

 

PART I
FINANCIAL INFORMATION

Item 1.  Financial Statements.
 
SWISSINSO HOLDING INC.
(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS
As of September 30, 2012 and December 31, 2011 (Unaudited)
 
   
2012
   
2011
 
   
September 30
   
December 31
 
             
ASSETS
           
             
CURRENT ASSETS
           
Cash
  $ 259,133     $ 8,163  
Prepaid assets
    5,130          
Other receivables
    55,445       53,818  
Inventory
    191,571       544,436  
Total current assets
    511,279       606,417  
                 
NON-CURRENT ASSETS
               
Property and equipment, net
    65,455       109,784  
Deferred debt issuance cost, net
    -       134,713  
Total non-current assets
    65,455       244,497  
                 
TOTAL ASSETS
  $ 576,734     $ 850,914  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
                 
CURRENT LIABILITIES
               
Accounts payable and accrued expenses
  $ 1,433,341     $ 1,638,566  
Accrued payroll and benefits
    846,644       904,822  
Promissory notes
    500,000       750,000  
Loans
    911,502       411,600  
Total current liabilities
    3,691,487       3,704,988  
                 
NON-CURRENT LIABILITIES
               
Accrued interest on notes payable
    466,034       801,796  
Convertible notes payable
    2,000,000       4,850,000  
Stock warrants liability
    477,780       215,642  
Total non-current liabilities
    2,943,814       5,867,438  
                 
TOTAL LIABILITIES
    6,635,301       9,572,426  
                 
STOCKHOLDERS' DEFICIT
               
Stockholders' deficit :
               
10,000,000 preferred shares, $0.0001 par value
    -       -  
Issued and outstanding shares : 0
               
Authorized :
               
200,000,000 common shares, $0.0001 par value
               
Issued and outstanding shares : 101,169,293 and 78,599,287
    10,117       7,860  
                 
Additional paid in capital
    7,509,374       2,571,221  
Deficit accumulated during development stage
    (13,691,710 )     (11,409,380 )
Accumulated other comprehensive income
    113,652       108,787  
Total stockholders' deficit
    (6,058,567 )     (8,721,512 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  $ 576,734     $ 850,914  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-1

 
 
SWISSINSO HOLDING INC.
(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
AND FOR THE PERIOD SINCE INCEPTION, JUNE 1, 2006 TO SEPTEMBER 30, 2012
UNAUDITED
 
   
For The Nine Months Ended
   
For The Three Months Ended
   
Inception
 
   
September 30,
   
September 30,
   
6/1/2006
 
   
2012
   
2011
   
2012
   
2011
   
to 09/30/2012
 
                               
REVENUES
  $ -     $ -     $ -     $ -     $ -  
                                         
OPERATING EXPENSES
                                       
General and administrative
    1,557,354       2,316,562       512,268       201,652       9,183,277  
Stock warrants expense
    262,138       (3,287,033 )     (89,850 )     (121,010 )     477,780  
Debt issuance expense
    134,713       635,760       -       211,920       1,695,362  
Research and development
    -       182,232       -       5,651       1,117,952  
      1,954,205       (152,479 )     422,418       298,213       12,474,371  
OTHER INCOME
                                       
Interest income
    3       18       1       3       277  
Gain on vehicle
    -       -       -       -       6,816  
      3       18       1       3       7,093  
                                         
OTHER EXPENSES
                                       
Interest on debt
    328,069       346,485       92,811       115,693       1,216,390  
Taxes
    59       134       59       134       (268 )
Commission on debt
    -       -       -       -       8,310  
      328,128       346,619       92,870       115,827       1,224,432  
                                         
NET INCOME (LOSS)
  $ (2,282,330 )   $ (194,122 )   $ (515,287 )   $ (414,037 )   $ (13,691,710 )
                                         
Foreign currency adjustment
    4,865       62,501       (43,077 )     200,400       113,652  
                                         
COMPREHENSIVE INCOME (LOSS)
    (2,277,465 )     (131,621 )     (558,364 )     (213,637 )     (13,578,058 )
                                         
Basic and diluted net income (loss) per share
  $ (0.03 )   $ (0.00 )   $ (0.01 )   $ (0.00 )   $ (0.21 )
                                         
Weighted average shares outstanding - Basic and diluted
    83,024,746       78,599,287       90,916,137       78,599,287       65,094,222  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-2

 
 
SWISSINSO HOLDING INC.
(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
AND FOR THE PERIOD SINCE INCEPTION, JUNE 1, 2006 TO SEPTEMBER 30, 2012
UNAUDITED
 
               
From
 
   
For The Nine Months Ended
   
Inception
 
   
September 30,
   
6/1/2006
 
   
2012
   
2011
   
to 09/30/2012
 
                   
NET INCOME (LOSS)
  $ (2,282,330 )   $ (194,122 )   $ (13,691,710 )
                         
OPERATING ACTIVITIES
                       
Depreciation
    40,802       44,488       122,938  
Amortization of defered debt issuance cost
    134,713       635,760       1,213,062  
Interest contributed by shareholder
    -       -       2,809  
Gain on sale of asset
    3,527       -       (3,289 )
Interest accrued on converted notes
    -       -       16,071  
Loss on inventory write down
    352,865       -       352,865  
Shares issued for services
    232,180       -       232,180  
Stock option expense
    220,000       -       220,000  
Capital contributions of interest expense
    32,998       -       32,998  
                         
Changes in Operating Assets and Liabilities:
                       
