Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Nov. 30, 2014 | Jan. 07, 2015 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Infinity Augmented Reality, Inc. | |
Entity Central Index Key | 1421538 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -23 | |
Document Type | 10-Q | |
Document Period End Date | 30-Nov-14 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2015 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 94,960,687 |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Nov. 30, 2014 | Aug. 31, 2014 |
CURRENT ASSETS | ||
Cash and cash equivalents | $1,163,005 | $875,438 |
Prepaid expenses and other receivables | 54,838 | 178,394 |
Total current assets | 1,217,843 | 1,053,832 |
Property and equipment, net | 76,356 | 84,885 |
Investment in Meta Company | 50,000 | 50,000 |
TOTAL ASSETS | 1,344,199 | 1,188,717 |
CURRENT LIABILITIES | ||
Accounts payable and accrued expenses | 51,342 | 191,046 |
Interest payable | 77,165 | 54,871 |
Current liabilities of discontinued operations | 27,835 | |
Total current liabilities | 128,507 | 273,752 |
Convertible debentures, net of debt discount | 4,021,890 | 3,291,930 |
TOTAL LIABILITES | 4,150,397 | 3,565,682 |
COMMITMENTS AND CONTINGENT LIABILITIES | ||
STOCKHOLDERS' DEFICIT | ||
Common stock ($ 0.00001 par value; 500,000,000 authorized; 95,316,155 issued and 94,960,687 outstanding at November 30, 2014 and at August 31, 2014 | 953 | 953 |
Additional paid in capital | 64,944,798 | 63,866,965 |
Treasury stock, at cost 355,468 shares of common stock November 30, 2014 and August 31, 2014 | -49,766 | -49,766 |
Accumulated deficit | -67,648,485 | -66,180,566 |
Accumulated other comprehensive loss | -53,698 | -14,551 |
Total Stockholders' Deficit | -2,806,198 | -2,376,965 |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $1,344,199 | $1,188,717 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Nov. 30, 2014 | Aug. 31, 2014 |
Consolidated Balance Sheets [Abstract] | ||
Common stock, par value (in dollars per share) | $0.00 | $0.00 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 95,316,155 | 95,316,155 |
Common stock, shares outstanding | 94,960,687 | 94,960,687 |
Treasury stock | 355,468 | 355,468 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (USD $) | 3 Months Ended | |
Nov. 30, 2014 | Nov. 30, 2013 | |
Income Statement [Abstract] | ||
Research and development | ($182,075) | ($344,799) |
Marketing, general and administrative expenses | -1,034,063 | -730,434 |
Total Operating expenses | -1,216,138 | -1,075,233 |
Other expense | ||
Foreign exchange gains | 11,195 | |
Interest expense | -251,780 | -130,931 |
Net loss | -1,467,918 | -1,194,969 |
Basic and diluted loss per common share | ||
Net loss per common share | ($0.01) | ($0.01) |
Basic weighted average shares outstanding | 100,960,687 | 99,281,941 |
Diluted weighted average shares outstanding | 100,960,687 | 99,281,941 |
Net loss | -1,467,918 | -1,194,969 |
Foreign currency translation adjustments | -39,147 | -5,801 |
Comprehensive loss | ($1,507,065) | ($1,200,770) |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | 3 Months Ended | |
Nov. 30, 2014 | Nov. 30, 2013 | |
Operating activities: | ||
Net loss | ($1,467,918) | ($1,194,969) |
Adjustments to reconcile net loss to net cash (used in) provided by operations | ||
Amortization of debt discount | 229,106 | 117,228 |
Stock-based compensation | 828,688 | 21,638 |
Foreign exchange gain on investment in subsidiary | -11,195 | |
Loss on disposition of equipment | 25,385 | |
Depreciation | 8,591 | 9,491 |
Changes in operating assets and liabilities | ||
Prepaid expenses and other receivables and long-term receivables | 116,272 | -30,074 |
Accounts payable and accrued expenses | -138,084 | -11,122 |
Interest payable | 22,293 | 7,420 |
Net cash used in operating activities- continuing operations | -401,052 | -1,066,198 |
Net cash used in operating activities- discontinued operations | -22,987 | |
Net cash used in operating activities | -424,039 | -1,066,198 |
Investing activities: | ||
Purchase of property and equipment | -7,004 | -59,039 |
Net cash used in investing activities | -7,004 | -59,039 |
Financing activities: | ||
Proceeds from convertible debentures | 750,000 | 1,000,000 |
Proceeds from exercise of stock options | 39,926 | |
Net cash provided by financing activities | 750,000 | 1,039,926 |
Effect of exchange rate on cash and cash equivalents | -31,390 | 2,941 |
Change in cash and cash equivalents | 287,567 | -82,370 |
Cash and cash equivalents, beginning | 875,438 | 431,760 |
Cash and cash equivalents of continuing operations, ending | 1,163,005 | 349,390 |
Warrants issued in connection with convertible debentures | 249,145 | 370,153 |
Fair value of conversion option | $554,240 |
Nature_and_Continuance_of_Oper
Nature and Continuance of Operations | 3 Months Ended | |
