UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2014

 

☐ 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 – 3^rd 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 ☐ No ☒

 

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 ☐ No ☒

 

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	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒

(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 ☒

 

As of September 24, 2014, there were outstanding 143,625,892 shares of Common Stock, par value $0.0001 per share.

 

 

 

TABLE OF CONTENTS

 

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	8
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	10
Item 4.	Controls and Procedures.	10
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings.	11
Item 1A.	Risk Factors.	11
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	11
Item 3.	Defaults Upon Senior Securities.	11
Item 4.	Mine Safety Disclosures.	11
Item 5.	Other Information.	11
Item 6.	Exhibits.	11

 

 

PART I

FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

SWISSINSO HOLDING INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

		June 30, 2014				December 31, 2013
ASSETS
ASSETS
Cash		$	1,969			$	6,173
Prepaid expenses			4,134				16,819
Subscription receivable			48,000				-
Total current assets			54,103				22,992
TOTAL ASSETS		$	54,103			$	22,992
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Bank Loan			342,518				392,367
Accounts payable			912,252				1,098,832
Accrued expenses			174,000				172,991
Accrued payroll and benefits			441,118				548,656
Deferred income			169,121				168,501
Convertible loans from related parties			1,591,575				719,697
Loans from third parties			590,887				533,332
Total current liabilities			4,221,471				3,634,376
TOTAL LIABILITIES		$	4,221,471			$	3,634,376
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 : 143,625,892 and 143,525,892, respectively			14,364				14,354
Additional paid in capital			12,479,914				12,431,924
Accumulated deficit			(16,653,206	)			(15.986,306	)
Other comprehensive income			(8,440	)			(71,356	)
Total stockholders' deficit			(4,167,368	)			(3,611,384	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	54,103			$	22,992

 

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

 

 

SWISSINSO HOLDING INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2014				2013				2014				2013
REVENUES			-				-				-				-
OPERATING EXPENSES
General and administrative		$	442,014			$	557,168			$	766,306			$	965,139
Stock warrants expense			-				(32,509	)			-				(473,039	)
			442,014				524,659				766,306				492,100
OTHER INCOME
Interest income			-				3				1				4
Abandonment of debts			81,700				451,508				109,226				451,508
Participation fee			-				13,280				-				160,222
			81,700				464,791				109,227				611,734
OTHER EXPENSES
Interest expense			4,591				75,995				9,821				168,367
Exchange loss			(73	)			10,447				-				10,848
			4,518				86,442				9,821				179,215
NET INCOME (LOSS)			(364,832	)			(146,310	)			(666,900	)			(59,581	)
Foreign currency adjustment			68,148				(10,378	)			62,916				66,780
COMPREHENSIVE INCOME (LOSS)			(296,684	)			(156,688	)			(603,984	)			7,199
Basic and diluted net income (loss) per share			(0.00	)			(0.00	)			(0.00	)			(0.00	)
Weighted average shares outstanding – Basic and diluted			143,607,003				134,397,189				143,566,223				128,895,814

  

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

 

  

SWISSINSO HOLDING INC.

CONSOLIDATED STATEMENTS OF CASH FLOW

(UNAUDITED)

 

		Six Months Ended
		June 30
		2014				2013
NET INCOME (LOSS)		$	(666,900	)			(59,581	)
OPERATING ACTIVITIES
Abandonment of debts			(109,226	)			-
Depreciation			-				11,504
Shares issued for services			-				68,020
Capital contributions of interest expense			-				22,873
Stock warrant expense			-				(473,039	)
Changes in Operating Assets and Liabilities:
Decrease (increase)  in prepaid expenses and other receivables			12,685				16,280
Decrease (increase) in deferred revenue			620				-
Increase (decrease) in debtors			-				(12,709	)
Increase (decrease) in accounts payable and accrued expense			(183,883	)			(603,897	)
Net cash used in operating activities			(946,704	)			(1,030,549	)
FINANCING ACTIVITIES
Proceeds from third party loans			57,555				-
Payment on line of credit			(49,849	)			-
Proceeds from related party loans			871,878				891,306
Net cash provided by financing activities			879,584				891,306
Effect of exchange rate on cash			62,916				35,201
INCREASE (DECREASE) IN CASH			(4,204	)			(104,042	)
CASH AT BEGINNING OF PERIOD			6,173				128,271
CASH AT END OF PERIOD		$	1,969			$	24,229
CASH PAID FOR:
Interest		$	-			$	-
Income taxes		$	-			$	-
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Subscription receivable		$	48,000			$	-

