10-Q

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 February 28, 2014

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: 000-53446

INFINITY AUGMENTED REALITY, INC.

(Exact name of registrant as specified in its charter)

Nevada	71-1013330
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2220 Nostrand Avenue Brooklyn, New York	11210
(Address of principal executive offices)	(Zip Code)
(917) 677-2084
(Registrant's telephone number, including area code)

(Former name or former address, 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 Exchange Act during the past 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 xNo 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 xNo 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," "non-accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer o
Non-accelerated filer o	(Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes oNo x

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. 94,960,687 shares of common stock as of April 9, 2014.

INFINITY AUGMENTED REALITY, INC.

 (A Development Stage Company)

Quarterly Report On Form 10-Q

For The Quarterly Period Ended

February 28, 2014

INDEX

			Page
PART I - FINANCIAL INFORMATION
	Item 1.	Financial Statements	3
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
	Item 4.	Controls and Procedures	24
PART II - OTHER INFORMATION
	Item 1.	Legal Proceedings	24
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
	Item 3.	Defaults Upon Senior Securities	24
	Item 4.	Mine Safety Disclosures	24
	Item 5.	Other Information	24
	Item 6.	Exhibits	24

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

The following unaudited interim financial statements of Infinity Augmented Reality, Inc. and its Subsidiary (sometimes referred to as "we", "us" or "our Company") are included in this quarterly report on Form 10-Q:

	Page
Condensed Consolidated Balance Sheets at February 28, 2014 (unaudited) and August 31, 2013	4
Condensed Consolidated Statements of Operations and Comprehensive loss for the three months and six months ended February 28, 2014 and February 28, 2013 and the period from November 15, 2012 to February 28, 2014 (unaudited)	5
Condensed Consolidated Statements of Cash Flows for the six months ended February 28, 2014 and February 28, 2013 and the period from November 15, 2012 to February 28, 2014 (unaudited)	6
Notes to Condensed Consolidated Financial Statements	7-19

3

INFINITY AUGMENTED REALITY, INC.

AND ITS SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS

	February 28, 2014 (unaudited)			August 31, 2013
ASSETS
Current Assets
Cash and cash equivalents	$	287,924		$	431,760
Convertible note receivable		-			50,000
Prepaid expenses and other receivables		9,062			21,355
Total current assets		296,986			503,115
Leasehold improvements and equipment, net		150,382			126,108
Security deposit and other long-term receivables		98,387			86,272
Investment in Meta Company		50,000			-
Noncurrent assets of discontinued operations		145,781			145,781
TOTAL ASSETS	$	741,536			861,276
LIABILITIES
Current Liabilities
Accounts payable and accrued expenses	$	572,077		$	190,620
Interest payable		21,983			3,906
Current liabilities of discontinued operations		873,921			955,978
Total current liabilities		1,467,981			1,150,504
Convertible debentures, net of debt discount		501,473			128,327
TOTAL LIABILITES		1,969,454			1,278,831
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS’ DEFICIT
Common stock ($0.00001 par value; 500,000,000 authorized;     94,368,245 issued and 94,012,777 outstanding) (August 31, 2013 –     93,584,759 issued and 93,229,291 outstanding)		944			936
Additional paid in capital		60,273,882			57,938,675
Treasury stock, at cost (355,468 shares of common stock)		(49,766	)		(49,766	)
Accumulated deficit		(61,434,324	)		(58,305,978	)
Accumulated other comprehensive loss		(18,654	)		(1,422	)
Total Stockholders' Deficit		(1,227,918	)		(417,555	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	741,536		$	861,276

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

4

INFINITY AUGMENTED REALITY, INC.

 AND ITS SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

UNAUDITED

	Three months ended February 28, 2014			Three months ended February 28, 2013			Six months ended February 28, 2014			Six months ended February 28, 2013			From November 15, 2012 to February 28, 2014
Research and Development expenses	$	(484,692	)	$	-		$	(829,491	)	$	-		$	(963,195	)
Marketing expenses		(53,781	)		-			(96,179	)		-			(130,547	)
General and administrative expenses		(1,096,812	)		(622,003	)		(1,784,847	)		(882,673	)		(8,277,695	)
Total Operating expenses		(1,635,285	)		(622,003	)		(2,710,517	)		(882,673	)		(9,371,437	)
Other income (expense)
Foreign exchange gain		8,689			-			19,884			-			12,748
Interest expense		(191,816	)		-			(322,748	)		-			(390,415	)
Loss from continuing operations before income tax		(1,818,412	)		(622,003	)		(3,013,381	)		(882,673	)		(9,749,104	)
Provision for income tax		-			(27,783	)		-			(190,652	)		(78,637	)
Loss from continuing operations		(1,818,412	)		(649,786	)		(3,013,381	)		(1,073,325	)		(9,827,741	)
Loss from discontinued operations (including loss on disposal of life settlement contracts of $8,438,584 for the three months and six months ended February 28, 2013), net of tax		(114,966	)		(53,798	)		(114,966	)		(4,318,440	)		(114,966	)
Net loss	$	(1,933,378	)	$	(703,584	)	$	(3,128,347	)	$	(5,391,765	)	$	(9,942,707	)
Basic and diluted loss per common share
Continuing operations	$	(0.02	)	$	(0.01	)	$	(0.03	)	$	(0.01	)
Discontinued operations		-			-			-			(0.04	)
Net loss per common share	$	(0.02	)	$	(0.01	)	$	(0.03	)	$	(0.05	)
Basic weighted average shares outstanding		99,855,165			98,226,463			99,566,969			98,228,040
Diluted weighted average shares outstanding		99,855,165			98,226,463			99,566,969			98,228,040
Net loss	$	(1,933,378	)	$	(703,584	)	$	(3,128,347	)	$	(5,391,765	)	$	(9,942,707	)
Foreign currency translation adjustments		(11,431	)		-			(17,232	)		-			(18,654	)
Comprehensive loss	$	(1,944,809	)	$	(703,584	)	$	(3,145,579	)	$	(5,391,765	)	$	(9,961,361	)

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

5

INFINITY AUGMENTED REALITY, INC.

AND ITS SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

	Six months ended February 28, 2014			Six months ended February 28, 2013			From November 15, 2012 to February 28, 2014
OPERATING ACTIVITIES
Net loss	$	(3,128,347	)	$	(5,391,765	)	$	(9,942,707	)
Loss from discontinued operations		114,966			4,318,440			114,966
Adjustments to reconcile net loss to net cash (used in) provided by operations
Amortization of debt discount		287,703			-			348,921
Stock-based compensation		294,622			3,511			4,805,984
Foreign exchange gain on investment in subsidiary		(19,884	)		-			(12,748	)
Stock forfeited by stockholders to settle payment of withholding tax on behalf of such stockholders		-			(5,645	)		(5,645	)
Payment-in-kind interest on shareholders loan		-			-			2,543
Loss on disposition of equipment		25,385			-			38,546
Issuance of stock for in-process research and development		26,110			-			26,110
Depreciation and amortization		24,818			11,977			46,737
Deferred rent		-			18,570			(63,638	)
Deferred income taxes		-			190,652			78,637
Changes in operating assets and liabilities:
Prepaid expenses and other receivables		12,427			7,073			9,636
Security deposit		(9,204	)		-			(38,426	)
Accounts payable and accrued expenses		376,447			8,575			395,785
Interest payable		18,077			-			21,983
Net cash used in operating activities- continuing operations		(1,976,880	)		(838,612	)		(4,173,316	)
Net cash (used in) provided by operating activities- discontinued operations		(197,023	)		(6,655,209	)		5,661,652
Net cash (used in) provided by operating activities		(2,173,903	)		(7,493,821	)		1,488,336
INVESTING ACTIVITIES
Payment for purchase of convertible note		-			-			(50,000	)
Proceeds received from sale of equipment		-			-			5,200
Purchase of leasehold improvements and equipment		(70,803	)		-			(175,628	)
Net cash used in investing activities- continuing operations		(70,803	)		-			(220,428	)
Net cash provided by investing activities- discontinued operations		-			9,756,718			-
Net cash (used in) provided by investing activities		(70,803	)		9,756,718			(220,428	)
FINANCING ACTIVITIES
Proceeds from convertible debentures		2,030,000			-			3,755,000
Proceeds from exercise of stock options		69,926			-			149,926
Proceeds from shareholder loan		-			-			200,000
Net cash provided by financing activities- continuing operations		2,099,926			-			4,104,926
Net cash (used in) provided by financing activities- discontinued operations		-			(2,300,000	)		(5,135,000	)
Net cash (used in) provided by financing activities		2,099,926			(2,300,000	)		(1,030,074	)
Effect of exchange rate on cash and cash equivalents		944			-			(8,030	)
Change in cash and cash equivalents		(143,836	)		(37,103	)		229,804
Cash and cash equivalents, beginning		431,760			233,050			58,120
Cash and cash equivalents of continuing operations, ending	$	287,924		$	195,947		$	287,924
Supplemental disclosure of cash flow information:
Tax paid in cash	$	197,023		$	-		$	222,850
Non-cash Investing and Financing activities:
Conversion of shareholder loan into convertible debentures	$	-		$	-		$	202,543
Warrants issued in connection with convertible debentures	$	834,272		$	-		$	1,652,984
Beneficial conversion feature	$	1,110,285		$	-		$	2,152,007
Conversion of convertible note receivables to preferred shares of Meta Company	$	50,000		$	-		$	50,000

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

6

INFINITY AUGMENTED REALITY, INC.

AND ITS SUBSIDIARY

(A Development Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

February 28, 2014

NOTE 1: NATURE AND CONTINUANCE OF OPERATIONS

Infinity Augmented Reality, Inc. (the "Company") was originally incorporated as Shimmer Gold, Inc. in the State of Nevada on September 7, 2006. The Company was an Exploration Stage company as defined by Accounting Standards Codification ("ASC") 915, Development Stage Entities, and 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 and was no longer classified as a development stage company.

Effective November 15, 2012, the Company was no longer engaged in its prior primary activity as a specialty financial services company primarily engaged in the purchase of life settlement contracts. As a result of the foregoing, the Company is currently classified as a development stage company. All of the operations related to the Company’s life settlements business are reported as discontinued operations in the unaudited condensed consolidated financial statements. As discussed in Note 3, the prior period operations related to this business have also been reclassified as discontinued operations retrospectively for all periods presented.

During the year ended August 31, 2012, the Company 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, the 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 software platform which will utilize augmented reality. The Company intends to develop a comprehensive augmented reality platform for enterprises. The Company’s objective is to establish itself firmly as a preeminent source for state-of-the-art augmented reality experiences, forging a strong association, early on, between the Infinity brand and the burgeoning medium.

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 expectation. 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 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.