(Increase) inventory "Krystall"
    -       (26,551 )     (544,436 )
Increase (decrease) in accounts payable and accrueds
    6,067       2,166,975       3,308,284  
(Increase) / decrease in prepaids and other receivables
    (6,757 )     (1,142 )     (60,575 )
Increase (decrease) in stock warrants liability
    262,138       (3,287,033 )     477,780  
                         
Net cash used in operating activities
    (1,003,797 )     (661,625 )     (8,321,023 )
                         
INVESTING ACTIVITIES
                       
Property and equipment acquisition
    -       (2,944 )     (219,928 )
Cash received in acquisition of shell
    -       -       670,357  
Proceeds from sale of asset
    -       -       34,080  
Net cash provided by (used in) investing activities
    -       (2,944 )     484,509  
                         
FINANCING ACTIVITIES
                       
Proceeds from convertible notes
    -       -       6,035,000  
Proceeds from issuance of shares
    -       -       85,698  
Repayment of borrowings
    -       -       (521,500 )
Loan
    750,000       -       1,250,000  
Debt due to shareholders
    499,902       267,999       1,131,794  
Net cash provided by financing activities
    1,249,902       267,999       7,980,992  
                         
Effect of exchange rate on cash
    4,865       62,501       114,655  
                         
INCREASE (DECREASE) IN CASH
    250,970       (334,069 )     259,133  
                         
CASH AT BEGINNING OF PERIOD
    8,163       339,567       -  
                         
CASH AT END OF PERIOD
  $ 259,133     $ 5,498     $ 259,133  
                         
Non-Cash Financing Activities                        
Shares issued on conversion of notes and accrued interest   $ 4,445,232     $ -     $ 4,445,232  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-3

 
 
SWISSINSO HOLDING INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
 FOR THE PERIOD SINCE INCEPTION, JUNE 1, 2006 TO SEPTEMBER 30, 2012
 
                                 
Deficit
       
                                 
Accumulated
       
               
Additional
         
Other
   
During the
   
Total
 
   
Common Stock
   
Paid-In
   
Subscription
   
comprehensive
   
Development
   
Stockholders'
 
   
Shares
   
Amount
   
Capital
   
receivable
   
income
   
Stage
   
Deficit
 
                                           
Balance - June 1, 2006
        $ -     $ -     $ -     $ -     $ -     $ -  
                                                       
Common Stock issued in recapitalization
                      -       -               -  
of Swissinso SA into Swissinso Holding Inc.
                                                 
(par value $0.0001) (1)
    50,000,000       5,000       75,644       (40,322 )                     40,322  
                                                         
Net loss from inception to December 31, 2006
                                      (50,833 )     (50,833 )
                                                         
Interest contributed by shareholder
                    26                               26  
                                                         
Foreign currency exchange adjustment
                                    (171 )             (171 )
                                                         
Balance at December 31, 2006
    50,000,000       5,000       75,670       (40,322 )     (171 )     (50,833 )     (10,656 )
                                                         
Net loss for the year ended December 31, 2007
                                      (28,003 )     (28,003 )
                                                         
Interest contributed by shareholder
                    234                               234  
                                                         
Foreign currency exchange adjustment
                                    (2,569 )             (2,569 )
                                                         
Balance at December 31, 2007
    50,000,000       5,000       75,904       (40,322 )     (2,740 )     (78,836 )     (40,994 )
                                                         
Net loss for the year ended December 31, 2008
                                      (118,788 )     (118,788 )
                                                         
Interest contributed by shareholder
                    1,033                               1,033  
                                                         
Foreign currency exchange adjustment
                                    (4,929 )             (4,929 )
                                                         
Balance at December 31, 2008
    50,000,000       5,000       76,937       (40,322 )     (7,669 )     (197,624 )     (163,678 )
                                                         
Common Stock issued to acquire the shell
                                                 
company at $0.001 per share
                                                       
(par value $0.0001) (1)
    25,100,000       2,510       (141,307 )                             (138,797 )
                                                         
Subscription on share capital of Swissinso SA
                      40,322                       40,322  
                                                         
Common Stock issued pursuant to conversion
                                                 
of shareholder loan to Swissinso SA
    1,097,145       110       220,182                               220,292  
                                                         
Net loss for the year ended December 31, 2009
                                      (4,532,266 )     (4,532,266 )
                                                         
Interest contributed by shareholder
                    1,516                               1,516  
                                                         
Foreign currency exchange adjustment
                                    (25,190 )             (25,190 )
                                                         
Balance at December 31, 2009
    76,197,145     $ 7,620     $ 157,328     $ -     $ (32,859 )   $ (4,729,890 )   $ (4,597,801 )
                                                         
Deferred debt issuance
                    1,213,062                               1,213,062  
                                                         
Shares issued on conversion of notes
    2,402,142       240       1,200,831                               1,201,071  
                                                         
Net loss for the period ended December 31, 2010
                                    (5,980,379 )     (5,980,379 )
                                                         
Foreign currency exchange adjustment
                                    4,352               4,352  
                                                         
Balance at December 31, 2010
    78,599,287     $ 7,860     $ 2,571,221     $ -     $ (28,507 )   $ (10,710,269 )   $ (8,159,695 )
                                                         
Net loss for the period ended December 31, 2011
                                    (699,111 )     (699,111 )
                                                         
Foreign currency exchange adjustment
                                    137,294               137,294  
                                                         
Balance at December 31, 2011
    78,599,287     $ 7,860     $ 2,571,221     $ -     $ 108,787     $ (11,409,380 )   $ (8,721,512 )
                                                         
