Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - SWISSINSO HOLDING INC. | Financial_Report.xls |
| EX-32.2 - CERTIFICATION - SWISSINSO HOLDING INC. | f10q0913ex32ii_swissinso.htm |
| EX-31.2 - CERTIFICATION - SWISSINSO HOLDING INC. | f10q0913ex31ii_swissinso.htm |
| EX-32.1 - CERTIFICATION - SWISSINSO HOLDING INC. | f10q0913ex32i_swissinso.htm |
| EX-31.1 - CERTIFICATION - SWISSINSO HOLDING INC. | f10q0913ex31i_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, 2013
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 333-151909
SWISSINSO HOLDING INC.
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 90-0620127 | |
|
(State or Other Jurisdiction of Incorporation or Organization)
|
(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
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Accelerated filer o
|
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Non-accelerated filer o
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Smaller reporting company x
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(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 o No x
As of November 19, 2013, there were outstanding 137,117,265 shares of Common Stock, par value $0.0001 per share.
TABLE OF CONTENTS
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Page
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PART I FINANCIAL INFORMATION
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1 |
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Item 1. Financial Statements.
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1 |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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15 |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
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17 |
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Item 4. Controls and Procedures.
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17 |
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PART II OTHER INFORMATION
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18 |
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Item 1. Legal Proceedings.
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18 |
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Item 1A. Risk Factors.
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18 |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
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18 |
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Item 3. Defaults Upon Senior Securities.
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18 |
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Item 4. Mine Safety Disclosures.
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18 |
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Item 5. Other Information.
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18 |
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Item 6. Exhibits.
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18 |
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
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SWISSINSO HOLDING INC.
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||||||||
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(A Development Stage Company)
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||||||||
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CONDENSED CONSOLIDATED BALANCE SHEETS
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||||||||
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As of September 30, 2013 (Unaudited) and December 31, 2012
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||||||||
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2013
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2012
|
|||||||
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September 30
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December 31
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|||||||
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UNAUDITED
|
||||||||
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ASSETS
|
||||||||
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CURRENT ASSETS
|
||||||||
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Cash
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$ | 4,883 | $ | 128,271 | ||||
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Prepaid assets
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46,165 | 47,090 | ||||||
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Other receivables
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64,144 | 76,069 | ||||||
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Debtors
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13,254 | - | ||||||
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Total current assets
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128,446 | 251,430 | ||||||
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NON-CURRENT ASSETS
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||||||||
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Property and equipment, net
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- | 24,308 | ||||||
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TOTAL ASSETS
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$ | 128,446 | $ | 275,738 | ||||
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LIABILITIES AND STOCKHOLDERS' DEFICIT
|
||||||||
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CURRENT LIABILITIES
|
||||||||
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Bank loan
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$ | 319,213 | $ | - | ||||
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Accounts payable
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1,408,253 | 1,408,276 | ||||||
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Accrued expenses
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192,034 | 325,335 | ||||||
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Accrued payroll and benefits
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601,004 | 1,006,050 | ||||||
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Promissory notes
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816,000 | 650,000 | ||||||
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Loans
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634,375 | 1,028,421 | ||||||
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Accrued interest on notes payable
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303,001 | |||||||
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Convertible notes payable
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1,000,000 | |||||||
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Total current liabilities
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5,273,880 | 4,418,082 | ||||||
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NON-CURRENT LIABILITIES
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||||||||
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Accrued interest on notes payable
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- | 511,406 | ||||||
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Convertible notes payable
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- | 2,000,000 | ||||||
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Stock warrants liability
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4,115 | 480,659 | ||||||
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Total non-current liabilities
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4,115 | 2,992,065 | ||||||
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TOTAL LIABILITIES
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5,277,995 | 7,410,147 | ||||||
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STOCKHOLDERS' DEFICIT
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||||||||
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Stockholders' deficit :
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||||||||
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10,000,000 preferred shares, $0.0001 par value
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- | - | ||||||
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Issued and outstanding shares : 0
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||||||||
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Authorized :
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||||||||
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200,000,000 common shares, $0.0001 par value
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||||||||
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Issued and outstanding shares : 137,117,265 and 101,469,293
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13,711 | 10,147 | ||||||
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Additional paid in capital
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10,066,688 | 7,557,147 | ||||||
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Deficit accumulated during development stage
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(15,209,109 | ) | (14,736,143 | ) | ||||
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Accumulated other comprehensive income
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(20,839 | ) | 34,440 | |||||
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Total stockholders' deficit
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(5,149,549 | ) | (7,134,409 | ) | ||||
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
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$ | 128,446 | $ | 275,738 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
-1-
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SWISSINSO HOLDING INC.