 

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

 

 

SWISSINSO HOLDING INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

June 30, 2014

 

NOTE 1 – Basis of presentation

 

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.

 

The company has limited operations and is considered to be in the development stage. In the six months ended June 30, 2014, the Company has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the company to remove the inception to date information and all references to development stage

 

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 through the generation of revenues from the sale of products and technologies. 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.

 

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 – Related Party Transactions

 

The Company borrowed $871,878 during the six months ended June 30, 2014 from InsOglass Holding SA, a business organization controlled by the Company’s Chief Executive Officer (“InsOglass”). The Company is indebted to InsOglass for $1,099,879 for loans made by such entity to the Company through June 30, 2014 to meet the working capital needs of the Company and its subsidiary. The balance outstanding is unsecured, due on demand and non-interest bearing. Such loans 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 $0.035 per share. Based on our share price at the time the loan agreement was entered into, the Company has a nominal beneficial conversion feature for this convertible loan.

 

 

The Company is indebted to Salim Shaikh Ismail, the holder of 13,858,633 shares of our Common Stock, or 9.66%, for $491,696 of loans made by him to the Company to meet the working capital needs of the Company and its subsidiary. Such loans are unsecured, are due on demand and do not bear interest.

 

NOTE 4 – Note payable

 

During the six months ended June 30, 2014, the Company borrowed $57,555 from a third party lender. The note is non-interest bearing and due on demand.

 

NOTE 5 – Commitments

 

Under an agreement for the acquisition of industrial technology, the Company through its subsidiary was committed at June 30, 2014 as follows:

 

- Payments for acquisition of technology over a 4 year period

$

56,780

 

NOTE 6 – Bank Loan

 

During the six months ended June 30, 2014, the Company repaid $49,849 of the $392,367 it had borrowed from Banque Cantonale de Fribourg with the personal guarantee of the Company’s Chief Executive Officer. The total outstanding amount due on this facility as of June 30, 2014 was $342,518.

 

NOTE 7 – Forgiveness of Accrued Expenses

 

During the six months ended June 30, 2014, the Company’s subsidiary settled obligations with certain of its creditors resulting in the forgiveness of $109,226 of accrued expenses.

 

NOTE 8 – Equity

 

During the quarter ended June 30, 2014, the Company sold 100,000 shares of common stock to a third party investor at a price of $0.48 per share. As of June 30, 2014, the proceeds of $48,000 were not received and have been accounted for as a subscription receivable. Such proceeds have been received as of the date of this report.

 

NOTE 9 – Subsequent Events

 

During the third quarter of 2014, the Company’s subsidiary borrowed approximately $275,000 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.

 

 

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 June 30, 2014 and 2013, 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 six months ended June 30, 2014 compared to three and six months ended June 30, 2013

 

During the three month periods ended June 30, 2014 and June 30, 2013, the Company has generated no revenues. During the quarter ended June 30, 2014, we incurred $442,014 of general and administrative expenses as we continued the development of the business of SwissINSO. In addition, we incurred $4,591 in interest charges related to a bridge loan received in September 2009 and short-term loans received during 2011, 2012, 2013 and the first six months of 2014. In comparison, during the quarter ended June 30, 2013, we incurred $557,168 of general and administrative expenses as we continued the development of the business of SwissINSO and $75,995 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 half of 2013.