Net loss for the period ended September 30, 2012
                                    (2,282,330 )     (2,282,330 )
                                                         
New Stock option expenses
                    220,000                               220,000  
                                                         
Shares issued for Services Rendered
    7,999,832       800       231,380                               232,180  
                                                         
Shares issued on conversion of notes and accrued interest
    14,570,174       1,457       4,453,775                               4,455,232  
                                                         
Capital contribution of interest
                    32,998                               32,998  
                                                         
Foreign currency exchange adjustment
                                    4,865               4,865  
                                                         
Balance at September 30, 2012
    101,169,293     $ 10,117     $ 7,509,374     $ -     $ 113,652     $ (13,691,710 )   $ (6,058,567 )
 
(1)
The Stockholders equity of Swissinso SA has been recapitalized to give effect to the shares received by the existing holders of Swissinso SA from the share exchangeagreement with Pashminadepot.com Inc.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-4

 
 
SWISSINSO HOLDING INC.
(A Development Stage Company)
UNAUDITED

NOTES TO FINANCIAL STATEMENTS

September 30, 2012
NOTE 1 -   Organization and Business
 
SwissINSO Holding Inc., (the “Company”) was incorporated in the state of Florida on November 13, 2007 under the name “Pashminadepot.com, Inc.” Until May 31, 2009, it focused on the business of developing a website to sell Pashmina and other accessories. Due to the state of the economy, virtually no business was conducted and this business plan was abandoned.  Management then sought an operating company with which to merge or to acquire.
 
On September 10, 2009 the Company entered into a Stock Purchase Agreement with SwissINSO SA, a Swiss company (“SwissINSO”), and its shareholders pursuant to which the Company agreed to purchase all of the shares of SwissINSO to develop new business opportunities. The transaction was consummated on October 19, 2009, and SwissINSO became a wholly-owned subsidiary of the Company and the shareholders of SwissINSO received in exchange for their shares an aggregate of 50,000,000 shares of the Company’s common stock, or 65.62% of the then issued and outstanding share capital of the Company. At the same time, the Company issued 1,097,145 shares of its common stock to the principal shareholder of SwissINSO, Michel Gruering, upon conversion of his existing shareholder loan to SwissINSO.
 
On October 28, 2009, the state of incorporation was changed from Florida to Delaware by the merger of Pashminadepot.com, Inc. with and into its wholly-owned subsidiary, SwissINSO Holding Inc., a Delaware corporation, which had been formed for such purpose. In connection with such merger, the Company’s name changed from “Pashminadepot.com, Inc.” to “SwissINSO Holding Inc.” Each issued share of the common stock of Pashminadepot.com, Inc. from and after the effective time of such merger was converted into one share of the common stock of SwissINSO Holding Inc.
 
Prior to the acquisition of SwissINSO, the Company was in the development stage and had no revenues or business operations. Following the acquisition of SwissINSO, the Company’s business became exclusively the business of SwissINSO described below.
 
SwissINSO was incorporated in Switzerland on May 30, 2006. SwissINSO utilizes its intellectual property and patented technologies to provide  fully integrated, efficient and aesthetic solar energy products and related solutions that significantly reduce the overall cost of energy to the consumer.

In those countries where Feed in Tariffs (FITs) are in place, SwissInso will provide solutions that maximize the amount of energy that can be fed back to the grid, thereby significantly reducing overall energy costs and accelerating returns on investment.
 
Since its inception, SwissINSO has devoted a substantial part of its efforts to research and development, product validation and industrialization, market segment analysis, fundraising and business development.

During the first nine months of 2012, the Company has focused on the industrialization of KLYMAA™, its revolutionary new color coated glass technology to be used in the fabrication of PV and Thermal Solar panels and tiles.  SwissINSO has not as yet generated any revenues.

The consolidated financial statements of the Company included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).  Certain information and footnote disclosures normally included in financial statements prepared in conjunction with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to ensure the information presented is not misleading.  These consolidated financial statements should be read in conjunction with the annual audited financial statements and the notes thereto included in the Company’s annual report on Form 10-K.
 
 
F-5

 
 
The accompanying unaudited interim financial statements reflect all adjustments of a normal and recurring nature which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented.  The results of operations for these periods are not necessarily comparable to, or indicative of, results of any other interim period or for the fiscal year taken as a whole.  Certain information that is not required for interim financial reporting purposes has been omitted.  
 
NOTE 2 -   Going Concern
 
The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on raising additional capital to fund its business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company's ability to continue as a going concern. The Company has funded its initial operations by way of entering into a private placement offering. From inception through September 30, 2012, subscriptions of $6,035,000 had been received under the terms of the private placement documents.

The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
 
NOTE 3 -   Significant Accounting Policies
 
Accounting Basis
 
These consolidated financial statements are prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America.
 
Principles of Consolidation
 
The consolidated financial statements include the historical financial information of SwissINSO SA from inception to September 30, 2012. Intercompany transactions and balances have been eliminated upon consolidation.
 
Translation of Foreign Currency Financial Statements and Foreign Currency Transactions
 
The financial statements of the Company’s international subsidiary have been translated into United States dollars by translating balance sheet accounts at year end and period end exchange rates except for non-current assets which are translated at historical exchange rates, and statement of operations accounts at average exchange rates for the periods. Foreign currency transaction gains and losses are reflected in the equity section of the Company’s consolidated balance sheet in Accumulated Other Comprehensive Income (Loss).