7

INFINITY AUGMENTED REALITY INC. AND ITS SUBSUDIARY

(A Development Stage Company)

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of February 28, 2014 and for the three months and six months ended February 28, 2014 and 2013 and for the period from November 15, 2012 to February 28, 2014 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 our wholly-owned subsidiary. All significant intercompany accounts and transactions are eliminated in the consolidation process. The unaudited Balance Sheet as of February 28, 2014, Statements of Operations and comprehensive loss for the three months and six months ended February 28, 2014 and February 28, 2013 and for the period from November 15, 2012 to February 28, 2014, and Statements of Cash Flows for the six months ended February 28, 2014 and February 28, 2013 and for the period from November 15, 2012 to February 28, 2014, 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 and six months ended February 28, 2014 and for the period from November 15, 2012 to February 28, 2014 are not necessarily indicative of results to be expected for the year ending August 31, 2014 or for any future interim period. In addition, the balance sheet data at August 31, 2013 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 December 23, 2013.

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 deferred income tax amounts and rates and timing of the reversal of income tax differences.

Reclassifications

The Company reclassified certain amounts in the historical balance sheet for presentation purposes. The reclassification had no effect on working capital or previously stated net income.  The Company identified certain amounts in accounts payable and accrued expenses that should have been included in current liabilities of discontinued operations. 

Development Stage Company

Effective November 15, 2012, the Company is considered a development stage company, having no operating revenues during the period from November 15, 2012 (“Inception”) to February 28, 2014, as defined by ASC 915-205, Development-Stage Entities. ASC 915-205 requires companies to report their operations, shareholders equity and cash flows upon entering the development stage through the date that revenues are generated. From November 15, 2012 through February 28, 2014, all operating expenses of the Company related to its augmented reality business and is included in the Condensed Consolidated Statements of Operations and comprehensive loss.

8

INFINITY AUGMENTED REALITY INC. AND ITS SUBSUDIARY

(A Development Stage Company)

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. The Company maintains cash balances that may be uninsured or in deposit accounts that exceed Federal Deposit Insurance Corporation limits. The Company maintains its cash deposits with major financial institutions.

Financial Instruments

The fair value of certain of the Company's financial instruments, consisting of cash, accounts payable and accrued expenses are estimated to be equal to their carrying value due to the short-term nature of these instruments. It is management's opinion that the Company is not exposed to significant interest, currency and credit risks arising from these financial instruments.

Leasehold Improvements and Equipment

Leasehold Improvements and Equipment consists of computer hardware and furniture and is recorded at cost. Computer hardware and furniture are depreciated on a straight-line basis over their estimated lives of three to five years. Leasehold Improvements are amortized on a straight-line basis over the life of the lease of two years.

Software Development Costs

The Company applies the principles of ASC 985-20, Software- Costs of Software to Be Sold, Leased, or Marketed, which requires that software development costs incurred in conjunction with product development be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of unamortized cost or net realizable value of the related product. The Company has adopted the "tested working model" approach to establishing technological feasibility for its products. Under this approach, a product in development is not considered to have passed the technological feasibility milestone until the Company has produced a model of the product that contains essentially all the functionality and features of the final product and have tested the model to ensure that it works as expected. The Company has expensed all software development costs when incurred since none of the Company’s products have reached technological feasibility.

Foreign Currency Translation

The financial statements are presented in United States dollars. In accordance with ASC 830, Foreign Currency Matters, foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary assets and liabilities are translated at exchange rates prevailing at the transaction date. Revenue and expenses are translated at average rates of exchange during the periods presented. Related translation adjustments are reported as a separate component of stockholders' deficit, whereas gains or losses resulting from foreign currency transactions and re-measurement are included in results of operations. Infinity Israel maintains its books and record using its functional currency which is the New Israeli Shekel ("NIS").

9

INFINITY AUGMENTED REALITY INC. AND ITS SUBSUDIARY

(A Development Stage Company)

Income Taxes

Deferred income taxes are provided for tax effects of temporary differences between the tax basis of asset and liabilities and their reported amounts in the financial statements. The Company uses the liability method to account for income taxes, which requires deferred taxes to be recorded at the statutory rate expected to be in effect when the taxes are paid. Valuation allowances are provided for a deferred tax asset when it is more likely than not that such asset will not be realized.

Management evaluates tax positions taken or expected to be taken in a tax return. The evaluation of a tax position includes a determination of whether a tax position should be recognized in the financial statements, and such a position should only be recognized if the Company determines that it is more likely than not that the tax position will be sustained upon examination by the tax authorities, based upon the technical merits of the position. For those tax positions that should be recognized, the measurement of a tax position is determined as being the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.

The Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense.

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 are the effects of 6,000,000 warrants exercisable at $.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 February 28, 2014, 59,709,834 shares of common stock, comprised of 15,830,172 convertible debentures with a conversion price of $0.25, 15,830,172 warrants with an exercise price of $0.50, and stock options exercisable into 28,049,490 common shares are not included in diluted loss per share since their effect would be anti-dilutive. There are no other potential common shares at February 28, 2013.

Stock-Based Compensation

The Company records stock-based compensation expense in accordance withASC 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.

Recent Accounting Pronouncements

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 consolidated financial statements of the Company.

10

INFINITY AUGMENTED REALITY INC. AND ITS SUBSUDIARY

(A Development Stage Company)

NOTE 3: DISCONTINUED OPERATIONS

Effective November 15, 2012, the Company reached an agreement with the agent of the Lenders regarding the satisfaction of the outstanding balance of the Loans, under the terms of a Loan Satisfaction Agreement. Such agreement resulted in the disposition of all of the life settlement contracts that were held by the Company to the Lender or an affiliate of the Lender. All of the operations related to the Company’s life settlements business are reported as discontinued operations in the condensed consolidated financial statements. The prior period operations related to this business have also been reported as discontinued operations retrospectively for all periods presented. The assets and liabilities related to the Company’s life settlements business are reported as assets and liabilities of discontinued operations in the condensed consolidated balance sheets as of February 28, 2014. The Company presented the prior year assets and liabilities related to the Company’s life settlements business as discontinued operations to provide comparability between the periods presented.

Discontinued operations on the condensed consolidated statement of operations for the three months and six months ended February 28, 2014 and February 28, 2014 are as follows:

	Three months ended February 28, 2014			Three months ended February 28, 2013			Six months ended February 28, 2014			Six months ended February 28, 2013
Sales, general and administrative expenses	$	-		$	(75,000	)	$	-		$	(204,200	)
Other income (expense)
Realized gain on life settlement contracts held under investment method		-			-			-			-
Realized loss on extinguishment of debt		-			-			-			(8,438,584	)
Change in fair value of life settlement contracts net of premiums paid		-			-			-			2,055,438
Interest expense		-			-			-			(1,610,571	)
Loss from discontinued operations before income tax		-			(75,000	)		-			(8,197,917	)
Income tax (expenses) benefit		(114,966	)		21,202			(114,966	)		3,879,477
Net loss from discontinued operations	$	(114,966	)	$	(53,798	)	$	(114,966	)	$	(4,318,440	)

Assets and liabilities of discontinued operations for the Company’s life settlements business on the condensed consolidated balance sheets consist of the following:

	February 28, 2014 (unaudited)		August 31, 2013
ASSETS
Current Assets
Deferred income taxes		145,781		145,781
Total noncurrent assets of discontinued operations	$	145,781	$	145,781
LIABILITIES
Current Liabilities
Income and other taxes payable		873,921		955,978
Total current liabilities of discontinued operations		873,921		955,978

During the six months ended February 28, 2013, a life settlement contract matured resulting in cash proceeds of $10,000,000, these proceeds were used to satisfy the Term Interest of $2,123,281, the Revolving Loan of $6,085,000 and the Premiums Payable of $1,170,526.

As of February 28, 2014 and August 31, 2013, the Company had a deferred income tax asset of $145,781 from an NOL from discontinued operations and income tax payable of $873,921 and $955,978, respectively, which includes $70,392 for interest and penalties, as a result of a realized gain from maturity of a life settlement contract which could not be offset by the capital loss generated by the disposition of life settlement contracts.

During the three and six months ended February 28, 2014, the Company recorded additional tax expense from discontinued operations of $114,966 from a true up of the tax liability to the 2012 and 2013 tax returns.

11

INFINITY AUGMENTED REALITY INC. AND ITS SUBSUDIARY

(A Development Stage Company)

NOTE 4: INVESTMENT IN META COMPANY

On July 10, 2013, the Company was issued a $50,000 par value Convertible Promissory Note from Meta Company (“Meta”), a Delaware company.  The Note bare a 5% annual coupon and was to mature on July 31, 2014.  The Note was convertible into shares of Meta at a conversion price of 80% of the price of common equity sold in a Qualified Offering of at least $1,000,000. The note was carried at cost which approximate fair value.  On January 27, 2014, Meta completed a qualified offering and converted the Convertible Promissory Note into 3,916 series A preferred shares of Meta at a purchase price of $16.397. The Company accounts for its investment in Meta in accordance with the cost method of accounting based on the guidance in ASC 325-20 “Investments-Other – Cost Method Investments” because the Company owns approximately 1% of the preferred shares issued in the Qualified Offering and does not exert influence over the operating and financial decisions of Meta management.

NOTE 5: CONVERTIBLE DEBENTURES

During the six months ended February 28, 2014, the Company completed a private placement of (i) five-year Convertible Debentures (the “Debentures”) for an aggregate principal amount of $2,030,000, bearing interest at 1.2% per annum, convertible into shares (the “Conversion Shares”) of common stock, at a conversion price of $0.25, and (ii) a five-year Warrant (the “Warrants”) to purchase 8,120,000 shares of common stock (the “Warrant Shares”), to certain accredited investors (the “Purchasers”) pursuant to several Securities Purchase Agreements.

The Debentures bear interest at 1.2% per annum payable semi-annually in arrears in either cash or common stock (at the discretion of the Company). There are no provisions for early redemption by the Company.

The Purchasers were issued Warrants to purchase the Company’s common stock, exercisable for a period of five years at an initial exercise price of $0.50, subject to adjustment. The Warrants provide for customary adjustments to the exercise price in the event of stock splits, stock dividends and other similar corporate events and may be exercised on a cashless basis. The Warrants do not confer any voting rights or any other rights as a shareholder.

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. The Company recorded an aggregate of $1,944,557 for the calculated fair value of the warrants and BCF, in conjunction with the convertible notes issued on September 17, 2013 through February 13, 2014.

The Company valued the warrants at the date the warrants were issued, using the Black-Scholes valuation model and the following assumptions:

	September 17, 2013			October 9, 2013			November 7, 2013			December 5, 2013			December 19, 2013			February 4, 2014			February 13, 2014
Contractual term (Years)		5.0			5.0			5.0			5.0			5.0			5.0			5.0
Volatility		68.5	%		67.3	%		66.3	%		64.6	%		91.9	%		92.8	%		92.7	%
Dividend yield		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
Risk-free interest rate		1.65	%		1.43	%		1.34	%		1.45	%		1.55	%		1.44	%		1.59	%

12

INFINITY AUGMENTED REALITY INC. AND ITS SUBSUDIARY

(A Development Stage Company)

NOTE 5: CONVERTIBLE DEBENTURES (Cont.)