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(A Development Stage Company)
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
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|||||||||||||||||||
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FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
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|||||||||||||||||||
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AND FOR THE PERIOD SINCE INCEPTION, JUNE 1, 2006 TO SEPTEMBER 30, 2013
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UNAUDITED
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|||||||||||||||||||
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For The Nine Months Ended
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For The Three Months Ended
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Inception
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|||||||||||||||||
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September 30,
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September 30,
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6/1/2006
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|||||||||||||||||
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2013
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2012
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2013
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2012
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to 09/30/2013
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|||||||||||||||
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REVENUES
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$ | - | $ | - | $ | $ | - | $ | - | ||||||||||
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OPERATING EXPENSES
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|||||||||||||||||||
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General and administrative
|
1,319,442 | 1,557,354 | 354,303 | 512,268 | 11,234,427 | ||||||||||||||
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Stock warrants expense
|
(476,544 | ) | 262,138 | (3,505 | ) | (89,850 | ) | 4,115 | |||||||||||
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Debt issuance expense
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- | 134,713 | - | 1,695,362 | |||||||||||||||
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Research and development
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- | - | 1,288,582 | ||||||||||||||||
| 842,898 | 1,954,205 | 350,798 | 422,418 | 14,222,486 | |||||||||||||||
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OTHER INCOME
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|||||||||||||||||||
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Interest income
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5 | 3 | 1 | 1 | 283 | ||||||||||||||
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Abandonment of Salaries
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452,233 | 725 | 452,233 | ||||||||||||||||
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Participation Fee
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160,479 | 257 | 160,479 | ||||||||||||||||
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Exchange profit
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1,180 | - | 1,180 | - | 1,697 | ||||||||||||||
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Gain on vehicle
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- | - | - | - | 6,816 | ||||||||||||||
| 613,897 | 3 | 2,163 | 1 | 621,508 | |||||||||||||||
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OTHER EXPENSES
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|||||||||||||||||||
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Interest on debt
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230,034 | 328,069 | 61,667 | 92,811 | 1,560,069 | ||||||||||||||
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Loss on impairment of property and equipment
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13,931 | - | 13,931 | - | 13,931 | ||||||||||||||
| Loss on disposal | - | - | - | - | 26,089 | ||||||||||||||
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Exchange loss
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- | (10,848 | ) | - | |||||||||||||||
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Taxes
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- | 59 | - | 59 | (268 | ) | |||||||||||||
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Commission on debt
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- | - | - | - | 8,310 | ||||||||||||||
| 243,965 | 328,128 | 64,750 | 92,870 | 1,608,131 | |||||||||||||||
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NET INCOME (LOSS)
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$ | (472,966 | ) | $ | (2,282,330 | ) | $ | (413,385 | ) | $ | (515,287 | ) | $ | (15,209,109 | ) | ||||
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Foreign currency adjustment
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(55,279 | ) | 4,865 | (122,059 | ) | (43,077 | ) | (20,820 | ) | ||||||||||
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COMPREHENSIVE INCOME (LOSS)
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(528,245 | ) | (2,277,465 | ) | (535,444 | ) | (558,364 | ) | (15,229,929 | ) | |||||||||
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Basic and diluted net income (loss) per share
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$ | (0.0036 | ) | $ | (0.03 | ) | $ | (0.0030 | ) | $ | (0.01 | ) | $ | (0.21 | ) | ||||
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Weighted average shares outstanding - Basic and diluted
|
131,342,397 | 83,024,746 | 136,262,750 | 90,916,137 | 73,048,563 | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
-2-
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SWISSINSO HOLDING INC.