The balance of the foreign currency translation adjustment, included in Accumulated Other Comprehensive Income (Loss), was $4,865 and $62,501 for the nine months ended September 30, 2012 and September 30, 2011, respectively.
 
 
F-6

 
 
Use of Estimates
 
The preparation of financial statements in conformity with generally accepted accounting principles of the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The more significant areas requiring the use of estimates include asset impairment, stock-based compensation, and future income tax amounts. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.
 
Cash and Cash Equivalents
 
Cash and cash equivalents are comprised of current bank balances. The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.
 
Inventory
 
The Company values its inventory at the lower of cost and market. The Company’s inventory is comprised of one reverse osmosis water purification unit valued at estimated market value.

Property and Equipment
 
Property and equipment are stated at cost less accumulated depreciation. Depreciation of furniture and equipment is provided using the straight-line method based on the estimated useful lives of assets, which range from four to ten years. Computer equipment is amortized using the straight-line method over the useful life of three years. Upon the disposition of property and equipment, the accumulated depreciation is deducted from the original cost and any gain or loss is reflected in current earnings.
 
Financial Instruments
 
The Company's financial instruments consist of notes payable to third parties and subscriptions to convertible debt at $0.50 per share issued under the terms of a private placement offering. 
 
It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from its financial instruments and that their fair values approximate their carrying values except where separately disclosed.
 
Derivative Financial Instruments
 
The Company’s objectives in using derivative financial instruments are to obtain the lowest cash cost-source of funds. Derivative liabilities are recognized in the consolidated balance sheets at fair value based on the criteria specified in FASB ASC topic 815-40 "Derivatives and Hedging – Contracts in Entity’s own Equity". The estimated fair value of the derivative liabilities is calculated using the Black-Scholes-Merton method where applicable and such estimates are revalued at each balance sheet date, with changes in the value recorded as stock warrant expense in the consolidated statements of operations.
 
General and Administrative Expenses
 
General and administrative expenses consist primarily of salary and related employee benefit costs, professional and consultants’ fees, production industrialization costs, marketing and promotional expenses, and various other general corporate expenses.
 
 
F-7

 
 
Employee Benefits
 
Mandatory contributions are made under Government retirement benefit and unemployment schemes at the minimum statutory rates in force during the period, based on gross salary payments. The costs of these payments are charged to the statement of income in the same period as the related salary costs.
 
Stock Option Plan
 
The Company recognizes all employee-based compensation as a cost in the financial statements.  Equity-classified awards are measured at the grant date fair value of the award.  The Company estimates grant date fair value using the Black-Scholes-Merton option-pricing model.

Excess tax benefits of awards that are recognized in equity related to stock option exercises are reflected as operating cash inflows.  Stock-based compensation cost that has been included in income from continuing operations amounted to $220,000 and $ - for the periods ended September 30, 2012 and September 30, 2011, respectively.

Research and Development
 
Costs incurred in acquiring technological expertise and corresponding research and development are charged to expense when incurred.
 
Other Expenses
 
Other expenses are comprised of fees for negotiating Company financing.
 
Net Loss Per Share
 
Basic net loss per share is calculated using the weighted average number of common shares outstanding and the treasury stock method is used to calculate diluted earnings per share. The Company has issued convertible notes with warrants which are potentially dilutive common shares. For the periods presented, this calculation proved to be anti-dilutive. As a result, the basic net loss per share is the same as diluted net loss per share for the three and nine month periods ended September 30, 2012.
 
Income Taxes
 
The Company and its subsidiary provide for income taxes in accordance with FASB ASC 740-10 (Prior authoritative literature: FASB Statement No. 109, “Accounting for Income Taxes.”) FASB ASC 740-10 requires the use of an asset and liability approach in accounting for income taxes.
 
FASB ASC 740-10 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. No provision for income taxes is included in the statement due to its immaterial amount, net of the allowance account, based on the likelihood of the Company and its subsidiary to utilize the loss carry-forward.
 
Operating leases
 
Rent expense on operating leases arises on a straight line basis and is charged to general and administrative expenses as it occurs.
 
Debt Issuance Costs
 
Debt issuance costs (i.e. placement agent costs) are capitalized when the expense is incurred and are amortized equally over a 24 month period.
 
 
F-8

 
 
NOTE 4 –   Inventory
 
The Company produced its first water purification unit in March, 2010. This unit was deployed in Switzerland for the product launch which took place on April 22, 2010.
 
Inventories are stated at the lower of cost (first-in, first-out) or market value. The Company’s policy is to regularly assesses slow-moving, excess and obsolete inventory and establish a reserve against any amounts determined to have such characteristics.  

In June 2012, the Company wrote down to market value the cost of its water purification unit held in inventory to $188,442 to reflect the expected sales price of this unit based on reduced costs of components, currency fluctuations, market interest, competitive products currently on the market and other factors. 
 
The following table presents the net book value of inventory on-hand as of September 30, 2012 and December 31, 2011:
 
   
Inventory at
   
Inventory at
 
   
September 30,
 2012
   
December 31,
2011
 
Raw Materials   $ -     $ -  
Work-in-process      -       -  
Finished Goods     191,571       544,436  
                 
Total Inventory   $ 191,571     $ 544,436  
 
NOTE 5 - Property and Equipment
 
Property and equipment at September 30, 2012 and December 31, 2011 at cost, consisted of the following: 
 
   
September 30,
 2012
   
December 31,
2011
 
Furniture    $ 72,544     $ 106,062  
Computer equipment      89,618       78,530  
      162,162       184,592  
Less accumulated depreciation      96,707       74,808  
    $ 65,455     $ 109,784  
 
Depreciation expense on property and equipment for the nine months ended September 30, 2012 and 2011 was $40,802 and $44,488 respectively.
 