	February 28, 2014
1.2% convertible debentures		3,957,543
Debt discount/ beneficial conversion feature		(3,456,070	)
Balance	$	501,473

On March 24, 2014, the Company’s board of directors terminated any further offering of Convertible Debentures Series A-13 and Warrants pursuant to the 2013 SPA.

NOTE 6: COMMITMENTS AND CONTINGENT LIABILITIES

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 based on foreign exchange rate as of February 28, 2014). During the three months ended February 28, 2014 Infinity Israel and the former employee have agreed on a settlement of the Claim of a lump sum payment of 50,000 NIS (approximately $16,500) by Infinity Israel to the former employee and, on January 26, 2014 the board of directors approved to issue the former employee options (the “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 will expire on June 23, 2014. The fair value of this grant was $31,311.

Effective November 1, 2013, Infinity Israel entered into an Employment Agreement with Ortal Zanzuri pursuant to which she will serve as the Chief Financial Officer of Infinity Israel. On November 11, 2013, the Board of the Company unanimously resolved to approve her employment agreement and resolved to appoint Ms. Zanzuri as the Secretary, Treasurer and Chief Financial Officer of the Company, effective on January 1, 2014. In connection with her appointment as Chief Financial Officer, Ms. Zanzuri will receive annual compensation of 480,000 New Israeli Shekel (approximately $136,000) and was granted options to purchase 400,000 shares of the Company with an exercise price of $0.10 (the “Options”). The options will vest semiannually over the next 2 years, beginning April 30, 2014 and continuing through October 31, 2015 and expire on February 22, 2019. Total fair value of this grant was $87,875.

The Board also accepted the resignation of Mr. Joshua Yifat, effective as of December 31, 2013.

On December 29, 2013, Infinity Israel entered into an employment agreements with Motti Kushnir (“Motti”) and Matan Protter (“Matan”) according to which Motti has been serving as the Chief Operation Officer (“COO”) since December 29, 2013 and Matan has been serving as the Chief Technology Officer (”CTO”) since January 1, 2014. In connection with their appointment as COO and CTO, Motti and Matan will receive annual compensation of approximately 630,000 and 531,600 NIS (approximately $179,000 and $151,000), respectively, and each of them was granted options to purchase 1,375,000 shares of the Company with an exercise price of $0.40 (the “Options”), vesting semiannually over the next 3 years, and expire on February 22, 2019.  Total fair value of these grants was $422,410.

Effective September 1, 2013, the Company terminated the At-Will Employment Agreement with Helen Papagiannis and entered into a consulting agreement pursuant to which Ms. Papagiannis continued to serve as the Chief Innovation Officer of the Company. The essential terms of the consulting agreement are similar to the prior At-Will Employment Agreement except for minor amended terms.

On January 31, 2014, the Company terminated the consulting agreement with the Company’s Chief Innovation Officer, Helen Papagiannis, effective as of April 30, 2014.

13

INFINITY AUGMENTED REALITY INC. AND ITS SUBSUDIARY

(A Development Stage Company)

NOTE 7: COMMON STOCK, WARRANTS AND OPTIONS

Common Stock

On December 29, 2013, the Company entered into an agreement to purchase certain intellectual property (“IP”) from Motti Kushnir and Matan Protter (the “Sellers”). In consideration for the purchase of the IP, the Company issued 84,226 shares of common stock, valued at approximately 100,000 New Israeli Shekels (approximately $26,000), of the Company which shall be restricted for a period of six months from the date of issuance.

During the six months ended February 28, 2014, a consultant exercised 699,260 options at an exercise price of $0.10 per share. The Company received cash proceeds of $69,926 on exercise of those options.

As of February 28, 2014, there are 355,468 shares of common stock in the Company’s treasury.

Warrants

Warrant transactions are summarized as follows:

	Number of warrants		Weighted average exercise price		Weighted average life remaining (in years)
Balance as at August 31, 2013 Issued		13,710,172		0.28	3.51 years
Additions as of February 28, 2014 Issued		8,120,000		0.50	4.74 years
Balance as at February 28, 2014		21,830,172		0.36	3.66 years

As of February 28, 2014, there were 21,830,172 warrants outstanding and exercisable with expiration dates commencing June 2015through February 2019.

Except as set forth under limited circumstances, the warrants do not permit net cash settlement.

Stock Options

During the six months ended February 28, 2014, the Board of Directors granted to a director 100,000 Non-Qualified Stock Options with an exercise price of $0.29, vesting semiannually over the next 2 years (at the beginning of the Company’s quarterly reporting date), and expiring on September 1, 2018.  25,000 (or 25%) of the Options shall initially vest on March 1, 2014 through September 1, 2015.

During the three months ended November 31, 2013, the Company’s Chief Financial Officer, Mr. Joshua Yifat, entered into a consulting agreement effective on January 1, 2014. Pursuant to the consulting agreement, the Board of Directors granted him 200,000 Non-Qualified Stock Options on November 7, 2013, at an exercise price of $0.35 vesting on April 16, 2014 and expiring on November 6, 2018.

During the six months ended February 28, 2014, the Board of Directors unanimously resolved to approve the appointments of Professor Steve Mann and Mr. Ido Sadeh as members of the Company’s Technology Advisory Board (the “Advisory Board”).

Professor Steve Mann was granted 200,000 Non-Qualified Stock Options with an exercise price of $0.33 (the “Options”), vesting semiannually over the next 2 years, and expiring on January 13, 2019.  50,000 (or 25%) of the Options shall initially vest on June 30, 2014 through December 31, 2015.

14

INFINITY AUGMENTED REALITY INC. AND ITS SUBSUDIARY

(A Development Stage Company)

NOTE 7: COMMON STOCK, WARRANTS AND OPTIONS (Cont.)

Mr. Ido Sadeh was granted 400,000 Non-Qualified Stock Options with an exercise price of $0.285 (the “Options”), vesting semiannually over the next 2 years, and expiring on February 21, 2019.  100,000 (or 25%) of the Options shall initially vest on August 31, 2014 through February 28, 2016.

During the six months ended February 28, 2014, the Board of Directors granted to a director 200,000 Non-Qualified Stock Options with an exercise price of $0.285. 100,000 options will be vested immediately and 100,000 options vesting semiannually over the next 2 years, and expiring on February 22, 2019.

During the six months ended February 28, 2014, the Board of Directors granted to Infinity Israel employees 300,000 Non-Qualified Stock Options with an exercise price of $0.285 (the “Options”), vesting semiannually over the next 3 years, and expiring on February 22, 2019.

During the six months ended February 28, 2014, the Board of Directors granted to certain of the Company’s officers 4,650,000 Non-Qualified Stock Options with exercise prices ranging from $0.10-$0.40 (the “Options”), vesting semiannually over the next 2-3 years, and will expiring on February 22, 2019.

During the six month ended February 28, 2014, the Board of Directors granted to a former employee of Infinity Israel 218,750 Non-Qualified Stock Options with an exercise price of $0.25 (the “Options”). The options vested immediately and will expire on June 23, 2014.

During the six month ended February 28, 2014, the Board of Directors granted to a former employee of Infinity Israel 50,000 Non-Qualified Stock Options with an exercise price of $0.285 (the “Options”). The options vested immediately and will expire on May 24, 2014.

Total grant date fair value of these options was $ 1,111,163. As of February 28, 2014, the unamortized stock compensation expense is $841,217, which will be amortized over the period ended November 30, 2016.

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 a 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.

15

INFINITY AUGMENTED REALITY INC. AND ITS SUBSUDIARY

(A Development Stage Company)

NOTE 7: COMMON STOCK, WARRANTS AND OPTIONS (Cont.)

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 February 28, 2014	Six Months ended February 28, 2014
Exercise price	$0.10 - $0.40	$0.10 - $0.40
Expected stock price volatility	87.9% - 92.4%	66.3% - 92.4%
Risk-free rate of interest	0.04% - 1.65%	0.04% - 1.72%
Expected life of options	1-4 Years	1-4 Years

The following table summarizes the stock-based compensation expense from stock option, employee stock purchase programs and restricted Common Stock awards for the six months and three months ended February 28, 2014 and 2013:

	Three months ended February 28,				Six months ended February 28,
	2014		2013		2014		2013
Employee awards	$	236,995	$	1,803	$	258,633	$	3,511
Non- employee awards, net of forfeitures		35,989			$	35,989
Total stock options compensation expense	$	272,984	$	1,803	$	294,622	$	3,511

The following table summarizes stock option activity:

	Number of Shares			Weighted Average Exercise Price		Total Weighted Average Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding at August 31, 2013		22,430,000			0.11		0.19		4.51
Options granted		6,318,750			0.28		0.05		4.93
Options exercised		(699,260	)		0.10		-		-
Options forfeited		-			-		-		-
Options cancelled		-			-		-		-
Outstanding at February 28, 2014		28,049,490			0.15		0.13		4.22
Options exercisable at February 28, 2014		22,832,623			0.11		0.15		4.00

16

INFINITY AUGMENTED REALITY INC. AND ITS SUBSUDIARY

(A Development Stage Company)

NOTE 8:            INCOME TAXES

Income tax expense consists of the following components for the three months and six months ended February 28, 2014 and 2013:

	Three Months ended February 28,				Six Months ended February 28,
	2014		2013		2014		2013
Current tax expense	$	-	$	-	$	-	$	-
Deferred tax expense (benefit)		-		27,783		-		190,652
Total income tax expense (benefit)	$	-	$	27,783	$	-	$	190,652

The Company calculates its interim tax provision in accordance with the provisions of ASC 740-270, Income Taxes; Interim Reporting. For interim periods, the Company estimates its annual effective income tax rate and applies the estimated rate to the year-to-date income or loss before income taxes. The Companyalso computes the tax provision or benefit related to items reported separately and recognizes the items net of their related tax effect in the interim periods inwhich they occur. The Company also recognizes the effect of changes in enacted tax laws or rates in the interim periods in which the changes occur.

In computing the annual estimated effective tax rate the Company makes certain estimates and judgments, such as estimated annual taxable income or loss, thenature and timing of permanent and temporary differences between taxable income for financial reporting and tax reporting, and the recoverability of deferred tax assets. These estimates and assumptions may change as new events occur, additional information is obtained, or as the tax environment changes. The difference between the statutory rate of 35% and the effective rate of 0% is primarily attributable to the effect of state and local taxes and offset by an increase in the valuation allowance.

As of August 31, 2013, the Company had approximately $1,974,000 of federal, state and local net operating losses (“NOL”). The federal NOL carryforward expires in the fiscal year ending August 31, 2032. As of August 31, 2013, the Company had approximately $340,000 of NOLs in Israel available to be carried forward indefinitely. The Company recorded a valuation allowance against its deferred tax asset resulting from its NOLs since management concluded that it was more likely than not that the Company would not realize the benefit of this portion of its deferred tax assets by generating sufficient taxable income in future years.