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(A Development Stage Company)
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
|
||||||||||||
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FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
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||||||||||||
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AND FOR THE PERIOD SINCE INCEPTION, JUNE 1, 2006 TO SEPTEMBER 30, 2013
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||||||||||||
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UNAUDITED
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||||||||||||
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From
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||||||||||||
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For the Nine Months Ended
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Inception
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|||||||||||
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September 30
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6/1/2006
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|||||||||||
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2013
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2012
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to 09/30/2013
|
||||||||||
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NET INCOME (LOSS)
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$ | (472,966 | ) | $ | (2,282,330 | ) | $ | (15,209,109 | ) | |||
|
OPERATING ACTIVITIES
|
||||||||||||
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Depreciation
|
12,124 | 40,802 | 149,219 | |||||||||
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Amortization of defered debt issuance cost
|
134,713 | 1,213,062 | ||||||||||
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Interest contributed by shareholder
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2,809 | |||||||||||
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Gain on sale of asset
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3,527 | (6,816 | ) | |||||||||
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Interest accrued on converted notes
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16,071 | |||||||||||
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Loss on inventory write down
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352,865 | 544,436 | ||||||||||
| Loss on impairment of property and equipment | 13,931 | - | 13,931 | |||||||||
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Loss on disposal
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26,089 | |||||||||||
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Shares issued for services
|
68,020 | 232,180 | 330,200 | |||||||||
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Stock option expense
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220,000 | 220,000 | ||||||||||
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Capital contributions of interest expense
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31,252 | 32,998 | 82,053 | |||||||||
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Change in stock warrants liability
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(476,544 | ) | 262,138 | 4,115 | ||||||||
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Increase (decrease) in security deposit
|
||||||||||||
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Changes in Operating Assets and Liabilities:
|
||||||||||||
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(Increase) / decrease in prepaids and other receivables
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12,850 | (6,757 | ) | (110,310 | ) | |||||||
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(Increase) / decrease in debtors
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(13,254 | ) | (13,254 | ) | ||||||||
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(Increase) inventory "Krystall"
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(544,436 | ) | ||||||||||
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Increase (decrease) in accounts payable and accrueds
|
(538,370 | ) | 6,067 | 3,274,962 | ||||||||
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Net cash used in operating activities
|
(1,362,957 | ) | (1,003,797 | ) | (10,006,978 | ) | ||||||
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INVESTING ACTIVITIES
|
||||||||||||
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Property and equipment acquisition
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- | (219,928 | ) | |||||||||
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Cash received in acquisition of shell
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- | - | 670,357 | |||||||||
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Proceeds from sale of asset
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- | - | 34,080 | |||||||||
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Net cash provided by (used in) investing activities
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- | - | 484,509 | |||||||||
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FINANCING ACTIVITIES
|
||||||||||||
| Proceeds of bank loan | 319,213 | - | 319,213 | |||||||||
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Proceeds from convertible notes
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- | - | 6,035,000 | |||||||||
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Proceeds from issuance of shares
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- | - | 85,698 | |||||||||
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Repayment of borrowings
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- | - | (521,500 | ) | ||||||||
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Loan
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166,000 | 750,000 | 1,566,000 | |||||||||
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Debt due to shareholders
|
811,376 | 499,902 | 2,060,089 | |||||||||
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Net cash provided by financing activities
|
1,296,589 | 1,249,902 | 9,544,500 | |||||||||
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Effect of exchange rate on cash
|
(57,020 | ) | 4,865 | (17,148 | ) | |||||||
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INCREASE (DECREASE) IN CASH
|
(123,388 | ) | 250,970 | 4,883 | ||||||||
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CASH AT BEGINNING OF PERIOD
|
128,271 | 8,163 | - | |||||||||
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CASH AT END OF PERIOD
|
$ | 4,883 | $ | 259,133 | $ | 4,883 | ||||||
| NON - CASH FINANCING ACTIVITIES | ||||||||||||
|
Shares issued on conversion of notes and accrued interest
|
2,413,833 | 4,445,232 | 6,859,065 | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
-3-
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SWISSINSO HOLDING INC.