NOTE 6 -  Notes Payable
 
The Company issued promissory notes or loan acknowledgements to independent third parties as follows: (a) $250,000 bearing interest at 9% per annum repayable once the Company raised $6,000,000 through the sale of securities; (b) $500,000 without interest repayable on or before May 11, 2011 and (c) $750,000 without interest repayable on a to be agreed date.  Loan acknowledgements totaling $1,000,000 were converted into 7,659,710 shares of common stock during the three months ended September 30, 2012.  The note referred to in (a) above and $250,000 of the loan acknowledgements referred to in (c) above remain outstanding.

 
F-9

 

During 2011 and the first nine months of 2012, the Company and its subsidiary borrowed an aggregate of $911,502 from current and former executive officers and directors and a shareholder of the Company to meet the working capital needs of the Company’s subsidiary.  

Loans aggregating $295,633 bear interest at 9% per annum, and the other loans are non-interest bearing. These loans remain outstanding.  Imputed interest of $32,998 has been contributed as capital during the nine months ended September 30, 2012.
 
NOTE 7 -   Convertible Notes with Warrants
 
The Company has received subscriptions of $6,035,000 from the sale of 9% Secured Convertible Notes with Warrants issued in a private placement. The notes are secured by all of the assets of SwissINSO and are convertible into shares of common stock at a conversion price of $0.50 per share. Conversion may be exercised by the holder at any time prior to the maturity date which is 24 months from the date of issue. The warrants are exercisable for an equivalent number of shares at an exercise price of $1.00 per share within five years of issuance date.
 
Notes totaling $1,185,000 plus accrued interest were converted into 2,402,142 shares of common stock during the year ended December 31, 2010.  No notes were converted during 2011.  Notes totaling $2,850,000 plus accrued interest were converted into 6,910,464 shares of common stock during the three months ended September 30, 2012.
 
The fair value of each warrant is estimated on the date of grant using Black-Scholes-Merton option-pricing model that uses the assumptions noted in the following table. 
 
Number of Warrants
 
% ogf Warrants Issued
 
Initial Vesting Date
 
2,000,000
 
100%
 
December 16, 2009
 
   
Dividend Yield
    0.00 %
   
Expected Volatility
    516.75 %
   
Risk-Free Interest Rate
    0.18 %
   
Contractual term
 
5 years
 
   
Estimated Remaining term
 
1.21 years
 
   
Stock Price at Date of Grant
  $ 1.89  
   
Exercise Price
  $ 1.00  
 
900,000
 
100%
 
December 22, 2009
 
   
Dividend Yield
    0.00 %
   
Expected Volatility
    516.75 %
   
Risk-Free Interest Rate
    0.18 %
   
Contractual term
 
5 years
 
   
Estimated Remaining term
 
1.23 years
 
   
Stock Price at Date of Grant
  $ 1.80  
   
Exercise Price
  $ 1.00  
 
8,270,000
 
100%
 
February 24, 2010
 
   
Dividend Yield
    0.00 %
   
Expected Volatility
    516.75 %
   
Risk-Free Interest Rate
    0.19 %
   
Contractual term
 
5 years
 
   
Estimated Remaining term
 
1.40 years
 
   
Stock Price at Date of Grant
  $ 1.25  
   
Exercise Price
  $ 1.00  
 
 
F-10

 
 
500,000
 
100%
 
September 15, 2010
 
   
Dividend Yield
    0.00 %
   
Expected Volatility
    516.75 %
   
Risk-Free Interest Rate
    0.20 %
   
Contractual term
 
5 years
 
   
Estimated Remaining term
 
2.04 years
 
   
Stock Price at Date of Grant
  $ 1.18  
   
Exercise Price
  $ 1.00  
 
400,000
 
100%
 
December 8, 2010
 
   
Dividend Yield
    0.00 %
   
Expected Volatility
    516.75 %
   
Risk-Free Interest Rate
    0.24 %
   
Contractual term
 
5 years
 
   
Estimated Remaining term
 
2.44 years
 
   
Stock Price at Date of Grant
  $ 0.59  
   
Exercise Price
  $ 1.00  
 
The total derivative charge for the nine months ended September 30, 2012 was $262,138, representing the change in fair value between the outstanding warrants as of September 30, 2012 and December 31, 2011, which equated to $477,780 and $215,642, respectively.
 
The Company will issue common stock from authorized shares to those subscribers who exercise the warrants upon the exercise of the warrants. As of September 30, 2012, no warrants have been exercised.
 
As of September 30, 2012, certain convertible notes have come due. The Company is in discussions with the holders of such notes to extend the maturity date of their notes for an additional two years. The Company has not received any indication that any holder is looking to satisfy the amount due through collection of assets securing the Company’s obligations under the notes.

NOTE 8 -  Debt Issuance Costs

Debt issuance costs (i.e. placement agent costs) are capitalized when the expense is incurred and are amortized equally over a 24 month period. In connection with the issuance of convertible debt on February 24, 2010, the Company paid its placement agent fees through the issuance of 1,117,000 stock warrants and cash of $403,500.
 