As of February 28, 2014, the Company has filed income tax returns through the fiscal 2012 tax year. The Company is required to file income tax returns in the United States (federal) and in New York State and City, and in Israel. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements.

The evaluation was performed for the August 31, 2008 – August 31, 2012 tax years, which remain subject to examination. At this time, the fiscal year 2011 tax return has been selected for examination by the Internal Revenue Service. The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in material changes to its financial position.

There are no significant amounts accrued for penalties or interest as of or during the six months ended February 28, 2014 and 2013. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.

17

INFINITY AUGMENTED REALITY INC. AND ITS SUBSUDIARY

(A Development Stage Company)

NOTE 9:            SUBSEQUENT EVENTS

On March 4, 2014, a consultant exercised 947,910 options at an exercise price of $0.10 per share. The Company received cash proceeds of $94,791 on exercise of those options.

On March 4, 2013, the Company entered into four separate Consulting Agreements (each, a “2013 Consulting Agreement”) with each of Agam Technologies LLC, SmartEyes Technologies LLC, XO Marketing LLC, and Gili Revensary as the managing member of GiliTech LLC (each, a “2013 Consultant”) and, in connection with each such 2013 Consulting Agreement, issued to the such 2013 Consultant, options to purchase shares of the Company’s Common Stock under the Existing Plans and Nonqualified Stock Option Agreements, dated March 4, 2013 (each, the “2013 Consultant’s Options” and the "2013 Option Agreement", respectively). In accordance with the 2013 Option Agreements, all the 2013 Consultant's Options which are vested at the termination of the 2013 Consulting Agreements may be exercised during a period of ninety (90) days after such termination date, and at the end of such ninety (90) day period, any unexercised 2013 Consultant's Options shall automatically expire and in accordance with the terms of the Existing Plans, shall be returned to the pool of shares available under the Existing Plans. Effective March 4, 2014 the Company terminated each of the 2013 Consulting Agreements. Any 2013 Consultant's Options which shall not be exercised within ninety (90) days after the termination date, shall expire and shall be returned to the pool of shares available under the Existing Plans. As of April 10, 2014, there are 19,852,830 exercisable options to these consultants.

On March 5, 2014, the Company issued Debentures and 400,000 warrants and received aggregate proceeds of $100,000.

On March 24, 2014, the  Company's board of directors adopted the 2014 Equity Incentive Plan, pursuant to which the Company may issue up to 30,000,000 shares (or options to purchase shares) of the Company’s Common Stock to designated officers, directors, employees and service provides of the Company pursuant to the terms of the 2014 Plan.

On March 24, 2014, the Company's board of directors elected Moshe Hogeg (“Mr. Hogeg”), a Director of the Company, to serve as Chairman of the Board until the next Annual Meeting of the Board or until his successor is duly qualified and elected. In consideration of his services as Chairman of the Board, the Company issued to Mr. Hogeg options to acquire 20,000,000 shares of the Company’s Common Stock under the Company’s 2014 Plan, such options, in the aggregate, to vest in 24 equal monthly installments (with the first vesting date being one month following the date of grant), provided he continues to serve as Chairman of the Board as of the relevant vesting date, and to have an exercise price of $0.01 per share and an expiration date which is March 24, 2024 (or earlier as provided in the 2014 Plan), and which will be subject to the execution and the terms of an option agreement between the Company and Mr. Hogeg.

On March 26, 2014, the Company entered into a Securities Purchase Agreement with Genesis Angels Fund, LP, (“Genesis Angels”) an affiliate of Moshe Hogeg, the Chairman of the Board of Directors of the Company. Pursuant to the terms of the Securities Purchase Agreement, the investor will invest  $1,000,000 in the Company and the Company will issue its Convertible Debentures Series A-14 (the “Convertible Debenture”), which will be convertible into shares of Common Stock at an initial conversion price of $0.25 per share, to the investor. The Company also received a commitment from Credit Strategies, LLC (the “Lead Investor”), for itself and/or its affiliates, which are major investors in the Company, to purchase an additional $1,500,000 upon similar terms within 90 days.

The Convertible Debentures have a term of five years and an interest rate of 1.20% per annum, payable semi-annually in cash or in kind at the option of the Company. If in kind, interest will be paid at the rate of $0.25 per share. The Company will also issue warrants (“Warrants”) to purchase a number of shares of the Company’s Common Stock equal to the number of shares that a Convertible Debenture could be converted into (i.e., a warrant to purchase 400,000 shares for each $100,000 in principal amount of Convertible Debenture). The Warrants have an exercise price of $0.50 per share, with cashless exercise rights, and expire five (5) years from the issuance date.

18

INFINITY AUGMENTED REALITY INC. AND ITS SUBSUDIARY

(A Development Stage Company)

NOTE 9:            SUBSEQUENT EVENTS (Cont.)

On March 24, 2014, the Board of Directors accepted Mr. Enon Landenberg’s resignation as Chief Executive Officer of the Company and its wholly-owned subsidiary, Infinity Israel effective April 1, 2014. Mr. Landenberg’s resignation was not the result of any disagreement regarding the operations, policies and procedures of the Company.   Mr. Landenberg will remain as President and a director of the Company.

Pursuant to the terms of an Agreement between the Company and Mr. Landenberg, Mr. Landenberg will continue to receive his current salary and full benefits until June 30, 2014. Mr. Landenberg had previously been granted options to purchase 1,500,000 shares of the Common Stock, of which 750,000 options had already vested.  He will also receive acceleration of the remaining currently unvested options to purchase 750,000 shares of Common Stock, so that they will vest in nine monthly installments beginning April 30, 2014 through December 31, 2014.

Effective as of the same date, the Board of Directors elected Mr. Motti Kushnir, currently the Chief Operating Officer of IAR Israel, to the additional role of Chief Executive Officer of the Company. He has also been elected as the Chief Executive Officer of IAR Israel.

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.

- - - - - - - - - - - - - - - - - - -

19

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

Special Note:  Certain statements in this quarterly report on Form 10-Q concerning our business prospects or future financial performance, anticipated revenues, expenses, profitability or other financial items, estimates as to size, growth in or projected revenues from the life settlement market, developments in industry regulations and the application of such regulations, expected outcomes of pending or potential litigation and regulatory actions, and our strategies, plans and objectives, together with other statements that are not historical facts, are “forward-looking statements” as that term is defined under the federal securities laws.  All of these forward-looking statements are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements.  You should carefully review the risks described herein and in other documents we file from time to time with the Securities and Exchange Commission, (“SEC”), including our Annual Report on Form 10-K for the year ended August 31, 2013 (“Fiscal 2013”), particularly in the sections entitled “Item 1A – Risk Factors” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  

Unless required by law, we undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this Report or to reflect the occurrence of unanticipated events. Shareholders and potential shareholders should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this Report. Management cautions that these statements are qualified by their terms and/or important factors, many of which are outside of our control, and involve a number of risks, uncertainties and other factors that could cause actual results and events to differ materially from the statements made, including, but not limited to, the following:

· actual or anticipated fluctuations in our quarterly and annual operating results;

· actual or anticipated product constraints;

· decreased demand resulting from changes in laws;

· product and services announcements by us or our competitors;

· loss of any of our key executives;

· regulatory announcements, proceedings or changes;

· competitive product developments and legal developments;

· any business combination we may propose or complete;

· any financing transactions we may propose or complete; or

· broader industry and market trends unrelated to its performance.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.

Overview

During the year ended August 31, 2012, we formed a wholly-owned subsidiary Infinity Augmented Reality, LLC (“IAR Subsidiary”) which was actively engaged in the development of software applications which will utilize augmented reality.

On February 26, 2013, the Company memorialized its understandings regarding prior and future activities with Infinity Advanced Technologies LTD (“IATL”), a company organized under the laws of the State of Israel which is developing applications for the Company’s augmented reality activities. In consideration of the services provided, IATL shall be entitled to receive a monthly base fee of $53,000. Additional charges may be incurred upon prior approval of the Company. Effective June 30, 2013, the Company terminated its services agreement with IATL.

Effective March 7, 2013, we changed our name from Absolute Life Solutions, Inc. to Infinity Augmented Reality, Inc. On that same date, we merged our IAR Subsidiary into the Company. We are currently actively engaged in the development of Augmented Reality software. Our objective is to establish ourself firmly as a preeminent source for state-of-the-art augmented reality experiences, forging a strong association, early on, between the Infinity brand and the burgeoning medium.

Augmented reality is a medium in which real sensory inputs are enhanced, or augmented, with relevant digital information from the Internet. Using specially equipped eyewear, virtual images, video, and sound are superimposed for the user over what is actually seen and heard, heightening the real-life experience with additional information that is pertinent, informative, practical, and/or entertaining. The individual user may also be fully immersed in a virtual world, temporarily blocking out real surroundings. With augmented reality, sensory inputs are no longer limited to what is within eyeshot or earshot, but may incorporate, in real-time, all that the network has to offer.

Augmented reality requires an interface, such as digitally-enhanced eyewear, that can instantaneously overlay virtual images and video on top of what is actually experienced. There are few companies in the process of developing augmented reality glasses that will change the way users see and interact with the world. We will utilize our augmented reality software through these glasses and/or through other mobile devices such as smart phones. As the individual turns his or her head in various directions and looks at different people or objects through the eyewear, the sights that are overlaid change accordingly.

20

Results of Operations

Our results of operations for the three months and six months ended February 28, 2014, consisted of research and development, Marketing and administrative expenses for personnel, leased office space and professional fees, income tax expense and loss from discontinued operations.

Three months and six months ended February 28, 2014 compared to three months and six months ended February 28, 2013

	Three months ended February 28, 2014			Three months ended February 28, 2013			Six months ended February 28, 2014			Six months ended February 28, 2013
Research and Development expenses	$	(484,692	)	$	-		$	(829,491	)	$	-
Marketing expenses		(53,781	)		-			(96,179	)		-
General and administrative expenses		(1,096,812	)		(622,003	)		(1,784,847	)		(882,673	)
Total Operating expenses		(1,635,285	)		(622,003	)		(2,710,517	)		(882,673	)
Other income (expense)
Foreign exchange gain		8,689			-			19,884			-
Interest expense		(191,816	)		-			(322,748	)		-
Loss from continuing operations before income tax		(1,818,412	)		(622,003	)		(3,013,381	)		(882,673	)
Provision for income tax		-			(27,783	)		-			(190,652	)
Loss from continuing operations		(1,818,412	)		(649,786	)		(3,013,381	)		(1,073,325	)
Loss from discontinued operations (including loss on disposal of $8,438,584 for the six months ended February 28, 2013), net of tax		(114,966	)		(53,798	)		(114,966	)		(4,318,440	)
Net loss	$	(1,933,378	)	$	(703,584	)	$	(3,128,347	)	$	(5,391,765	)

Operating expenses: Operating expenses increased from $622,003 and $882,673 for the three months and six months ended February 28, 2013 respectively to $1,635,285 and $2,710,517 for the three months and six months ended February 28, 2014 respectively. Operating expenses were primarily related to salaries, stock based compensation and other operating cost resulting from development of augmented reality applications mainly in the Israeli subsidiary. All of the operating expenses from the prior period that was related to our life settlements business were reclassified to discontinued operations. See Note 3 - Discontinued Operations to the Condensed Consolidated Financial Statements contained elsewhere in this Form 10-Q for more information.