|
||||||||||||||||||||||||||||
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(A Development Stage Company)
|
||||||||||||||||||||||||||||
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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
|
||||||||||||||||||||||||||||
|
FOR THE PERIOD SINCE INCEPTION, JUNE 1, 2006 TO SEPTEMBER 30, 2013
|
||||||||||||||||||||||||||||
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Deficit
|
||||||||||||||||||||||||||||
|
Accumulated
|
||||||||||||||||||||||||||||
|
Additional
|
Other
|
During the
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Total
|
|||||||||||||||||||||||||
|
Common Stock
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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 December 31, 2012
|
(3,326,763 | ) | (3,326,763 | ) | ||||||||||||||||||||||||
|
New Stock option expenses
|
220,000 | 220,000 | ||||||||||||||||||||||||||
|
Shares issued for Services Rendered
|
8,299,832 | 830 | 261,350 | 262,180 | ||||||||||||||||||||||||
|
Shares issued on conversion of notes + accrued interest
|
14,570,174 | 1,457 | 4,453,775 | 4,455,232 | ||||||||||||||||||||||||
|
Capital contribution of interest
|
50,801 | 50,801 | ||||||||||||||||||||||||||
|
Foreign currency exchange adjustment
|
(74,347 | ) | (74,347 | ) | ||||||||||||||||||||||||
|
Balance at December 31, 2012
|
101,469,293 | $ | 10,147 | $ | 7,557,147 | $ | - | $ | 34,440 | $ | (14,736,143 | ) | $ | (7,134,409 | ) | |||||||||||||
|
Net loss for the period ended September 30, 2013
|
(472,966 | ) | (472,966 | ) | ||||||||||||||||||||||||
|
Shares issued for services rendered
|
1,914,286 | 191 | 67,829 | 68,020 | ||||||||||||||||||||||||
|
Shares issued on conversion of notes + accrued interest
|
33,733,686 | 3,373 | 2,410,460 | 2,413,833 | ||||||||||||||||||||||||
|
Capital contribution of interest
|
31,252 | 31,252 | ||||||||||||||||||||||||||
|
Foreign currency exchange adjustment
|
(55,279 | ) | (55,279 | ) | ||||||||||||||||||||||||
|
Balance at September 30, 2013
|
137,117,265 | $ | 13,711 | $ | 10,066,688 | $ | - | $ | (20,839 | ) | $ | (15,209,109 | ) | $ | (5,149,549 | ) | ||||||||||||
|
(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 exchange agreement with Pashminadepot.com Inc.
|
The accompanying notes are an integral part of these consolidated financial statements.
-4-
SWISSINSO HOLDING INC.
(A Development Stage Company)
UNAUDITED
NOTES TO FINANCIAL STATEMENTS
September 30, 2013
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. In conjunction with the Solar Energy and Building Physics Laboratory (LESO-PB) of the Swiss Polytechnic Institute of Lausanne, Switzerland (EPFL), SwissINSO targets, develops and commercializes breakthrough renewable energy green technologies exiting the LESO-PB product development pipeline.
SwissINSO utilizes its intellectual property assets to provide aesthetic and efficient solar energy solutions and products to the renewable energy market.
SwissINSO’s goal is to become a world leader in the development of leading-edge technologies and products in the renewable energy sector that address the global energy shortage through products that are aesthetic and efficient with a specific focus on solar technology innovations in the areas of solar air cooling and heating.
Since its inception, SwissINSO has devoted substantially all of its efforts to raising capital, research and development, market research, securing technology rights and the validation and scale-up of the Kromatix™ technology, the first SwissINSO product to exit the LESO-PB development pipeline.
SwissINSO generated income during the nine months ended September 30, 2013 as a result of its joint venture arrangement with Acomet Solar S.A. (see footnote 17 for additional details).
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The condensed 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 make the information presented not misleading. These condensed 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.
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, 2013 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 condensed 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 condensed consolidated financial statements include the historical financial information of SwissINSO SA from inception to September 30, 2013. Intercompany transactions and balances have been eliminated.
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. The balance of the foreign currency translation adjustment, included in Accumulated other comprehensive income, was ($55,279) and $4,865 for the nine months ended September 30, 2013 and September 30, 2012, respectively.
-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. At September 30, 2013 the Company had no saleable inventory or work-in-process.
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, marketing and promotional expenses, expenses linked with the industrial development (material and transport) of SwissINSO’s Kromatix™ product and various other general corporate expenses.
Employee Benefit
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.
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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 $-0- and $220,000 for the periods ended September 30, 2013 and September 30, 2012, 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 Income (Loss) Per Share
Basic net income (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 income (loss) per share is the same as diluted net income (loss) per share for the periods ended September 30, 2013 and September 30, 2012.
Income Taxes
The Company and its subsidiary provide for income taxes in accordance with FASB ASC 740-10. 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. Debt issuance costs were fully amortized during 2012.