Nov. 30, 2014 | ||
Nature and Continuance of Operations [Abstract] | ||
NATURE AND CONTINUANCE OF OPERATIONS | NOTE 1: | NATURE AND CONTINUANCE OF OPERATIONS |
Infinity Augmented Reality, Inc. (formerly known as Absolute Life Solutions, Inc.) (the “Company”) was originally incorporated as Shimmer Gold, Inc. in the State of Nevada on September 7, 2006. The Company was in the business of the acquisition and exploration of mineral resources during the period from September 7, 2006 to May 21, 2010. Subsequently, a majority of our shareholders approved an amendment to our Articles of Incorporation changing our name to Absolute Life Solutions, Inc. During the fiscal year ended August 31, 2010, the Company commenced operations as a specialty financial services company engaged in the business of purchasing life settlement contracts for long-term investment purposes. Effective November 15, 2012, the Company is no longer engaged in its prior primary activity as a specialty financial services company primarily engaged in the purchase of life settlement contracts. In May 2012, we formed a wholly-owned subsidiary Infinity Augmented Reality, LLC, (“IAR Subsidiary”), and commenced activities to enable it to be actively engaged in the development of software applications which will utilize augmented reality. Effective March 7, 2013, the Company changed its name from Absolute Life Solutions, Inc. to Infinity Augmented Reality, Inc. On that same date, IAR Subsidiary was merged into the Company. Effective June 30, 2013, the Company formed a wholly owned Israeli subsidiary, Infinity Augmented Reality Israel Ltd. (“Infinity Israel”). | ||
The Company is actively engaged in the development of an augmented reality software platform which will provide end users with a fully three dimensional (3D), interactive augmented reality experience with full hand controls and a completely natural user interface. Augmented reality, (”AR”), is a technology which allows the projection of visual content that the viewer perceives as a real life experience and allows the viewer to intuitively interact with augmented content in his or her physical surroundings. The Company’s technology platform is made up of computer vision algorithms which will interface with any hardware including mobile or wearable devices, that have two dimensional (2D) stereoscopic cameras. The Company’s technology will turn such hardware into a powerful content augmentation platform. The Company’s technology will be usable both outdoors and indoors and will feature a lower power consumption. | ||
The Company is developing three software development kits, or SDKs, which will serve as the core platform for augmented reality software developers and wearable device manufacturers. The Company’s solution is designed to assist application developers in easily and efficiently developing advanced augmented reality applications, in a shorter time-to-market, while still providing a rich augmented reality experience. | ||
The continued existence of the Company is dependent upon its ability to generate profit from its augmented reality business and to meet its obligations as they become due. If additional cash is needed, the Company intends to finance the future capital required for continued operations from a combination of traditional debt and equity markets. However, there is no assurance that (a) traditional debt and equity markets may be accessible as required, or if so, on acceptable terms and, or (b) the demand for and selling prices of the Company’s augmented reality products, may not be sufficient to meet cash flow expectations. The outcome of these matters cannot be predicted with certainty and therefore the Company may not be able to continue or expand operations as planned. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These unaudited financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. |
Significant_Accounting_Policie
Significant Accounting Policies | 3 Months Ended | |||||||||
Nov. 30, 2014 | ||||||||||
Significant Accounting Policies [Abstract] | ||||||||||
SIGNIFICANT ACCOUNTING POLICIES | NOTE 2: | SIGNIFICANT ACCOUNTING POLICIES | ||||||||
Basis of Presentation | ||||||||||
The accompanying unaudited condensed consolidated financial statements as of November 30, 2014 and for the three months ended November 30, 2014 and 2013 have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the annual audited financial statements. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions are eliminated in the consolidation process. The unaudited condensed consolidated Balance Sheet as of November 30, 2014, condensed consolidated Statements of Operations and Comprehensive loss for the three months ended November 30, 2014 and 2013, and condensed consolidated Statements of Cash Flows for the three months ended November 30, 2014 and 2013, are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the period presented. The results for the three months ended November 30, 2014 are not necessarily indicative of results to be expected for the year ending August 31, 2015 or for any future interim period. In addition, the balance sheet data at August 31, 2014 was derived from the audited financial statements but does not include all disclosures required by GAAP. The accompanying financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on November 26, 2014. | ||||||||||