Interest Expense: Interest expense for the three months and six months ended February 28, 2014 increased to $191,816 and $322,748 respectively as compared to $0 in the three months and six months ended February 28, 2013. Interest expenses include interest on Convertible Debts and amortization of debt discount related to convertible debt.

Income Tax:  Income tax expense for the three months and six months ended February 28, 2013 respectively was $27,783 and $190,652. The expenses are primarily attributable to an increase in the valuation allowance because the Company entered the development stage.

There were no income tax expenses resulting from changes in the deferred tax asset in the three months and six month ended February 28, 2014 because we recorded a full valuation allowance against the deferred tax asset resulting from the our NOL, since we concluded that it is more likely than not that we will not realize the benefit of our deferred tax assets by generating sufficient taxable income in future years.

Net Loss from continuing operations: We reported a net loss from continuing operations of $1,818,412 and $3,013,381 for the three months and six months ended February 28, 2014 respectively compared to a net loss of $649,786 and $1,073,325 for the three months and six months ended February 28, 2013 respectively. The increase of  $1,168,626 and $1,940,056 is primarily attributable to an increase of $484,692 and $829,491 in research and development expenses, an increase of $528,590 and $998,354 in marketing and general and administrative expenses for continuing operations, an increase of $191,816 and $322,748 in interest expense for continuing operations, an increase of $8,689 and $19,884 in foreign exchange gains on our investment in Infinity Israel and a decrease of $27,783 and $190,652 in income tax expense for continuing operations. Refer to preceding discussions for explanation of variances.

Loss from discontinued operations: Loss from discontinued operations was $114,966 in the three months and six months ended February 28, 2014 respectively. The expenses resulted from a true up of income taxes related to the year end 2012 and 2013 tax returns.

21

Liquidity and Capital Resources

Net cash used in operating activities for the six months ended February 28, 2014 was $2,173,903. Net cash used in investing activities was $70,803 arising from purchase of computer equipment. Net cash provided by financing activities was $2,099,926 arising from proceeds from convertible debentures and exercise of stock options. This resulted in a decrease in cash of $143,836.

Working Capital and Capital Availability: As of February 28, 2014, we had negative working capital of $1,170,995 consisting of negative working capital of $297,074 from continuing operations and negative working capital of $873,921 from discontinued operations. Subsequent to February 28, 2014, we issued Convertible Debentures and received aggregate proceeds of $100,000. To provide a secure and assured source of financing to the Company for its funding needs through the end of 2014, Credit Strategies LLP (the "Lead Investor"), on behalf of itself and its affiliates, and Genesis Angels Fund LP, a limited partnership organized under the laws of New Zealand (collectively the “Purchasers”), have agreed to purchase $2,500,000 in the aggregate of the Company’s Convertible Debentures Series A-14, bearing an interest rate of 1.20% per annum, payable semi-annually in cash or kind, at the Company’s option, convertible into the Company’s Common Stock at the rate of $0.25 per share together with Warrants to purchase up to 10,000,000 shares of Common Stock at an exercise price of $0.50 per share, both expiring March 31, 2019.

On March 24, 2014, the Company's board of directors approved the Securities Purchase Agreement with each of the Purchasers, substantially upon the terms set forth in the Securities Purchase Agreement (the “2014 SPA”), and to accept the offer of each of the Purchasers, to purchase its respective portion of the $2,500,000 of the Company’s Convertible Debentures Series A-14 with Warrants on the terms previously set forth in the 2014 SPA. We anticipate that barring unforeseen developments, the proceeds received from these subsequent debt financings will sustain our operations until December 31, 2014. To date, we issued a total of approximately $4,057,543 of Convertible Debentures with a maximum available of $5,000,000. We anticipate raising additional funds to continue our augmented reality operations through subsequent debt or equity offerings to one or more accredited investors. Such issuances may dilute the interests of our existing shareholders. During the next twelve months, we anticipate that we will not generate significant cash from operations. We are unable to estimate our working capital requirements and capital availability for the next twelve months.

Going Concern Qualification

The Company will require additional funds to finance its new augmented reality operations. Effective November 15, 2012, we are a development stage company dependent upon the expected demand for our software applications and our ability to generate sufficient cash from our augmented reality business to meet our obligations as they come due. We may not be able to obtain additional financing on reasonable terms or at all. These conditions raise substantial doubt about our ability to continue as a going concern.However, there can be no assurance that the Company can successfully implement its business plan, and it is uncertain that the Company will achieve a profitable level of operations and be able to obtain additional financing. There can be no assurance that any additional financings will be available to the Company on satisfactory terms and conditions, if at all.

Application of Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations are based on our financial statements that were prepared in accordance with accounting principles generally accepted in the United States of America. To guide our preparation, we follow accounting policies, some of which represent critical accounting policies as defined by the SEC. The SEC defines critical accounting policies as those that are both most important to the portrayal of a company’s financial condition and results and require management’s most difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates involve significant judgments, assumptions and estimates by management that may have a material impact on the carrying value of certain assets and liabilities, disclosures of contingent liabilities, and the reported amounts of income and expenses during the reporting period that management considers critical accounting estimates. The judgments, assumptions and estimates used by management are based on historical experience, management’s experience, knowledge of the accounts and other factors that are believed to be reasonable. Because of the nature of the judgments and assumptions made by management, actual results may differ materially from these judgments and estimates, which could have a material impact on the carrying values of assets and liabilities and the results of our operations. Areas affected by our estimates and assumptions are identified below.

We apply the principles of ASC 985-20, Software- Costs of Software to Be Sold, Leased, or Marketed, which requires that software development costs incurred in conjunction with product development be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of unamortized cost or net realizable value of the related product. We have adopted the “tested working model” approach to establishing technological feasibility for its products. Under this approach, a product in development is not considered to have passed the technological feasibility milestone until we have produced a model of the product that contains essentially all the functionality and features of the final product and have tested the model to ensure that it works as expected. We have expensed all software development costs when incurred since they have not reached technological feasibility.

We account for the BCF and warrant valuation in accordance with ASC 470-20, Debt with Conversion and Other Options. We record 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.

22

We record stock-based compensation expense in accordance with ASC 718, Compensation - Stock Compensation. We expense 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, we re-measure 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.

We review the carrying value of the property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment includes current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment, there was no impairment during the six months ended February 28, 2014.

We evaluate the useful lives of our property and equipment to assure that an adequate amount of depreciation is being charged to operations. Useful lives are based generally on specific knowledge of an asset’s life.

We are required to estimate our income taxes. This process involves estimating our current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These differences result in deferred tax assets and liabilities. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income, and, to the extent we believe that recovery is not likely, we establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we include a tax provision or reduce our tax benefit in the statements of operations. We use our judgment to determine our provision or benefit for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets.

We cannot predict what future laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes in laws and regulations on a regular basis and update the assumptions and estimates used to prepare our financial statements when we deem it necessary.

We have not made any material changes to our critical accounting estimates or assumptions or the judgments affecting the application of those estimates or assumptions.

Off-Balance Sheet Arrangements

We did not engage in any off-balance sheet arrangements or transactions.

Outlook

Effective March 7, 2013, we changed our name from Absolute Life Solutions, Inc. to Infinity Augmented Reality, Inc. On that same date, we merged our IAR Subsidiary into the Company. We are actively engaged in the development of software platform, which will utilize Augmented Reality. On February 26, 2013, we memorialized our understandings regarding prior and future activities withInfinityAdvanced Technologies LTD (“IATL”), a company organized under the laws of the State of Israel which is developing applications for our augmented reality activities. Effective June 30, 2013, the Company terminated its services agreement with IATL.

We are currently in the process of developing a number of augmented reality technologies. We believe our Company and our industry are fundamentally sound and well positioned to deal with the current uncertainty in the financial and capital markets.  We carry no operational debt and do not rely on leverage in our capital structure. We do rely, however, upon the availability of investment capital. While it is conceivable that a financial crisis could diminish the supply of investment capital throughout the economy, we believe that greater investment capital will be placed in the augmented reality sector. We believe this is due to the fact that augmented reality is one of the technologies of the future.

We believe that domestic and international demand for augmented reality products will continue to grow as the industry continues to mature.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Management does not believe that there is any material market risk exposure with respect to derivative or other financial instruments that would require disclosure under this item.

23

Item 4. Controls and Procedures.

Disclosure Controls and Procedures.  With the participation of our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)), as of the end of the period covered by this report.  Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such periods, our disclosure controls and procedures were not effective due to the material weaknesses noted below, in ensuring that (i) information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

· Due to the small size of its staff, the Company did not have sufficient segregation of duties to support its internal control over financial reporting.

There were no changes in our internal controls over financial reporting during the quarter ended February 28, 2014, that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

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 based on foreign exchange rate as of February 28, 2014). During the three month ended February 28, 2014 Infinity Israel and the former employee have agreed on a settlement of the Claim of a lump sum payment of 50,000 NIS (approximately $16,500) by Infinity Israel to the former employee and, on January 26, 2014 the board of directors approved to issue the former employee options (the “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 will expire on June 23, 2014.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

The Company currently does not have senior securities.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit Number	Description
31.1	Certification of Chief Executive Officer   pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer   pursuant to Section 906 of the Sarbanes-Oxley Act.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

24

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

INFINITY AUGMENTED REALITY, INC.
April 11, 2014	/s/ Ortal Zanzuri
	Ortal Zanzuri Treasurer and Chief Financial Officer (Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Capacity in which signed	Date
/s/ Motti Kushnir
Motti Kushnir	Chief Executive Officer (Principal Executive Officer )	April 11, 2014

25

EX-31.1

Exhibit 31.1

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

I, Motti Kushnir, certify that:

1.	I have reviewed this Form 10-Q of Infinity Augmented Reality, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods present in this report;
4.	The issuer’s other certifying officer(s) and I are  responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the issuer and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the issuer’s internal control over financing reporting that occurred during the issuer’s most recent fiscal quarter (the issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and
5.	The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involved management or other employees who have a significant role in the issuer’s internal control over financial reporting.
Date: April 11, 2014
/s/ Motti Kushnir
Motti Kushnir Chief Executive Officer (principal executive officer and duly authorized officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF

CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

I, Ortal Zanzuri, certify that:

1.	I have reviewed this Form 10-Q of Infinity Augmented Reality, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods present in this report;
4.	The issuer’s other certifying officer(s) and I are  responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the issuer and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the issuer’s internal control over financing reporting that occurred during the issuer’s most recent fiscal quarter (the issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and
5.	The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involved management or other employees who have a significant role in the issuer’s internal control over financial reporting.
Date: April 11, 2014
/s/ Ortal Zanzuri
Ortal Zanzuri Treasurer and Chief Financial Officer (principal  financial  officer and duly authorized officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying Quarterly Report on Form 10-Q of Infinity Augmented Reality, Inc., for the quarter ending February 28, 2014, I, Enon Landenberg, President and Chief Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

1.    Such Quarterly Report on Form 10-Q for the quarter ending February 28, 2014, fully complies with the requirements of  Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.    The information contained in such Quarterly Report on Form 10-Q for the quarter ending February 28, 2014, fairly represents in all material respects, the financial condition and results of operations of Infinity Augmented Reality, Inc.