 

 

Our net loss before foreign currency translation adjustments during the quarter ended June 30, 2014 was $364,832, as compared to a net loss before foreign currency translation adjustments during the quarter ended June 30, 2013 of $146,310, including accrued salaries of $451,508 abandoned during the period and an offsetting gain on such abandonment and a non-cash stock warrants gain of $32,509. In 2014, management determined that warrants granted in prior years should not have been accounted for as derivatives and that the liability at June 30, 2014 (as well as at December 31, 2013) should be $-0-. Had this accounting treatment been in place during the quarter ended June 30, 2013, our results for that quarter would have been a net loss before foreign currency translation adjustments of $178,819.

 

During the six month periods ended June 30, 2014 and June 30, 2013, the Company generated no revenues. During the six months ended June 30, 2014, we incurred $766,306 of general and administrative expenses as we continued the development of the business of SwissINSO. In addition, we incurred $9,821 in interest charges related to a bridge loan received in September 2009 and short-term loans received during 2011, 2012, 2013 and the first six months of 2014. In comparison, during the six months ended June 30, 2013, we incurred $965,139 of general and administrative expenses as we continued the development of the business of SwissINSO and $168,367 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 half of 2013.

 

Our net loss before foreign currency translation adjustments during the six months ended June 30, 2014 was $666,900, as compared to a net loss before foreign currency translation adjustments during the six months ended June 30, 2013 of $59,581, including accrued salaries of $451,508 abandoned during the period and an offsetting gain on such abandonment and a non-cash stock warrants gain of $473,039. In 2014, management determined that warrants granted in prior years should not have been accounted for as derivatives and that the liability at June 30, 2014 (as well as at December 31, 2013) should be $-0-. Had this accounting treatment been in place during the six months ended June 30, 2013, our results for that quarter would have been a net loss before foreign currency translation adjustments of $465,840.

 

Liquidity and Capital Resources

 

As of June 30, 2014, we had a working capital deficit of $4,167,368 as compared with a working capital deficit at December 31, 2013 of $3,611,384. During the past twelve (12) months, we have incurred significant operating expenses, and we expect to incur additional, but less significant, operating expenses for overheads, research and development, sampling and certification, sales channel development, general and administrative expenses and debt payments during the next twelve (12) months.

 

During the six months ended June 30, 2014, we received short-term loans aggregating approximately $871,878 from our Chief Executive Officer to meet the working capital needs of SwissINSO. These loans were sufficient to enable the Company to meet the working capital needs of SwissINSO. We were also able to negotiate settlements or extended payment terms with our creditors, and a large part of these obligations were settled in the six months ended June 30, 2014.

 

We do not have any other available credit, bank financing or other external sources of liquidity except those provided by our Chief Executive Officer and will need to obtain additional capital in order to continue SwissINSO’s business operations. In order to obtain such capital, we will need to sell additional securities and/or borrow additional funds from lenders. There can be no assurance that we will obtain additional funding which is sufficient until substantial revenue from sales has started. We will also need to commercialize our Kromatix™ business. If we are not successful in raising sufficient capital, either from sales of securities, additional borrowings, revenues generated by the Kromatix™ 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.

 

 

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 six months ended June 30, 2014 of $666,900. 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 sales of securities and private borrowings, from the commercialization of the Kromatix™ business and from entry into a joint venture with a 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 not 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 June 30, 2014 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.

 

On April 18, 2014, the Company issued 100,000 shares of its Common Stock to an investor for a purchase price of $48,000, or $0.48 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 June 30, 2014, the Company’s subsidiary borrowed approximately $326,077 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

 

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.

 

 

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: September 24, 2014	By:	/s/ Rafic Hanbali
	Name:	Rafic Hanbali
	Title:	Chief Executive Officer
		(Principal Executive Officer)
Dated: September 24, 2014	By:	/s/ Clive Harbutt
	Name:	Clive Harbutt
	Title:	Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer

 

 

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