NOTE 4 – Inventory
Inventories are stated at the lower of cost (first-in, first-out) or market. The Company’s policy is to regularly assesses slow-moving, excess and obsolete inventory and establish appropriate reserves against any amounts determined to have such characteristics. There were no inventories on hand as of September 30, 2013 and December 31, 2012.
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NOTE 5 - Property and Equipment at September 30, 2013 and December 31, 2012 at cost, consisted of the following:
|
September 30, 2013
|
December 31, 2012
|
|||||||
| Furniture | $ | 84,618 | $ | 84,618 | ||||
| Computer equipment | 116,520 | 102,818 | ||||||
| 201,138 | 187,436 | |||||||
| Less accumulated depreciation | (201,138 | ) | (163,128 | ) | ||||
| $ | -0- | $ | 24,308 | |||||
Depreciation expense on property and equipment for the nine months ended September 30, 2013 and 2012 was $12,124 and $40,802, 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) $1,066,000 without interest repayable on a to be agreed date. The loan acknowledgement referred to in (b) above and $500,000 of the loan acknowledgements referred to in (c) above were converted into 7,659,710 shares of common stock during 2012. The note referred to in (a) above and $566,000 of the loan acknowledgements referred to in (c) above remain outstanding.
During 2011, 2012 and the first nine months of 2013, the Company’s subsidiary borrowed an aggregate of $1,682,373 from current and former executive officers and directors and shareholders 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. As of September 30, 2013, $634,375 of these amounts remain outstanding. Imputed interest of $31,252 has been contributed as capital during the nine months ended September 30, 2013.
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 $5,035,000 plus accrued interest have been converted into 11,964,550 shares of common stock. Notes totaling $1,000,000 were converted during the first nine months of 2013.
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
|
% of Warrants Issued
|
Initial Vesting Date
|
||
|
2,000,000
|
100%
|
December 16, 2009
|
||
|
Dividend Yield
|
0.00%
|
|||
|
Expected Volatility
|
153.30%
|
|||
|
Risk-Free Interest Rate
|
0.10%
|
|||
|
Contractual term
|
5 years
|
|||
|
Estimated Remaining term
|
0.21 years
|
|||
|
Stock Price at Date of Grant
|
$1.89
|
|||
|
Exercise Price
|
$1.00
|
-9-
|
900,000
|
100%
|
December 22, 2009
|
||
|
Dividend Yield
|
0.00%
|
|||
|
Expected Volatility
|
153.30%
|
|||
|
Risk-Free Interest Rate
|
0.10%
|
|||
|
Contractual term
|
5 years
|
|||
|
Estimated Remaining term
|
0.23 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
|
153.30%
|
|||
|
Risk-Free Interest Rate
|
0.10%
|
|||
|
Contractual term
|
5 years
|
|||
|
Estimated Remaining term
|
0.40 years
|
|||
|
Stock Price at Date of Grant
|
$1.25
|
|||
|
Exercise Price
|
$1.00
|
|
500,000
|
100%
|
September 15, 2010
|
||
|
Dividend Yield
|
0.00%
|
|||
|
Expected Volatility
|
153.30%
|
|||
|
Risk-Free Interest Rate
|
0.11%
|
|||
|
Contractual term
|
5 years
|
|||
|
Estimated Remaining term
|
1.04 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
|
153.30%
|
|||
|
Risk-Free Interest Rate
|
0.14%
|
|||
|
Contractual term
|
5 years
|
|||
|
Estimated Remaining term
|
1.19 years
|
|||
|
Stock Price at Date of Grant
|
$0.59
|
|||
|
Exercise Price
|
$1.00
|
Since the Company now has four years of publicly traded historical stock prices, expected volatility is now estimated based on the historical volatility of the Company’s share price over the past twelve months.
The total derivative gain for the nine months ended September 30, 2013 was $476,544, representing the change in fair value between the outstanding warrants as of September 30, 2013 and December 31, 2012, which equated to $4,115 and $480,659, respectively. The Company originally computed the value of the warrants based on an expected exercise of the warrants two years following their issuance. The foregoing table estimates the exercise of the warrants four years following their issuance.
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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, 2013, no warrants have been exercised.
As of September 30, 2013, the remaining $1,000,000 of convertible notes have come due. Effective October 31, 2013, the Company has notified the holders of the $1,000,000 of remaining convertible notes that, as a result of the conversion of at least 80% of the convertible notes into Common Stock of the Company, they are required to convert their notes and accrued interest in Common Stock as well.
