Convertible Notes with Warrants

6 Months Ended

Jun. 30, 2012

Convertible Notes With Warrants [Abstract]

Convertible Notes with Warrants

NOTE 7 -    Convertible Notes with Warrants

The Company has received subscriptions of $6,035,000 from the sale of 9% Secured Convertible Notes with Warrants issued in a private placement. The notes are secured by all of the assets of SwissINSO and are convertible into shares of common stock at a conversion price of $0.50 per share. Conversion may be exercised by the holder at any time prior to the maturity date which is 24 months from the date of issue. The warrants are exercisable for an equivalent number of shares at an exercise price of $1.00 per share within five years of issuance date.  Notes totaling $1,185,000 plus accrued interest were converted into 2,402,142 shares of common stock during the year ended December 31, 2010.  No notes were converted during 2011 or the first half of 2012.

The fair value of each warrant is estimated on the date of grant using Black-Scholes-Merton option-pricing model that uses the assumptions noted in the following table. 

Number of Warrants	% of Warrants Issued	Initial Vesting Date
2,000,000	100%	December 16, 2009
	Dividend Yield	0.00%
	Expected Volatility	369.51%
	Risk-Free Interest Rate	0.25%
	Contractual term	5 years
	Estimated Remaining term	1.46 years
	Stock Price at Date of Grant	$1.89
	Exercise Price	$1.00

900,000	100%	December 22, 2009
	Dividend Yield	0.00%
	Expected Volatility	369.51%
	Risk-Free Interest Rate	0.25%
	Contractual term	5 years
	Estimated Remaining term	1.48 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	369.51%
	Risk-Free Interest Rate	0.26%
	Contractual term	5 years
	Estimated Remaining term	1.65 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	369.51%
	Risk-Free Interest Rate	0.29%
	Contractual term	5 years
	Estimated Remaining term	2.29 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	369.51%
	Risk-Free Interest Rate	0.31%
	Contractual term	5 years
	Estimated Remaining term	2.69 years
	Stock Price at Date of Grant	$0.59
	Exercise Price	$1.00

 The total derivative charge for the six months ended June 30, 2012 was $351,988, representing the change in fair value between the outstanding warrants as of June 30, 2012 and December 31, 2011, which equated to $567,630 and $215,642, respectively.

The Company will issue common stock from authorized shares to those subscribers who exercise the warrants upon the exercise of the warrants. As of June 30, 2012, no warrants have been exercised.

As of June 30, 2012, certain convertible notes have come due. The Company is in discussions with the holders of such notes to extend the maturity date of their notes for an additional two years.  The Company has not received any indication that any holder is looking to satisfy the amount due through collection of assets securing the Company’s obligations under the notes.