Date: April 11, 2014

/s/ Motti Kushnir

Motti Kushnir

Chief Executive Officer

(principal executive officer and duly authorized officer)

EX-32.2

Exhibit 32.2

CERTIFICATION OF

CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying Quarterly Report on Form 10-Q of Infinity Augmented Reality, Inc., for the quarter ending February 28, 2014, I, Ortal Zanzuri, Treasurer and Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

1.    Such Quarterly Report on Form 10-Q for the quarter ending February 28, 2014, fully complies with the requirements of  Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.    The information contained in such Quarterly Report on Form 10-Q for the quarter ending February 28, 2014, fairly represents in all material respects, the financial condition and results of operations of Infinity Augmented Reality, Inc.

Date: April 11, 2014

/s/ Ortal Zanzuri

Ortal Zanzuri

Treasurer and Chief Financial Officer

( principal  financial  officer and duly authorized officer)

XML

COMMON STOCK, WARRANTS AND OPTIONS (Schedule of Stock Option Activity) (Details) (Stock Options [Member], USD $)	6 Months Ended	12 Months Ended
	Feb. 28, 2014	Aug. 31, 2013
Stock Options [Member]
Number of Shares
Outstanding at August 31, 2013	22,430,000
Options granted	6,318,750
Options exercised	(699,260)
Options forfeited
Options cancelled
Outstanding at February 28, 2014	28,049,490	22,430,000
Options exercisable at February 28, 2014	22,832,623
Weighted Average Exercise Price
Outstanding at August 31, 2013	$ 0.11
Options granted	$ 0.28
Options exercised	$ 0.10
Options forfeited
Options cancelled
Outstanding at February 28, 2014	$ 0.15	$ 0.11
Options exercisable at February 28, 2014	$ 0.11
Total Weighted Average Intrinsic Value
Outstanding at August 31, 2013	$ 0.19
Options granted	$ 0.05
Options exercised
Options forfeited
Options cancelled
Outstanding at February 28, 2014	$ 0.13	$ 0.19
Options exercisable at February 28, 2014	$ 0.15
Weighted Average Remaining Contactual Life (in years)
Outstanding	4 years 2 months 19 days	4 years 6 months 4 days
Options granted	4 years 11 months 5 days
Options exercised
Options forfeited
Options cancelled
Options exercisable at February 28, 2014	4 years

XML

CONVERTIBLE DEBENTURES (Narrative) (Details) (USD $)	6 Months Ended
	Feb. 28, 2014
Debt Instrument [Line Items]
Exercise price of warrants	$ 0.01
Convertible Debentures [Member]
Debt Instrument [Line Items]
Term	5 years
Amount	$ 2,030,000
Interest rate	1.20%
Conversion price	$ 0.25
Warrant Term	5 years
Warrants issued to purchase shares of common stock	8,120,000
Exercise price of warrants	$ 0.50
Aggregate fair value of warrants and beneficial conversion feature	$ 1,944,557

XML

DISCONTINUED OPERATIONS

6 Months Ended

Feb. 28, 2014

DISCONTINUED OPERATIONS [Abstract]

DISCONTINUED OPERATIONS

NOTE 3: DISCONTINUED OPERATIONS

Effective November 15, 2012, the Company reached an agreement with the agent of the Lenders regarding the satisfaction of the outstanding balance of the Loans, under the terms of a Loan Satisfaction Agreement. Such agreement resulted in the disposition of all of the life settlement contracts that were held by the Company to the Lender or an affiliate of the Lender. All of the operations related to the Company's life settlements business are reported as discontinued operations in the condensed consolidated financial statements. The prior period operations related to this business have also been reported as discontinued operations retrospectively for all periods presented. The assets and liabilities related to the Company's life settlements business are reported as assets and liabilities of discontinued operations in the condensed consolidated balance sheets as of February 28, 2014. The Company presented the prior year assets and liabilities related to the Company's life settlements business as discontinued operations to provide comparability between the periods presented.

Discontinued operations on the condensed consolidated statement of operations for the three months and six months ended February 28, 2014 and February 28, 2014 are as follows:

	Three months ended February 28, 2014			Three months ended February 28, 2013			Six months ended February 28, 2014			Six months ended February 28, 2013
Sales, general and administrative expenses	$	-		$	(75,000	)	$	-		$	(204,200	)
Other income (expense)
Realized gain on life settlement contracts held under investment method		-			-			-			-
Realized loss on extinguishment of debt		-			-			-			(8,438,584	)
Change in fair value of life settlement contracts net of premiums paid		-			-			-			2,055,438
Interest expense		-			-			-			(1,610,571	)
Loss from discontinued operations before income tax		-			(75,000	)		-			(8,197,917	)
Income tax (expenses) benefit		(114,966	)		21,202			(114,966	)		3,879,477
Net loss from discontinued operations	$	(114,966	)	$	(53,798	)	$	(114,966	)	$	(4,318,440	)

Assets and liabilities of discontinued operations for the Company's life settlements business on the condensed consolidated balance sheets consist of the following:

	February 28, 2014 (unaudited)		August 31, 2013
ASSETS
Current Assets
Deferred income taxes		145,781		145,781
Total noncurrent assets of discontinued operations	$	145,781	$	145,781
LIABILITIES
Current Liabilities
Income and other taxes payable		873,921		955,978
Total current liabilities of discontinued operations		873,921		955,978

During the six months ended February 28, 2013, a life settlement contract matured resulting in cash proceeds of $10,000,000, these proceeds were used to satisfy the Term Interest of $2,123,281, the Revolving Loan of $6,085,000 and the Premiums Payable of $1,170,526.

As of February 28, 2014 and August 31, 2013, the Company had a deferred income tax asset of $145,781 from an NOL from discontinued operations and income tax payable of $873,921 and $955,978, respectively, which includes $70,392 for interest and penalties, as a result of a realized gain from maturity of a life settlement contract which could not be offset by the capital loss generated by the disposition of life settlement contracts.

During the three and six months ended February 28, 2014, the Company recorded additional tax expense from discontinued operations of $114,966 from a true up of the tax liability to the 2012 and 2013 tax returns.

XML

COMMON STOCK, WARRANTS AND OPTIONS (Narrative) (Details)	0 Months Ended		6 Months Ended		15 Months Ended		3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended
	Dec. 29, 2013 USD ($)	Dec. 29, 2013 ILS	Feb. 28, 2014 USD ($)	Feb. 28, 2013 USD ($)	Feb. 28, 2014 USD ($)	Aug. 31, 2013	Feb. 28, 2014 2013 Plan [Member]	Feb. 28, 2014 Director [Member] USD ($)	Nov. 30, 2013 Mr. Joshua Yifat [Member] USD ($)	Feb. 28, 2014 Professor Steve Mann [Member] USD ($)	Feb. 28, 2014 Mr. Ido Sadeh [Member] USD ($)	Feb. 28, 2014 Second Director [Member] USD ($)	Feb. 28, 2014 Infinity Israel employees [Member] USD ($)	Feb. 28, 2014 Officers [Member]	Feb. 28, 2014 First Group of Former Employees of Infinity Israel [Member] USD ($)	Feb. 28, 2014 Second Group of Former Employees of Infinity Israel [Member] USD ($)	Feb. 28, 2014 Minimum [Member]	Feb. 28, 2014 Minimum [Member] Director [Member]	Feb. 28, 2014 Minimum [Member] Professor Steve Mann [Member]	Feb. 28, 2014 Minimum [Member] Mr. Ido Sadeh [Member]	Feb. 28, 2014 Minimum [Member] Officers [Member] USD ($)	Feb. 28, 2014 Maximum [Member]	Feb. 28, 2014 Maximum [Member] Director [Member]	Feb. 28, 2014 Maximum [Member] Professor Steve Mann [Member]	Feb. 28, 2014 Maximum [Member] Mr. Ido Sadeh [Member]	Feb. 28, 2014 Maximum [Member] Officers [Member] USD ($)	Feb. 28, 2014 Consultants [Member] USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issued for purchase of intellectual property	84,226	84,226
Shares issued for purchase of intellectual property, value	$ 26,000	100,000
Options exercised																											699,260
Options exercised, exercise price																											$ 0.10
Proceeds on exercise of options			69,926		149,926																						69,926
Treasury stock			355,468		355,468	355,468
Warrants outstanding and exercisable			21,830,172		21,830,172
Warrant expiration date																	Jun. 01, 2015					Feb. 28, 2019
Options granted								100,000	200,000	200,000	400,000	200,000	300,000	4,650,000	218,750	50,000
Options granted, exercise price								$ 0.29	$ 0.35	$ 0.33	$ 0.285	$ 0.285	$ 0.285		$ 0.25	$ 0.285					$ 0.10					$ 0.40
Options vested												100,000
Vesting period								2 years		2 years	2 years	2 years	3 years								2 years					3 years
Stock option, expiration date							Jun. 23, 2014	Sep. 01, 2018	Nov. 06, 2018	Jan. 13, 2019	Feb. 21, 2019	Feb. 22, 2019	Feb. 22, 2019	Feb. 22, 2019	Jun. 23, 2014	May 24, 2014
Options to initially vest								25,000		50,000	100,000
Vesting percentage								25.00%		50.00%	25.00%
Vesting rate, number												100,000
Stock option, vesting date									Apr. 16, 2014									Mar. 01, 2014	Jun. 30, 2014	Aug. 31, 2014			Sep. 01, 2015	Dec. 31, 2015	Feb. 28, 2016
Aggregate fair value of the options at grant date			1,111,163		1,111,163
Unamortized compensation cost related to stock options			$ 841,217		$ 841,217
End of amortization period related to stock options			Nov. 30, 2016