On February 24, 2010, the Company determined the fair value of these warrants to be $1,213,062. The fair value was determined by using the Black-Scholes-Merton option-pricing model based on the following assumptions:
 
Number of Warrants
 
% of Warrants Issued
 
Initial Vesting Date
 
1,117,000
 
100%
 
February 24, 2010
 
   
Dividend Yield
    0.00 %
   
Expected Volatility
    270.21 %
   
Risk-Free Interest Rate
    2.69 %
   
Contractual term
 
5 years
 
   
Estimated term
 
1.875 years
 
   
Stock Price at Date of Grant
  $ 1.25  
   
Exercise Price
  $ 1.00  
 
 
F-11

 
 
Debt issuance costs as of September 30, 2012 and December 31, 2011 were as follows: 
 
   
September 30,
2012
   
December 31,
2011
 
Debt Issuance Cost   $ 1,695,362     $ 1,695,362  
Accumulated amortization     (1,695,362     (1,560,649 )
Debt Issuance, end of period    $ -0-     $ 134,713  
 
Amortization of debt issuance expense for the periods ended September 30, 2012 and September 30, 2011 was $134,713 and $635,760, respectively.
 
NOTE 9 -  Capital Stock
 
Preferred Stock
 
The Company has authorized 10,000,000 shares of preferred stock, par value $0.0001 per share, none of which are issued and outstanding as of September 30, 2012.
 
Common Stock
 
The Company has authorized 200,000,000 shares of common stock, par value $0.0001 per share, of which 101,169,293 shares were issued and outstanding as of September 30, 2012.
 
NOTE 10 – Related Party Transactions
 
The Company is indebted to InsOglass Holding SA, a business organization controlled by the Company’s Chief Executive Officer (“InsOglass”), for approximately $642,028 of loans made by such entity to the Company during 2011 and the first nine months of 2012 to meet the working capital needs of the Company and its subsidiary.
 
On June 1, 2012, the Company entered into a Loan Agreement with InsOglass, pursuant to which such entity agreed to make loans of up to $1,000,000 to the Company, including the loans made through September 30, 2012.  Such loans are interest-free, mature on April 1, 2013, are secured by certain assets of the Company’s subsidiary and are convertible, at the option of InsOglass, into shares of common stock of the Company at a conversion rate of $0.10 per share.

On August 14, 2012, the Company issued 2,500,000 shares of common stock valued at $50,000 to InsOglass in consideration of services rendered by the Company’s Chief Executive Officer to the Company and its subsidiary.

On June 1, 2012, the Company issued 2,500,000 shares of common stock valued at $100,000 to SICG S.A., a business organization of which the Company’s Chief Financial Officer is the principal, in consideration of services rendered by SICG S.A. to the Company and its subsidiary. On August 15, 2012 the Company issued an additional 168,460 shares of common stock valued at $25,269 to SICG S.A.in consideration of  the cancellation of certain debt of the Company’s subsidiary to SICG S.A..

NOTE 11 – Lease
 
SwissINSO rents office space pursuant to a monthly property rental agreement with Fondation Scientifique EPFL Lausanne, Switzerland that can be renewed monthly.  The monthly office rental payment to EPFL (excluding TVA) is $2,413.  The rental cost for the period ended September 30, 2012 totaled $21,722.
 
 
F-12

 
 
NOTE 12 - Concentrations of Risks
 
Cash Balances 
 
The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (FDIC). Up to September 30, 2012 all non-interest bearing transaction deposit accounts at an FDIC-insured institution, including all personal and business checking deposit accounts that do not earn interest, are fully insured for the entire amount in the deposit account.  All other deposit accounts at FDIC-insured institutions are insured up to at least $250,000 per depositor. Insurance coverage for certain retirement accounts, which include all IRA deposit accounts, will remain at $250,000 per depositor. 
 
SwissINSO maintains its cash with sound international banking institutions.
 
NOTE 13 - Commitments
 
Under agreements for the acquisition of industrial technology, the Company through its subsidiary was committed at September 30, 2012 as follows:
 
Payments for acquisition of technology
 over a 4 year period
  $ 180,610  
Minimum royalties over a 5 year period               Euro 120,000
  $ 171,200  
 
During the first nine months of 2012, the Company’s subsidiary made payments aggregating $180,904 to EPFL as required under the agreement between SwissINSO and EPFL for the acquisition of technology.

NOTE 14 – Recent Accounting Pronouncements 
 
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow. 
 
NOTE 15 – Equity Compensation Plans
 
In 2009, the Company adopted a stock compensation plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stock options or nonvested shares to officers and key employees.  To date, the Company has only granted stock options settleable in shares.  The Plan authorizes grants to purchase up to 10,000,000 shares of authorized but unissued common stock.  Stock options can be granted with an exercise price less than, equal to or greater than the stock’s fair value at the date of grant.  All awards have terms and vesting schedules as determined on a case-by-case basis by the Board of Directors.
 
On June 1, 2012, the Company granted non-qualified options to purchase an aggregate of 5,500,000 shares of its common stock to its Chief Executive Officer, its Chief Financial Officer and one employee at an exercise price of $0.10 per share.

At September 30, 2012, there were 4,500,000 additional shares available for the Company to grant under the Plan.  The grant-date fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option-pricing model.  The weighted average assumptions for the grants issued to September 30, 2012 are provided in the following table.

The Company uses company specific historical data to estimate the expected term of the option, such as employee option exercise and employee post-vesting departure behavior.  Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes.  Since the Company’s shares are not publicly traded and its shares are rarely traded privately, expected volatility is estimated based on the average historical volatility of similar entities with publicly traded shares.  The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve at the date of grant.
 