Use of Estimates | ||||||||||
The preparation of financial statements in conformity with GAAP 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 reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to these financial statements relate to the value of warrants and options and deferred income tax amounts and rates and timing of the reversal of income tax differences. | ||||||||||
Loss per Share | ||||||||||
Basic loss per share is calculated using the weighted average number of shares of common stock outstanding during the period. Included in basic loss per share calculations for each period presented are the effects of 6,000,000 warrants exercisable at $0.01. Diluted earnings per share reflect the potential dilution that could occur if potentially dilutive securities were exercised or converted to common stock. The dilutive effect of options and warrants and their equivalent is computed by application of the treasury stock method and the effect of convertible securities by the "if converted" method. As of November 30, 2014, 88,148,344 shares of common stock, comprised of 31,174,172 convertible debentures with a conversion price of $0.25, 31,174,172 warrants with an exercise price of $0.50, and stock options exercisable into 25,800,000 common shares are not included in diluted loss per share since their effect would be anti-dilutive.As of November 30, 2013, 45,751,084 shares of common stock, comprised of 11,710,172 convertible debentures with a conversion price of $0.25, 11,710,172 warrants with an exercise price of $0.50, and stock options exercisable into 22,330,740 common shares are not included in diluted loss per share since their effect would be anti-dilutive. | ||||||||||
Stock-Based Compensation | ||||||||||
The Company records stock-based compensation expense in accordance with ASC 718, Compensation - Stock Compensation. The Company expenses stock-based compensation to employees over the requisite service period based on the estimated grant-date fair value of the awards and forfeiture rates. For stock-based compensation awards to non-employees, the Company re-measures the fair value of the non-employee awards at each reporting period prior to vesting and finally at the vesting date of the award. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. | ||||||||||
Valuation Assumptions | ||||||||||
The Company estimates the fair value of stock option grants using a Black-Scholes option pricing model. In applying this model, the Company uses the following assumptions: | ||||||||||
„ | Risk-Free Interest Rate: The Company determined the risk-free interest rate equivalent to the expected term based on the U.S. Treasury constant maturity rate. | |||||||||
„ | Expected Volatility: The Company determined its future stock price volatility based on the average historical stock price volatility of comparable peer companies. | |||||||||
„ | Expected Term: Due to the limited exercise history of the Company’s stock options, the Company determined the expected term based on the stratification of employee groups and the expected effect of events that have indications on future exercise activity. Expected life for options granted to employees uses the Simplified Method, while options granted to non-employees uses an expected term equal to the life of the contract. | |||||||||
„ | Expected Dividend Rate: The Company has not paid and does not anticipate paying any cash dividends in the near future. | |||||||||
The fair value of each option award was estimated on the grant date using the Black Scholes option-pricing model and expensed under the straight line method. The following assumptions were used: | ||||||||||
Three Months ended | Three Months ended | |||||||||
November 30, 2014 | November 30, 2013 | |||||||||
Exercise price | - | $0.29 - $0.35 | ||||||||
Expected stock price volatility | - | 66.3% - 73.8% | ||||||||
Risk-free rate of interest | - | 1.31% - 1.72% | ||||||||
Expected life of options | - | 3-3.5 Years | ||||||||
Recent Accounting Pronouncements | ||||||||||