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COMMITMENTS AND CONTINGENT LIABILITIES (Details)	0 Months Ended			3 Months Ended			0 Months Ended		0 Months Ended		0 Months Ended
	Dec. 29, 2013 USD ($)	Nov. 27, 2013 USD ($)	Nov. 27, 2013 ILS	Feb. 28, 2014 USD ($)	Feb. 28, 2014 ILS	Feb. 28, 2014 2013 Plan [Member] USD ($)	Jan. 01, 2014 Ortal Zanzuri [Member] USD ($)	Jan. 01, 2014 Ortal Zanzuri [Member] ILS	Dec. 29, 2013 Motti [Member] USD ($)	Dec. 29, 2013 Motti [Member] ILS	Dec. 29, 2013 Matan [Member] USD ($)	Dec. 29, 2013 Matan [Member] ILS
COMMITMENTS AND CONTINGENT LIABILITIES [Abstract]
Damages being sought		$ 57,780	202,000
Damages paid in settlement				16,500	50,000
Commitments And Contingencies [Line Items]
Options issuable from settlement						218,750
Options issuable from settlement, exercise price						$ 0.25
Annual base compensation							136,000	480,000	179,000	630,000	151,000	531,600
Options granted							400,000		1,375,000		1,375,000
Options granted, exercise price							$ 0.10		$ 0.40		$ 0.40
Vesting period							2 years		3 years		3 years
Stock option, expiration date						Jun. 23, 2014	Feb. 22, 2019		Feb. 22, 2019		Feb. 22, 2019
Options granted, fair value	$ 422,410					$ 31,311	$ 87,875

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COMMON STOCK, WARRANTS AND OPTIONS (Schedule of Warrant Transactions) (Details) (Warrant [Member], USD $)	6 Months Ended	12 Months Ended
	Feb. 28, 2014	Aug. 31, 2013
Warrant [Member]
Number of warrants
Balance	13,710,172
Issued	8,120,000
Balance	21,830,172	13,710,172
Weighted average exercise price
Balance	$ 0.28
Issued	$ 0.50
Balance	$ 0.36	$ 0.28
Weighted average life remaining (in years)
Balance	3 years 7 months 28 days	3 years 6 months 4 days
Issued	4 years 8 months 27 days

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COMMON STOCK, WARRANTS AND OPTIONS (Fair Value Assumptions for Options) (Details) (Stock Options [Member], USD $)	3 Months Ended	6 Months Ended
	Feb. 28, 2014	Feb. 28, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected stock price volatility, minimum	87.90%	66.30%
Expected stock price volatility, maximum	92.40%	92.40%
Risk-free rate of interest, minimum	0.04%	0.04%
Risk-free rate of interest, maximum	1.65%	1.72%
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price	$ 0.10	$ 0.10
Expected life of options	1 year	1 year
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price	$ 0.40	$ 0.40
Expected life of options	4 years	4 years

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SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Feb. 28, 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 February 28, 2014 and for the three months and six months ended February 28, 2014 and 2013 and for the period from November 15, 2012 to February 28, 2014 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 our wholly-owned subsidiary. All significant intercompany accounts and transactions are eliminated in the consolidation process. The unaudited Balance Sheet as of February 28, 2014, Statements of Operations and comprehensive loss for the three months and six months ended February 28, 2014 and February 28, 2013 and for the period from November 15, 2012 to February 28, 2014, and Statements of Cash Flows for the six months ended February 28, 2014 and February 28, 2013 and for the period from November 15, 2012 to February 28, 2014, 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 and six months ended February 28, 2014 and for the period from November 15, 2012 to February 28, 2014 are not necessarily indicative of results to be expected for the year ending August 31, 2014 or for any future interim period. In addition, the balance sheet data at August 31, 2013 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 December 23, 2013.

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 deferred income tax amounts and rates and timing of the reversal of income tax differences.

Reclassifications

The Company reclassified certain amounts in the historical balance sheet for presentation purposes. The reclassification had no effect on working capital or previously stated net income.  The Company identified certain amounts in accounts payable and accrued expenses that should have been included in current liabilities of discontinued operations. 

Development Stage Company

Effective November 15, 2012, the Company is considered a development stage company, having no operating revenues during the period from November 15, 2012 ("Inception") to February 28, 2014, as defined by ASC 915-205, Development-Stage Entities. ASC 915-205 requires companies to report their operations, shareholders equity and cash flows upon entering the development stage through the date that revenues are generated. From November 15, 2012 through February 28, 2014, all operating expenses of the Company related to its augmented reality business and is included in the Condensed Consolidated Statements of Operations and comprehensive loss.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. The Company maintains cash balances that may be uninsured or in deposit accounts that exceed Federal Deposit Insurance Corporation limits. The Company maintains its cash deposits with major financial institutions.

Financial Instruments

The fair value of certain of the Company's financial instruments, consisting of cash, accounts payable and accrued expenses are estimated to be equal to their carrying value due to the short-term nature of these instruments. It is management's opinion that the Company is not exposed to significant interest, currency and credit risks arising from these financial instruments.

Leasehold Improvements and Equipment

Leasehold Improvements and Equipment consists of computer hardware and furniture and is recorded at cost. Computer hardware and furniture are depreciated on a straight-line basis over their estimated lives of three to five years. Leasehold Improvements are amortized on a straight-line basis over the life of the lease of two years.

Software Development Costs

The Company applies the principles of ASC 985-20, Software- Costs of Software to Be Sold, Leased, or Marketed, which requires that software development costs incurred in conjunction with product development be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of unamortized cost or net realizable value of the related product. The Company has adopted the "tested working model" approach to establishing technological feasibility for its products. Under this approach, a product in development is not considered to have passed the technological feasibility milestone until the Company has produced a model of the product that contains essentially all the functionality and features of the final product and have tested the model to ensure that it works as expected. The Company has expensed all software development costs when incurred since none of the Company's products have reached technological feasibility.

Foreign Currency Translation

The financial statements are presented in United States dollars. In accordance with ASC 830, Foreign Currency Matters, foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary assets and liabilities are translated at exchange rates prevailing at the transaction date. Revenue and expenses are translated at average rates of exchange during the periods presented. Related translation adjustments are reported as a separate component of stockholders' deficit, whereas gains or losses resulting from foreign currency transactions and re-measurement are included in results of operations. Infinity Israel maintains its books and record using its functional currency which is the New Israeli Shekel ("NIS").

Income Taxes

Deferred income taxes are provided for tax effects of temporary differences between the tax basis of asset and liabilities and their reported amounts in the financial statements. The Company uses the liability method to account for income taxes, which requires deferred taxes to be recorded at the statutory rate expected to be in effect when the taxes are paid. Valuation allowances are provided for a deferred tax asset when it is more likely than not that such asset will not be realized.

Management evaluates tax positions taken or expected to be taken in a tax return. The evaluation of a tax position includes a determination of whether a tax position should be recognized in the financial statements, and such a position should only be recognized if the Company determines that it is more likely than not that the tax position will be sustained upon examination by the tax authorities, based upon the technical merits of the position. For those tax positions that should be recognized, the measurement of a tax position is determined as being the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.

The Company's policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense.

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 are the effects of 6,000,000 warrants exercisable at $.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 February 28, 2014, 59,709,834 shares of common stock, comprised of 15,830,172 convertible debentures with a conversion price of $0.25, 15,830,172 warrants with an exercise price of $0.50, and stock options exercisable into 28,049,490 common shares are not included in diluted loss per share since their effect would be anti-dilutive. There are no other potential common shares at February 28, 2013.

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.

Recent Accounting Pronouncements

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 consolidated financial statements of the Company.

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COMMON STOCK, WARRANTS AND OPTIONS (Schedule of Stock-Based Compensation Expense) (Details) (USD $)	3 Months Ended		6 Months Ended		15 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 28, 2014	Feb. 28, 2013	Feb. 28, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock options compensation expense	$ 272,984	$ 1,803	$ 294,622	$ 3,511	$ 4,805,984
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock options compensation expense	236,995	1,803	258,633	3,511
Non-Employee Award [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock options compensation expense	$ 35,989		$ 35,989

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Feb. 28, 2014	Aug. 31, 2013
Current Assets
Cash and cash equivalents	$ 287,924	$ 431,760
Convertible note receivable		50,000
Prepaid expenses and other receivables	9,062	21,355
Total current assets	296,986	503,115
Leasehold improvements and equipment, net	150,382	126,108
Security deposit and other long-term receivables	98,387	86,272
Investment in Meta Company	50,000
Noncurrent assets of discontinued operations	145,781	145,781
TOTAL ASSETS	741,536	861,276
Current Liabilities
Accounts payable and accrued expenses	572,077	190,620
Interest payable	21,983	3,906
Current liabilities of discontinued operations	873,921	955,978
Total current liabilities	1,467,981	1,150,504
Convertible debentures, net of debt discount	501,473	128,327
TOTAL LIABILITIES	1,969,454	1,278,831
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' DEFICIT
Common stock ($0.00001 par value; 500,000,000 authorized; 94,368,245 issued and 94,012,777 outstanding) (August 31, 2013 - 93,584,759 issued and 93,229,291 outstanding)	944	936
Additional paid in capital	60,273,882	57,938,675
Treasury stock, at cost (355,468 shares of common stock)	(49,766)	(49,766)
Accumulated deficit	(61,434,324)	(58,305,978)
Accumulated other comprehensive loss	(18,654)	(1,422)
Total Stockholders' Deficit	(1,227,918)	(417,555)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$ 741,536	$ 861,276

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	6 Months Ended		15 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 28, 2014
OPERATING ACTIVITIES
Net loss	$ (3,128,347)	$ (5,391,765)	$ (9,942,707)
Loss from discontinued operations	114,966	4,318,440	114,966
Adjustments to reconcile net loss to net cash (used in) provided by operations
Amortization of debt discount	287,703		348,921
Stock-based compensation	294,622	3,511	4,805,984
Foreign exchange gain on investment in subsidiary	(19,884)		(12,748)
Stock forfeited by stockholders to settle payment of withholding tax on behalf of such stockholders		(5,645)	(5,645)
Payment-in-kind interest on shareholders loan			2,543
Loss on disposition of equipment	25,385		38,546
Issuance of stock for in-process research and development	26,110		26,110
Depreciation and amortization	24,818	11,977	46,737
Deferred rent		18,570	(63,638)
Deferred income taxes		190,652	78,637
Changes in operating assets and liabilities:
Prepaid expenses and other receivables	12,427	7,073	9,636
Security deposit	(9,204)		(38,426)
Accounts payable and accrued expenses	376,447	8,575	395,785
Interest payable	18,077		21,983
Net cash used in operating activities- continuing operations	(1,976,880)	(838,612)	(4,173,316)
Net cash (used in) provided by operating activities- discontinued operations	(197,023)	(6,655,209)	5,661,652
Net cash (used in) provided by operating activities	(2,173,903)	(7,493,821)	1,488,336
INVESTING ACTIVITIES
Payment for purchase of convertible note			(50,000)
Proceeds received from sale of equipment			5,200
Purchase of leasehold improvements and equipment	(70,803)		(175,628)
Net cash used in investing activities- continuing operations	(70,803)		(220,428)
Net cash provided by investing activities- discontinued operations		9,756,718
Net cash (used in) provided by investing activities	(70,803)	9,756,718	(220,428)
FINANCING ACTIVITIES
Proceeds from convertible debentures	2,030,000		3,755,000
Proceeds from exercise of stock options	69,926		149,926
Proceeds from shareholder loan			200,000
Net cash provided by financing activities- continuing operations	2,099,926		4,104,926
Net cash (used in) provided by financing activities- discontinued operations		(2,300,000)	(5,135,000)
Net cash (used in) provided by financing activities	2,099,926	(2,300,000)	(1,030,074)
Effect of exchange rate on cash and cash equivalents	944		(8,030)
Change in cash and cash equivalents	(143,836)	(37,103)	229,804
Cash and cash equivalents, beginning	431,760	58,120	233,050
Cash and cash equivalents of continuing operations, ending	287,924	195,947	287,924
Supplemental disclosure of cash flow information:
Tax paid in cash	197,023		222,850
Non-cash Investing and Financing activities:
Conversion of shareholder loan into convertible debentures			202,543
Warrants issued in connection with convertible debentures	834,272		1,652,984
Beneficial conversion feature	1,110,285		2,152,007
Conversion of convertible note receivables to preferred shares of Meta Company	$ 50,000		$ 50,000