 
F-13

 
 
Valuation Assumptions
 
September 30, 2012
 
Expected Dividend Yield
    0.00 %
Expected Volatility
    369.51 %
Expected Term (Years)
    10  
Risk-free Interest Rate
    1.67  
 
Stock option activity during the periods indicated is as follows:
 
   
Number of Shares
   
Weighted average exercise price
   
Weighted average remaining contractual term
   
Average intrinsic value
 
Balance at December 31st, 2011
  $ -     $ -     $ -     $ -  
Granted
    5,5000,000     $ 0.10       10          
Forfeited
                               
Exercised
                               
Expired
                               
Balance at 30th September, 2012
    5,500,000                          
Exercisable at 30th September, 2012
    5,500,000     $ 0.10       10     $ -  
 
The weighted average fair value of the options granted at September 30, 2012 and December 31, 2011 was $0.04 and $-, respectively. As of September, 30, 2012, no options have been exercised.
 
The Company currently uses authorized and unissued shares to satisfy share award exercises.
 
F-14

 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

As used in this Form 10-Q, references to the “Company,” “we,” “our” or “us” refer to the Registrant and our subsidiary, SwissINSO SA, unless the context otherwise indicates.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking information.  Forward-looking information includes statements relating to future actions, future performance, costs and expenses, interest rates, outcome of contingencies, financial condition, results of operations, liquidity, business strategies, cost savings, objectives of management and other such matters of the Company.  The Private  Securities  Litigation  Reform Act of 1995 provides a “safe harbor” for forward-looking  information to encourage companies to provide prospective  information about themselves  without fear of litigation so long as that  information  is identified as forward-looking  and  is  accompanied  by meaningful cautionary statements  identifying important factors that could cause actual results to differ  materially  from those  projected in the  information. Forward-looking information may be included in this Quarterly Report on Form 10-Q or may be incorporated by reference from other documents filed with the Securities and Exchange Commission (the “SEC”) by us. You can find many of these statements by looking for words including, for example, “believes,” “expects,” “anticipates,” “estimates” or similar expressions in this Quarterly Report on Form 10-Q or in documents incorporated  by  reference in this Quarterly Report on Form 10-Q.  We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events.

We have based the forward-looking statements relating to our operations on management's current expectations, estimates, and projections about us and the industry in which we operate.  These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict.  In particular, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate.  Accordingly, our actual results may differ materially from those contemplated by these forward-looking statements.  Any differences could result from a variety of factors, including, but not limited to general economic and business conditions, competition, and other factors.

The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described.  This discussion contains forward-looking statements, as discussed above.  Please see the section entitled “Forward-Looking Statements” for a discussion of the assumptions associated with these forward-looking statements.

The following discussion and analysis of our financial condition and results of operations are based on the unaudited financial statements as of September 30, 2012 and 2011, all of which were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).  You should read the discussion and analysis together with such financial statements and the related notes thereto.

Results of OperationsThree and nine months ended September 30, 2012 compared to three and nine months ended September 30, 2011

We are in the development stage and did not generate any revenues for the three and nine month periods ended September 30, 2012 or 2011.  During the quarter ended September 30, 2012, we incurred $512,268 of general and administrative expenses as we continued the development of the business of SwissINSO and $92,811 in interest charges related to bridge loans received in September 2009, convertible notes and warrants sold in a private placement from December 2009 through December 2010 and short-term loans received during 2011 and the first nine months of 2012.  In comparison, during the quarter ended September 30, 2011, we incurred $201,652 of general and administrative expenses and $5,651 in research and development expenses as we continued to develop the business of SwissINSO and $115,693 in interest charges related to bridge loans received in September 2009 and convertible notes sold in the private placement from December 2009 through December 2010.  Our net loss before foreign currency translation adjustments during the quarter ended September 30, 2012 was $515,287, including a non-cash gain of $89,850, representing the change from June 30, 2012 to September 30, 2012 in fair value for accounting purposes of the outstanding warrants issued in connection with the sale of our convertible notes and warrants in the private placement, as compared to a net loss before foreign currency translation adjustments during the quarter ended September 30, 2011 of $414,037, including a non-cash gain of $121,010 to reflect an adjustment to the fair value at September 30, 2011 of the outstanding warrants issued in connection with the sale of our convertible notes and warrants in the private placement.
 
 
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During the nine months ended September 30, 2012, we incurred $1,557,354 of general and administrative expenses (including a $352,865 write-down to market value of the cost of SwissINSO’s water purification unit held in inventory and non-cash charges of $452,180 related to the issuance of stock options and shares during the second and third quarter) as we continued the development of the business of SwissINSO and $328,069 in interest charges related to bridge loans received in September 2009, convertible notes and warrants sold in a private placement from December 2009 through December 2010 and short-term loans received during 2011 and the first nine months of 2012.  In comparison, during the nine months ended September 30, 2011, we incurred $2,316,562 of general and administrative expenses and $182,232 in research and development expenses as we continued to develop the business of SwissINSO and $346,485 in interest charges related to bridge loans received in September 2009 and convertible notes sold in the private placement from December 2009 through December 2010.   Our net loss before foreign currency translation adjustments during the nine months ended September 30, 2012 was $2,282,330, including the $352,865 write-down to market value of the cost of SwissINSO’s water purification unit held in inventory, non-cash charges of $452,180 related to the issuance of stock options and shares during the second and third quarter and a non-cash charge of $262,138, representing the change from December 31, 2011 to September 30, 2012 in fair value for accounting purposes of the outstanding warrants issued in connection with the sale of our convertible notes and warrants in the private placement, as compared to a net loss before foreign currency translation adjustments during the nine months ended September 30, 2011 of $194,122, including a non-cash gain of $3,287,033, representing the change from December 31, 2010 to September 30, 2011 in fair value for accounting purposes of the outstanding warrants issued in connection with the sale of our convertible notes and warrants in the private placement.