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
|
Debt issuance costs as of September 30, 2013 and December 31, 2012 were as follows:
|
September 30, 2013
|
December 31, 2012
|
|||||||
| Debt Issuance Cost | $ | - | $ | 134,713 | ||||
| Accumulated amortization | - | (134,713 | ) | |||||
| Debt Issuance, end of period | $ | - | $ | -0- | ||||
Amortization of debt issuance expense for the periods ended September 30, 2013 and September 30, 2012 was $-0- and $134,713, respectively. These debt issuance costs have now been fully amortized.
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, 2013.
Common Stock
The Company has authorized 200,000,000 shares of common stock, par value $0.0001 per share, of which 137,117,265 shares were issued and outstanding as of September 30, 2013.
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NOTE 10 – Related Party Transactions
During the nine months ended September 30, 2013, the Company’s subsidiary borrowed an aggregate of $355,468 from InsOglass to meet the working capital needs of the Company and its subsidiary. The loans do not bear interest and are repayable on a to be agreed future date.
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 nine month period ended September 30, 2013 totaled $21,717.
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, 2013 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 $100,000 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 an agreement for the acquisition of industrial technology, the Company through its subsidiary was committed at September 30, 2013 as follows:
|
- Payments for acquisition of technology over a 4 year period
|
$ | 127,035 |
During the nine months ended September 30, 2013, the Company’s subsidiary made payments aggregating $72,999 to EPFL as required under the agreement.
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 5,800,000 shares of its common stock to its Chief Executive Officer, its Chief Financial Officer, one employee and one outside consultant at an exercise price of $0.10 per share.
At September 30, 2013, there were 4,200,000 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, 2013 are provided in the following table.
-12-
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 now has four years of publicly traded historical stock prices, expected volatility is now estimated based on the historical volatility of the Company’s share price over the past twelve months. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve at the date of grant.
|
Valuation Assumptions
|
September 30, 2013
|
|
|
Expected Dividend Yield
|
0.00%
|
|
|
Expected Volatility
|
153.30%
|
|
|
Expected Term (Years)
|
10
|
|
|
Risk-free Interest Rate
|
2.52%
|
As and for the nine months ended September 30, 2013, there were no additional stock options granted, forfeited, exercised or expired. The stock options outstanding and exercisable as of December 31, 2012 and September 30, 2013 were 5,500,000. 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 31, 2012
|
5,500,000 | $ | 0.10 | 10 | - | |||||||||||
|
Granted
|
- | - | - | - | ||||||||||||
|
Forfeited
|
- | - | - | - | ||||||||||||
|
Exercised
|
- | - | - | - | ||||||||||||
|
Expired
|
- | - | - | - | ||||||||||||
|
Balance at September 30, 2013
|
5,500,000 | $ | 0.10 | 10 | - | |||||||||||
|
Exercisable at September 30, 2013
|
5,500,000 | $ | 0.10 | 10 | - | |||||||||||
The Company currently uses authorized and unissued shares to satisfy share award exercises.
NOTE 16 – Subsequent Events
None
-13-
NOTE 17 – Joint Venture Agreement
On January 26, 2013, SwissINSO Holding Inc. entered into a Joint Venture Agreement (the “Agreement”) with Acomet Solar S.A. (“Acomet”) through its holding company Axama Consult AG. The joint venture is intended to create a vehicle for SwissINSO S.A., the Company’s wholly-owned subsidiary (“SwissINSO”), and Acomet to combine their product, technologies and expertise in the field of Business Integrated Photovoltaic (“BIPV”) solar façade construction to provide integrated, aesthetic and efficient solar energy-saving solutions to commercial, industrial and domestic energy consumers.
Under the terms of the Agreement, SwissINSO will grant Acomet a non-exclusive agreement whereby Acomet will leverage its BIPV expertise and client base to provide projects, starting in Switzerland, which will integrate a range of color coated solar panels and roof tiles developed using SwissINSO’s breakthrough color coating solar glass technology. In addition, SwissINSO will provide Acomet a robust future pipeline of new solar technologies and innovations for its BIPV projects.
Acomet will contribute the initial stock capital of the joint venture and pay a participation fee to the Company in consideration of the grant to Acomet by SwissINSO of the right to use SwissINSO technologies in its solar façade integration projects.