In November 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-17, Pushdown Accounting. This ASU provides companies with the option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. The election to apply pushdown accounting can be made either in the period in which the change of control occurred, or in a subsequent period. This ASU is effective as of November 18, 2014. The adoption will not have a material impact on the Company’s results of operations, cash flows or financial position | ||||||||||
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, as a new Topic, Accounting Standards Codification (ASC) Topic 606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU is effective for annual periods beginning after December 15, 2016 (fiscal 2018) and shall be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is evaluating the effect of adopting this new accounting guidance but does not expect adoption will have a material impact on the Company’s results of operations, cash flows or financial position. | ||||||||||
In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This ASU raises the threshold for a disposal to qualify as discontinued operations and requires new disclosures for individually material disposal transactions that do not meet the definition of a discontinued operation. Under the new standard, companies report discontinued operations when they have a disposal that represents a strategic shift that has or will have a major impact on operations or financial results. This update will be applied prospectively and is effective for annual periods, and interim periods within those years, beginning after December 15, 2014 (fiscal 2016). Early adoption is permitted provided the disposal was not previously disclosed. This update will not have a material impact on the Company's reported results of operations and financial position. The impact is non-cash in nature and will not affect the Company's cash position | ||||||||||
Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to be significant to the condensed financial statements of the Company. | ||||||||||
Convertible_Debentures
Convertible Debentures | 3 Months Ended | |||||||||
Nov. 30, 2014 | ||||||||||
Convertible Debentures [Abstract] | ||||||||||
CONVERTIBLE DEBENTURES | NOTE 3: | CONVERTIBLE DEBENTURES | ||||||||
During the three months ended November 30, 2014, the Company issued a (i) five-year Convertible Series A-14 Debentures (the “A-14 Debentures”) for an aggregate principal amount of $750,000, bearing interest at 1.2% per annum, convertible into shares of common stock, at a conversion price of $0.25, and (ii) a five-year Warrant (the “2014 Warrants”) to purchase 3,000,000 shares of common stock, to Credit Strategies, LLC (the “Lead Investor”), pursuant to Securities Purchase Agreements dated March 26, 2014 (the “2014 SPA”). | ||||||||||
The Company accounts for the beneficial conversion feature (“BCF”) and warrant valuation in accordance with ASC 470-20, Debt with Conversion and Other Options. The Company records a BCF related to the issuance of convertible debt that has conversion features at fixed rates that are “in-the-money” when issued and the fair value of warrants issued in connection with those instruments. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds to warrants, based on their relative fair value, and as a reduction to the carrying amount of the convertible debt equal to the intrinsic value of the conversion feature. The discount recorded in connection with the BCF and warrant valuation is recognized as non-cash interest expense and is amortized over the terms of the convertible notes. | ||||||||||
During the three months ended November 30, 2014, the Company recorded an aggregate of $249,145 for the calculated fair value of 2014 Warrants and BCF, in conjunction with A-14 Debentures issued on September 15 and November 7, 2014. | ||||||||||
The Company valued the warrants at the date the warrants were issued, using the Black-Scholes valuation model and the following assumptions: | ||||||||||
September 15, 2014 | November 7, 2014 | |||||||||
Contractual term (Years) | 5 | 5 | ||||||||
Volatility | 139.6 | % | 162.5 | % | ||||||
Dividend yield | 0 | % | 0 | % | ||||||
Risk-free interest rate | 1.8 | % | 1.6 | % | ||||||
November 30, 2014 | December 31, 2014 | |||||||||
1.2% convertible debentures | 7,793,543 | 7,043,543 | ||||||||
Debt discount/ beneficial conversion feature | (3,771,653 | ) | (3,751,613 | ) | ||||||
Balance | $ | 4,021,890 | $ | 3,291,930 | ||||||
Commitments_and_Contingent_Lia
Commitments and Contingent Liabilities | 3 Months Ended | |
Nov. 30, 2014 | ||
Commitments and Contingent Liabilities [Abstract] | ||
COMMITMENTS AND CONTINGENT LIABILITIES | NOTE 4: | COMMITMENTS AND CONTINGENT LIABILITIES |
With respect to the Company’s prior activities in the life insurance settlement business, the Company recently joined as a defendant in a lawsuit captioned as CMS Life Ins. Opportunity Fund L.P., et al. v. Progressive Capital Solutions in the New York State Supreme Court, New York County. The intervening plaintiffs, Genesis Merchant Partners, LP and Genesis Merchant Partners II, LP (collectively, “Genesis”), claim that the Company owned certain unidentified "Life Settlement" insurance policies, that are subject to Genesis' rights. | ||