Liquidity and Capital Resources

As of September 30, 2012, we had a working capital deficit of $3,180,208 as compared with a working capital deficit at December 31, 2011 of $3,098,571.  During the past twelve (12) months, we have incurred significant operating expenses, and we expect to incur additional significant operating expenses for manufacturing, research and development, marketing, sales channel development, general and administrative expenses and debt payments during the next twelve (12) months, contingent upon raising capital.

During the nine months ended September 30, 2012, we did not sell any additional convertible notes and warrants in the private placement.  We did, however, receive short-term loans aggregating approximately $642,028 from a company controlled by our Chief Executive Officer and interest-free loans of $750,000 from one of our former noteholders to meet the working capital needs of SwissINSO.  We have not received any other cash infusions, are unable to meet our current obligations to employees, suppliers, vendors, service providers and lenders and are negotiating extended payment terms with some of our creditors.

During the three months ended September 30, 2012, $1,000,000 of outstanding loans and $2,850,000 of convertible notes issued in the private placement were converted into an aggregate of 14,570,174 shares of our Common Stock, thereby reducing our total non-current liabilities at September 30, 2012 from $5,867,438 to $2,943,814 and our total liabilities at September 30, 2012 from $9,572,426 to $6,635,301.
 
 
We do not have any other available credit, bank financing or other external sources of liquidity and will need to obtain substantial additional capital in order to continue SwissINSO’s business operations.  In order to obtain such capital, we will need to sell additional notes and warrants in the private placement, sell other securities to purchasers and/or borrow additional funds from lenders.  There can be no assurance that we will be successful in obtaining such additional funding.  We will also need to commercialize our KLYMMA business.   If we are not successful in raising sufficient capital, either from the sale of additional notes and warrants in the private placement, from the sale of other securities, from additional borrowings, from revenues generated by sales in the KLYMMA business, from the sale of all or parts of the SwissINSO business or from the entry into a joint venture with a partner for all or parts of the SwissINSO business, this would have a material adverse effect on our business, results of operations, liquidity and financial condition, and we would be forced to liquidate the business of SwissINSO.
 
 
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Going Concern Consideration

The accompanying financial statements have been prepared assuming that we will continue as a going concern.  As discussed in the notes to the financial statements, we have not yet established an ongoing source of revenues sufficient to cover our operating costs and allow us to continue as a going concern.  Our ability to continue as a going concern and ultimately to attain profitable operations is dependent on (a) raising capital to meet our past due, current and future obligations to employees, suppliers, vendors, landlords, service providers and lenders and to fund SwissINSO’s business plan and developing the KLYMMA business.  We incurred a net loss before foreign currency translation adjustments during the nine months ended September 30, 2012 of $2,282,330, including the $352,865 write-down to market value of the cost of SwissINSO’s water purification unit held in inventory, non-cash charges of $452,180 related to the issuance of stock options and shares during the second and third quarter and a non-cash charge of $262,138, representing the change from December 31, 2011 to September 30, 2012 in fair value for accounting purposes of the outstanding warrants issued in connection with the sale of our convertible notes and warrants in the private placement.  We have an accumulated deficit since inception of $13,691,710, primarily comprised of $10,301,229 in general and administrative expenses and research and development expenses incurred to create the Company, develop the business of SwissINSO and maintain the Company’s existence as a public company and $1,216,390 in interest charges incurred on the bridge loans and convertible debt used to finance the Company and the business of SwissINSO.  These factors continue to raise substantial doubt about our ability to continue as a going concern.  As discussed above, management plans include attempting to obtain additional capital from the sale of securities, from bank and private borrowings, from the commercialization of the KLYMMA business and from attempting to find a buyer or partner for all or part of SwissINSO’s business.  The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.
 
Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Exchange Act.  In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met.  Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.  The design of any disclosure controls and procedures is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
 
 
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Our management, including our Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q.  Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective:

•           to give reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and

•           to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended September 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II
OTHER INFORMATION

Item 1.   Legal Proceedings.

None

Item 1A.  Risk Factors

We are a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
 
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.

Reference is made to the Current Report on Form 8-K filed by the registrant on August 17, 2012 for information regarding the unregistered sales of equity securities during the second quarter ended June 30, 2012 and the third quarter ended September 30, 2012.

Item 3.   Defaults Upon Senior Securities.

None.

Item 4.  Mine Safety Disclosures.

Not applicable.

Item 5.  Other Information.

None.
 
 
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Item 6.  Exhibits

Exhibit
Number
 
Description
     
31.1 and 31.2
 
Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  Filed herewith.
     
32.1 and 32.2
 
Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  Filed herewith.

 
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
SWISSINSO HOLDING INC.
 
       
Dated: November 21, 2012
By:
/s/ Rafic Hanbali  
  Name:  Rafic Hanbali  
  Title: Chief Executive Officer  
   
(Principal Executive Officer)
 
 
Dated: November 21, 2012
By:
/s/ Clive D. Harbutt  
  Name:  Clive D. Harbutt  
  Title: Chief Financial Officer  
   
(Principal Financial Officer and
 
   
Principal Accounting Officer)
 
 
 
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