As of September 30, 2013, the Company received participation fees of $160,479 from Acomet.
-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, 2013 and 2012, 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 Operations – Three and nine months ended September 30, 2013 compared to three and nine months ended September 30, 2012
During the three month periods ended September 30, 2013 and September 30, 2012, we did not generate any operating revenues. We were successful in creating a joint venture with Acomet Solar S.A. which generated income during the three months ended September 30, 2013 from a participation fee paid to the Company of $257. During the quarter ended September 30, 2013, we incurred $354,303 of general and administrative expenses as we continued the development of the business of SwissINSO. In addition, we incurred $61,667 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, 2012 and the first nine months of 2013. In comparison, 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.
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Our net loss before foreign currency translation adjustments during the quarter ended September 30, 2013 was $413,385, including a non-cash gain of $3,505, representing the change from June 30, 2013 to September 30, 2013 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, 2012 of $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.
During the nine month periods ended September 30, 2013 and September 30, 2012, we did not generate any operating revenues. We were successful in creating a joint venture with Acomet Solar S.A. which generated income during the nine months ended September 30, 2013 from a participation fee paid to the Company of $160,479. During the nine months ended September 30, 2013, we incurred $1,319,442 of general and administrative expenses as we continued the development of the business of SwissINSO and $230,034 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, 2012 and the first nine months of 2013. In comparison, 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 quarters) 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.
Our net loss before foreign currency translation adjustments during the nine months ended September 30, 2013 was $472,966, including accrued salaries of $452,233 abandoned during the period and an offsetting gain on such abandonment and a non-cash gain of $476,544, representing the change from December 31, 2012 to September 30, 2013 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, 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 quarters 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.
Liquidity and Capital Resources
As of September 30, 2013, we had a working capital deficit of $5,145,434 as compared with a working capital deficit at December 31, 2012 of $4,166,652. 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, 2013, we did not sell any additional convertible notes and warrants in the private placement. We did, however, receive short-term loans aggregating approximately $355,468 from our Chief Executive Officer and one of our shareholders and $319,213 from a credit facility with Banque Cantonal Freiburg guaranteed by our Chief Executive Officer to meet the working capital needs of SwissINSO and had $1,000,000 of convertible notes (together with accrued interest) convert into our Common Stock, thereby enabling us to force the conversion of the remaining $1,000,000 of convertible notes and accrued interest effective October 31, 2013. We have not received any other cash infusions, are unable to meet our current obligations to suppliers, vendors, service providers and lenders and are negotiating extended payment terms with some of our creditors. In addition, we have substantially reduced our personnel and sharply curtailed our business operations other than the development of our Kromatix™ business.
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 Kromatix™ 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 the Kromatix™ 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 (b) developing the Kromatix™ business. We incurred a net loss before foreign currency translation adjustments during the nine months ended September 30, 2013 of $472,966, including accrued salaries of $452,233 abandoned during the period and an offsetting gain on such abandonment and a non-cash gain of $476,544, representing the change from December 31, 2012 to September 30, 2013 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 $15,209,109 primarily comprised of $12,523,009 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 $1,560,069 in interest charges incurred on the bridge loans, convertible debt and other short-term 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 Kromatix™ 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.
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, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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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.
On July 31, 2013, the Company issued 2,651,944 shares of its Common Stock to one holder of our convertible notes upon conversion of $1,000,000 principal amount of such notes and $325,972 of accrued interest at a conversion price of $0.50 per share. Such securities were issued under Section 4(2) of the Securities Act of 1933, as amended, and Regulations D and S promulgated by the Securities and Exchange Commission thereunder.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
During the quarter ended September 30, 2013, the Company’s subsidiary borrowed approximately $183,564 from InsOglass Holding SA, a business organization controlled by the Company’s Chief Executive Officer, to meet the working capital needs of the Company’s subsidiary. The loans do not bear interest and are repayable on a to be agreed future date.
Item 6. Exhibits
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Exhibit Number
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Description
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31.1 and 31.2
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Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
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32.1 and 32.2
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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. | ||
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Dated: November 19, 2013
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By:
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/s/ Rafic Hanbali |
| Name: Rafic Hanbali | ||
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Title: Chief Executive Officer
(Principal Executive Officer)
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| Dated: November 19, 2013 | By: | /s/ Pierre Galster |
| Name: Pierre Galster | ||
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Title: Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
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