Genesis is seeking declaratory and injunctive relief (but no money damages). The Company exited the life settlement insurance business in November 2012 and does not own or claim any rights in any such life settlement insurance policies. Accordingly, the Company believes that the claims are frivolous and intends to vigorously defend against the allegations. The Company has filed a motion to dismiss all of the claims against the Company and the Plaintiff has filed an opposition to the motion to dismiss. The Court is expected to rule on the motion to dismiss in the coming months. | ||
On November 27, 2013, Infinity Israel received a pre lawsuit claim letter from the legal representative of a former employee. The compensation amount sought by the former employee as per his pre lawsuit claim letter was approximately 202,000 NIS (approximately $57,780). During the year ended August 31, 2014 Infinity Israel and the former employee agreed to the settlement of the Claim by a lump sum payment of 50,000 NIS (approximately $14,300) by Infinity Israel to the former employee and, on January 26, 2014 the board of directors approved the issuance to the former employee of options to purchase up to 218,750 shares of the Company’s Common Stock under the Company’s 2013 Equity Incentive Plan at an exercise price of $0.25 per share, which options were forfeited on June 23, 2014. The fair value of this grant was $31,311. |
Warrants_and_Stock_Options
Warrants and Stock Options | 3 Months Ended | |||||||||||||
Nov. 30, 2014 | ||||||||||||||
Warrants and Stock Options [Abstract] | ||||||||||||||
WARRANTS AND STOCK OPTIONS | NOTE 5: | WARRANTS AND STOCK OPTIONS | ||||||||||||
Warrants | ||||||||||||||
Warrant transactions are summarized as follows: | ||||||||||||||
Number of warrants | Weighted | Weighted average life remaining | ||||||||||||
average | (in years) | |||||||||||||
exercise | ||||||||||||||
price | ||||||||||||||
Balance as at August 31, 2014 - Issued | 34,174,172 | 0.41 | 3.97 years | |||||||||||
Additions as of November 30, 2014 - Issued | 3,000,000 | 0.5 | 4.86 years | |||||||||||
Balance as at November 30, 2014 | 37,174,172 | 0.42 | 3.60 years | |||||||||||
As of November 30, 2014, there were 37,174,172 warrants outstanding and exercisable with expiration dates from June 2015 through November 2019. | ||||||||||||||
Stock options | ||||||||||||||
The following table summarizes the stock-based compensation expense from stock option, employee stock purchase programs and restricted Common Stock awards for the Three months ended November 30, 2014 and 2013: | ||||||||||||||
Three months ended November 30, | ||||||||||||||
2014 | 2013 | |||||||||||||
Employee awards | $ | 828,688 | $ | 4,644 | ||||||||||
Non- employee awards, net of forfeitures | - | 16,994 | ||||||||||||
Total stock options compensation expense | $ | 828,688 | $ | 21,638 | ||||||||||
No options were granted during the three months ended November 30, 2014. |
Subsequent_Events
Subsequent Events | 3 Months Ended | |
Nov. 30, 2014 | ||
Subsequent Events [Abstract] | ||
SUBSEQUENT EVENTS | NOTE 6: | SUBSEQUENT EVENTS |
On December 7, 2014, the Board of Directors granted to an Infinity Israel employee 50,000 Non-Qualified Stock Options with an exercise price of $0.07, vesting semiannually over the next 3 years and expiring on December 7, 2019. | ||
The Company evaluates events that have occurred after the balance sheet date through the date the financial statements were publicly available. Based upon the evaluation, the Company did not identify any other recognized or non-recognized subsequent events that would have required adjustment to or disclosure in the financial statements. | ||
Significant_Accounting_Policie1
Significant Accounting Policies (Policies) | 3 Months Ended | |||||||||
Nov. 30, 2014 | ||||||||||
Significant Accounting Policies [Abstract] | ||||||||||
Basis of Presentation | Basis of Presentation | |||||||||
The accompanying unaudited condensed consolidated financial statements as of November 30, 2014 and for the three months ended November 30, 2014 and 2013 have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the annual audited financial statements. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions are eliminated in the consolidation process. The unaudited condensed consolidated Balance Sheet as of November 30, 2014, condensed consolidated Statements of Operations and Comprehensive loss for the three months ended November 30, 2014 and 2013, and condensed consolidated Statements of Cash Flows for the three months ended November 30, 2014 and 2013, are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the period presented. The results for the three months ended November 30, 2014 are not necessarily indicative of results to be expected for the year ending August 31, 2015 or for any future interim period. In addition, the balance sheet data at August 31, 2014 was derived from the audited financial statements but does not include all disclosures required by GAAP. The accompanying financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on November 26, 2014. | ||||||||||
Use of Estimates | Use of Estimates | |||||||||
The preparation of financial statements in conformity with GAAP 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 reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to these financial statements relate to the value of warrants and options and deferred income tax amounts and rates and timing of the reversal of income tax differences. | ||||||||||
Loss per Share | Loss per Share | |||||||||
Basic loss per share is calculated using the weighted average number of shares of common stock outstanding during the period. Included in basic loss per share calculations for each period presented are the effects of 6,000,000 warrants exercisable at $0.01. Diluted earnings per share reflect the potential dilution that could occur if potentially dilutive securities were exercised or converted to common stock. The dilutive effect of options and warrants and their equivalent is computed by application of the treasury stock method and the effect of convertible securities by the "if converted" method. As of November 30, 2014, 88,148,344 shares of common stock, comprised of 31,174,172 convertible debentures with a conversion price of $0.25, 31,174,172 warrants with an exercise price of $0.50, and stock options exercisable into 25,800,000 common shares are not included in diluted loss per share since their effect would be anti-dilutive. As of November 30, 2013, 45,751,084 shares of common stock, comprised of 11,710,172 convertible debentures with a conversion price of $0.25, 11,710,172 warrants with an exercise price of $0.50, and stock options exercisable into 22,330,740 common shares are not included in diluted loss per share since their effect would be anti-dilutive. | ||||||||||
Stock-Based Compensation | Stock-Based Compensation | |||||||||
The Company records stock-based compensation expense in accordance with ASC 718, Compensation - Stock Compensation. The Company expenses stock-based compensation to employees over the requisite service period based on the estimated grant-date fair value of the awards and forfeiture rates. For stock-based compensation awards to non-employees, the Company re-measures the fair value of the non-employee awards at each reporting period prior to vesting and finally at the vesting date of the award. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. | ||||||||||
Valuation Assumptions | Valuation Assumptions | |||||||||
The Company estimates the fair value of stock option grants using a Black-Scholes option pricing model. In applying this model, the Company uses the following assumptions: | ||||||||||
„ | Risk-Free Interest Rate: The Company determined the risk-free interest rate equivalent to the expected term based on the U.S. Treasury constant maturity rate. | |||||||||
„ | Expected Volatility: The Company determined its future stock price volatility based on the average historical stock price volatility of comparable peer companies. | |||||||||
„ | Expected Term: Due to the limited exercise history of the Company’s stock options, the Company determined the expected term based on the stratification of employee groups and the expected effect of events that have indications on future exercise activity. Expected life for options granted to employees uses the Simplified Method, while options granted to non-employees uses an expected term equal to the life of the contract. | |||||||||
„ | Expected Dividend Rate: The Company has not paid and does not anticipate paying any cash dividends in the near future. | |||||||||
The fair value of each option award was estimated on the grant date using the Black Scholes option-pricing model and expensed under the straight line method. The following assumptions were used: | ||||||||||
Three Months ended | Three Months ended | |||||||||
November 30, 2014 | November 30, 2013 | |||||||||
Exercise price | - | $0.29 - $0.35 | ||||||||
Expected stock price volatility | - | 66.3% - 73.8% | ||||||||
Risk-free rate of interest | - | 1.31% - 1.72% | ||||||||
Expected life of options | - | 3-3.5 Years | ||||||||
Recent Accounting Pronouncements | Recent Accounting Pronouncements | |||||||||
In November 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-17, Pushdown Accounting. This ASU provides companies with the option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. The election to apply pushdown accounting can be made either in the period in which the change of control occurred, or in a subsequent period. This ASU is effective as of November 18, 2014. The adoption will not have a material impact on the Company’s results of operations, cash flows or financial position | ||||||||||
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, as a new Topic, Accounting Standards Codification (ASC) Topic 606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU is effective for annual periods beginning after December 15, 2016 (fiscal 2018) and shall be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is evaluating the effect of adopting this new accounting guidance but does not expect adoption will have a material impact on the Company’s results of operations, cash flows or financial position. | ||||||||||
In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This ASU raises the threshold for a disposal to qualify as discontinued operations and requires new disclosures for individually material disposal transactions that do not meet the definition of a discontinued operation. Under the new standard, companies report discontinued operations when they have a disposal that represents a strategic shift that has or will have a major impact on operations or financial results. This update will be applied prospectively and is effective for annual periods, and interim periods within those years, beginning after December 15, 2014 (fiscal 2016). Early adoption is permitted provided the disposal was not previously disclosed. This update will not have a material impact on the Company's reported results of operations and financial position. The impact is non-cash in nature and will not affect the Company's cash position | ||||||||||
Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to be significant to the condensed financial statements of the Company. |
Significant_Accounting_Policie2
Significant Accounting Policies (Tables) | 3 Months Ended | |||||||||
Nov. 30, 2014 | ||||||||||
Significant Accounting Policies [Abstract] | ||||||||||
Fair value of option award was estimated on the grant date using the Black Scholes option-pricing model | Three Months ended | Three Months ended | ||||||||
November 30, 2014 | November 30, 2013 | |||||||||
Exercise price | - | $0.29 - $0.35 | ||||||||
Expected stock price volatility | - | 66.3% - 73.8% | ||||||||
Risk-free rate of interest | - | 1.31% - 1.72% | ||||||||
Expected life of options | - | 3-3.5 Years |
Convertible_Debentures_Tables
Convertible Debentures (Tables) | 3 Months Ended | |||||||||
Nov. 30, 2014 | ||||||||||
Convertible Debentures [Abstract] | ||||||||||
Schedule of warrant valuation assumptions | September 15, 2014 | November 7, 2014 | ||||||||
Contractual term (Years) | 5 | 5 | ||||||||
Volatility | 139.6 | % | 162.5 | % | ||||||
Dividend yield | 0 | % | 0 | % | ||||||
Risk-free interest rate | 1.8 | % | 1.6 | % | ||||||
Schedule of senior convertible notes | November 30, 2014 | December 31, 2014 | ||||||||
1.2% convertible debentures | 7,793,543 | 7,043,543 | ||||||||
Debt discount/ beneficial conversion feature | (3,771,653 | ) | (3,751,613 | ) | ||||||
Balance | $ | 4,021,890 | $ | 3,291,930 |
Warrants_and_Stock_Options_Tab
Warrants and Stock Options (Tables) | 3 Months Ended | |||||||||||||
Nov. 30, 2014 | ||||||||||||||
Warrants and Stock Options [Abstract] | ||||||||||||||
Schedule of warrant transactions | Number of warrants | Weighted | Weighted average life remaining | |||||||||||
average | (in years) | |||||||||||||
exercise | ||||||||||||||
price | ||||||||||||||
Balance as at August 31, 2014 - Issued | 34,174,172 | 0.41 | 3.97 years | |||||||||||
Additions as of November 30, 2014 - Issued | 3,000,000 | 0.5 | 4.86 years | |||||||||||
Balance as at November 30, 2014 | 37,174,172 | 0.42 | 3.60 years | |||||||||||
Schedule of stock-based compensation expense | Three months ended November 30, | |||||||||||||
2014 | 2013 | |||||||||||||
Employee awards | $ | 828,688 | $ | 4,644 | ||||||||||
Non- employee awards, net of forfeitures | - | 16,994 | ||||||||||||
Total stock options compensation expense | $ | 828,688 | $ | 21,638 |
Significant_Accounting_Policie3
Significant Accounting Policies (Details) (USD $) | 3 Months Ended | |
Nov. 30, 2014 | Nov. 30, 2013 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Exercise price | ||
Expected stock price volatility, minimum | 66.30% | |
Expected stock price volatility, maximum | 73.80% | |
Risk-free rate of interest, minimum | 1.31% | |
Risk-free rate of interest, maximum | 1.72% | |
Minimum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Exercise price | 0.29 | |
Expected life of options | 3 years | |
Maximum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Exercise price | 0.35 | |
Expected life of options | 3 years 6 months |
Significant_Accounting_Policie4
Significant Accounting Policies (Details Textual) (USD $) | 3 Months Ended | |
Nov. 30, 2014 | Nov. 30, 2013 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Warrants exercisable | 6,000,000 | |
Exercise price of warrants | 0.01 | |
Common stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities not included in computation of earnings per common share | 88,148,344 | 45,751,084 |
Convertible Debentures [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities not included in computation of earnings per common share | 31,174,172 | 11,710,172 |
Conversion price | 0.25 | 0.25 |
Stock option [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities not included in computation of earnings per common share | 25,800,000 | 22,330,740 |
Warrants [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities not included in computation of earnings per common share | 31,174,172 | 11,710,172 |
Exercise price of warrants | 0.5 | 0.5 |
Convertible_Debentures_Details
Convertible Debentures (Details) (Warrant [Member]) | 3 Months Ended |
Nov. 30, 2014 | |
Issued on September 15, 2014 [Member] | |
Class of Warrant or Right [Line Items] | |
Contractual term (Years) | 5 years |
Volatility | 139.60% |
Dividend yield | 0.00% |
Risk-free interest rate | 1.80% |
Issued on November 07, 2014 [Member] | |
Class of Warrant or Right [Line Items] | |
Contractual term (Years) | 5 years |
Volatility | 162.50% |
Dividend yield | 0.00% |
Risk-free interest rate | 1.60% |
Convertible_Debentures_Details1
Convertible Debentures (Details 1) (USD $) | Nov. 30, 2014 | Aug. 31, 2014 | Dec. 31, 2014 |
Debt Instrument, Redemption [Line Items] | |||
1.2% convertible debentures | $7,793,543 | ||
Debt discount/ beneficial conversion feature | -3,771,653 | ||
Balance | 4,021,890 | 3,291,930 | |
Subsequent Event [Member] | |||
Debt Instrument, Redemption [Line Items] | |||
1.2% convertible debentures | 7,043,543 | ||
Debt discount/ beneficial conversion feature | -3,751,613 | ||
Balance | $3,291,930 |
Convertible_Debentures_Details2
Convertible Debentures (Details Textual) (USD $) | 3 Months Ended |
Nov. 30, 2014 | |
Convertible Debentures (Textual) | |
Aggregate principal amount | $7,793,543 |
Aggregate fair value of warrants and beneficial conversion feature | 249,145 |
Credit Strategies Llc [Member] | |
Convertible Debentures (Textual) | |
Aggregate principal amount | $750,000 |
Term | 5 years |
Interest rate | 1.20% |
Conversion price | $0.25 |
Term of warrants | 5 years |
Number of shares available for warrants exercised | 3,000,000 |
Commitments_and_Contingent_Lia1
Commitments and Contingent Liabilities (Details) | 0 Months Ended | 12 Months Ended | 0 Months Ended | ||
Nov. 27, 2013 | Nov. 27, 2013 | Aug. 31, 2014 | Aug. 31, 2014 | Jan. 26, 2014 | |
USD ($) | ILS | USD ($) | ILS | 2013 Plan [Member] | |
USD ($) | |||||
Commitments and Contingent Liabilities (Textual) | |||||
Common stock issued to former employee | 218,750 | ||||
Exercise price | $0.25 | ||||
Stock option, expiration date | 23-Jun-14 | ||||
Options granted, fair value | $31,311 | ||||
Lawsuit settlement, Amount | $57,780 | 202,000 | $14,300 | 50,000 |
Warrants_and_Stock_Options_Det
Warrants and Stock Options (Details) (Warrant [Member], USD $) | 3 Months Ended | 12 Months Ended |
Nov. 30, 2014 | Aug. 31, 2014 | |
Warrant [Member] | ||
Number of warrants | ||
Balance | 34,174,172 | |
Issued | 3,000,000 | |
Balance | 37,174,172 | 34,174,172 |
Weighted average exercise price | ||
Balance | $0.41 | |
Issued | $0.50 | |
Balance | $0.42 | $0.41 |
Weighted average life remaining (in years) | ||
Balance | 3 years 7 months 6 days | 3 years 11 months 19 days |
Issued | 4 years 10 months 10 days |
Warrants_and_Stock_Options_Det1
Warrants and Stock Options (Details 1) (USD $) | 3 Months Ended | |
Nov. 30, 2014 | Nov. 30, 2013 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock options compensation expense | $828,688 | $21,638 |
Employee awards [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock options compensation expense | 828,688 | 4,644 |
Non-Employee Award [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock options compensation expense | $16,994 |
Warrants_and_Stock_Options_Det2
Warrants and Stock Options (Details Textual) | Nov. 30, 2014 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Warrants outstanding and exercisable | 37,174,172 |
Subsequent_Events_Details
Subsequent Events (Details) (Subsequent Event [Member], Infinity Israel Employee [Member], USD $) | 0 Months Ended |
Dec. 07, 2014 | |
Subsequent Event [Member] | Infinity Israel Employee [Member] | |
Subsequent Events (Textual) | |
Stock option granted | 50,000 |
Stock options exercise price | $0.07 |
Vesting period | 3 years |
Stock option, expiration date | 7-Dec-19 |