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INCOME TAXES (Narrative) (Details) (USD $)	6 Months Ended	12 Months Ended
	Feb. 28, 2014	Aug. 31, 2013
Operating Loss Carryforwards [Line Items]
Statutory rate	35.00%
Effective tax rate	0.00%
Net operating losses		$ 1,974,000
Net operating losses carried forward, expiration date		Aug. 31, 2032
Israel [Member] | Available To Be Carried Forward Indefinitely [Member]
Operating Loss Carryforwards [Line Items]
Net operating losses		$ 340,000

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DISCONTINUED OPERATIONS (Condensed Statement of Operations and Condensed Balance Sheets) (Details) (USD $)	3 Months Ended		6 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 28, 2014	Feb. 28, 2013	Aug. 31, 2013
DISCONTINUED OPERATIONS [Abstract]
Sales, general and administrative expenses		$ (75,000)		$ (204,200)
Other income (expense)
Realized gain on life settlement contracts held under investment method
Realized loss on extinguishment of debt				(8,438,584)
Change in fair value of life settlement contracts net of premiums paid				2,055,438
Interest expense				(1,610,571)
Loss from discontinued operations before income tax		(75,000)		(8,197,917)
Income tax (expenses) benefit	(114,966)	21,202	(114,966)	3,879,477
Net loss from discontinued operations	(114,966)	(53,798)	(114,966)	(4,318,440)
ASSETS
Deferred income taxes	145,781		145,781		145,781
Total noncurrent assets of discontinued operations	145,781		145,781		145,781
LIABILITIES
Income and other taxes payable	873,921		873,921		955,978
Total current liabilities of discontinued operations	$ 873,921		$ 873,921		$ 955,978

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SUBSEQUENT EVENTS (Details) (USD $)	0 Months Ended	6 Months Ended		15 Months Ended	6 Months Ended		0 Months Ended					0 Months Ended
	Mar. 05, 2014	Feb. 28, 2014	Feb. 28, 2013	Feb. 28, 2014	Feb. 28, 2014 Minimum [Member]	Feb. 28, 2014 Maximum [Member]	Mar. 26, 2014 Convertible Debentures Series A-14 [Member]	Mar. 24, 2014 Enon Landenberg [Member]	Mar. 24, 2014 Enon Landenberg [Member] Minimum [Member]	Mar. 24, 2014 Enon Landenberg [Member] Maximum [Member]	Mar. 24, 2014 2014 Equity Incentive Plan [Member]	Mar. 24, 2014 2014 Equity Incentive Plan [Member] Mosh Hogeg [Member]	Mar. 05, 2014 Warrant [Member]	Mar. 05, 2014 Consultants [Member]	Apr. 10, 2014 Consultants [Member]	Mar. 26, 2014 Genesis Angels [Member]	Mar. 26, 2014 Credit Strategies, LLC [Member]
Subsequent Event [Line Items]
Options exercised														947,910
Options exercised, exercise price														$ 0.10
Proceeds on exercise of options		$ 69,926		$ 149,926										$ 94,791
Options exercisable															19,852,830
Warrants issued													400,000
Aggregate proceeds from debentures and warrants issued	100,000
Equity Incentive Plan, shares of common stock reserved for issuance											30,000,000
Options granted								1,500,000				20,000,000
Vesting period												24 months
Options granted, exercise price												$ 0.01
Stock option, expiration date												Mar. 24, 2024
Securities Purchase Agreement , investment amount																1,000,000	1,500,000
Conversion price							$ 0.25
Debt term							5 years
Interest rate							1.20%
In kind interest, per share							$ 0.25
Warrants issued to purchase shares of common stock							400,000
Principal payment amount							$ 100,000
Exercise price of warrants		$ 0.01		$ 0.01			$ 0.50
Warrant expiration date					Jun. 01, 2015	Feb. 28, 2019
Options vested								750,000
Non-vested options								750,000
Stock option, vesting date									Apr. 30, 2014	Dec. 31, 2014

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INVESTMENT IN META COMPANY (Details) (Meta Company [Member], USD $)

0 Months Ended

Jan. 27, 2014

Series A Preferred Shares [Member]

Jul. 10, 2013

Convertible Note Receivable [Member]

Jan. 27, 2014

Convertible Note Receivable [Member]

Series A Preferred Shares [Member]

Investment [Line Items]

Amount

$ 50,000

Interest rate

5.00%

Maturity

Jul. 31, 2014

Terms of conversion

The Note was convertible into shares of Meta at a conversion price of 80% of the price of common equity sold in a Qualified Offering of at least $1,000,000.

Shares issued in debt conversion

3,916

Purchase price

$ 16.397

Ownership interest

1.00%

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NATURE AND CONTINUANCE OF OPERATIONS

6 Months Ended

Feb. 28, 2014

NATURE AND CONTINUANCE OF OPERATIONS [Abstract]

NATURE AND CONTINUANCE OF OPERATIONS

NOTE 1: NATURE AND CONTINUANCE OF OPERATIONS

Infinity Augmented Reality, Inc. (the "Company") was originally incorporated as Shimmer Gold, Inc. in the State of Nevada on September 7, 2006. The Company was an Exploration Stage company as defined by Accounting Standards Codification ("ASC") 915, Development Stage Entities, and 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 and was no longer classified as a development stage company.

Effective November 15, 2012, the Company was no longer engaged in its prior primary activity as a specialty financial services company primarily engaged in the purchase of life settlement contracts. As a result of the foregoing, the Company is currently classified as a development stage company. All of the operations related to the Company's life settlements business are reported as discontinued operations in the unaudited condensed consolidated financial statements. As discussed in Note 3, the prior period operations related to this business have also been reclassified as discontinued operations retrospectively for all periods presented.

During the year ended August 31, 2012, the Company 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, the 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 software platform which will utilize augmented reality. The Company intends to develop a comprehensive augmented reality platform for enterprises. The Company's objective is to establish itself firmly as a preeminent source for state-of-the-art augmented reality experiences, forging a strong association, early on, between the Infinity brand and the burgeoning medium.

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 expectation. 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 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.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Feb. 28, 2014	Aug. 31, 2013
Common stock, par value (in dollars per share)	$ 0.00001	$ 0.00001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	94,368,245	93,584,759
Common stock, shares outstanding	94,012,777	93,229,291
Treasury stock	355,468	355,468

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DISCONTINUED OPERATIONS (Tables)

6 Months Ended

Feb. 28, 2014

DISCONTINUED OPERATIONS [Abstract]

Schedule of Discontinued Operations, Income Statement and Balance Sheet

Discontinued operations on the condensed consolidated statement of operations for the three months and six months ended February 28, 2014 and February 28, 2014 are as follows:

	Three months ended February 28, 2014			Three months ended February 28, 2013			Six months ended February 28, 2014			Six months ended February 28, 2013
Sales, general and administrative expenses	$	-		$	(75,000	)	$	-		$	(204,200	)
Other income (expense)
Realized gain on life settlement contracts held under investment method		-			-			-			-
Realized loss on extinguishment of debt		-			-			-			(8,438,584	)
Change in fair value of life settlement contracts net of premiums paid		-			-			-			2,055,438
Interest expense		-			-			-			(1,610,571	)
Loss from discontinued operations before income tax		-			(75,000	)		-			(8,197,917	)
Income tax (expenses) benefit		(114,966	)		21,202			(114,966	)		3,879,477
Net loss from discontinued operations	$	(114,966	)	$	(53,798	)	$	(114,966	)	$	(4,318,440	)

Assets and liabilities of discontinued operations for the Company's life settlements business on the condensed consolidated balance sheets consist of the following:

	February 28, 2014 (unaudited)		August 31, 2013
ASSETS
Current Assets
Deferred income taxes		145,781		145,781
Total noncurrent assets of discontinued operations	$	145,781	$	145,781
LIABILITIES
Current Liabilities
Income and other taxes payable		873,921		955,978
Total current liabilities of discontinued operations		873,921		955,978

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Document And Entity Information	6 Months Ended
	Feb. 28, 2014	Apr. 09, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	Infinity Augmented Reality, Inc.
Entity Central Index Key	0001421538
Current Fiscal Year End Date	--08-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	also
Entity Common Stock, Shares Outstanding		94,368,245
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Feb. 28, 2014
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2014

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CONVERTIBLE DEBENTURES (Tables)

6 Months Ended

Feb. 28, 2014

CONVERTIBLE DEBENTURES [Abstract]

Schedule of Warrant Valuation Assumptions

The Company valued the warrants at the date the warrants were issued, using the Black-Scholes valuation model and the following assumptions:

	September 17 , 2013			October 9, 2013			November 7, 2013			December 5, 2013			December 19, 2013			February 4, 2014			February 13, 2014
Contractual term (Years)		5.0			5.0			5.0			5.0			5.0			5.0			5.0
Volatility		68.5	%		67.3	%		66.3	%		64.6	%		91.9	%		92.8	%		92.7	%
Dividend yield		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
Risk-free interest rate		1.65	%		1.43	%		1.34	%		1.45	%		1.55	%		1.44	%		1.59	%

Schedule of Senior Convertible Notes

	February 28, 2014
1.2% convertible debentures		3,957,543
Debt discount/ beneficial conversion feature		(3,456,070	)
Balance	$	501,473

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		6 Months Ended		15 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 28, 2014	Feb. 28, 2013	Feb. 28, 2014
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract]
Research and Development expenses	$ (484,692)		$ (829,491)		$ (963,195)
Marketing expenses	(53,781)		(96,179)		(130,547)
General and administrative expenses	(1,096,812)	(622,003)	(1,784,847)	(882,673)	(8,277,695)
Total Operating expenses	(1,635,285)	(622,003)	(2,710,517)	(882,673)	(9,371,437)
Other income (expense)
Foreign exchange gain	8,689		19,884		12,748
Interest expense	(191,816)		(322,748)		(390,415)
Loss from continuing operations before income tax	(1,818,412)	(622,003)	(3,013,381)	(882,673)	(9,749,104)
Provision for income tax		(27,783)		(190,652)	(78,637)
Loss from continuing operations	(1,818,412)	(649,786)	(3,013,381)	(1,073,325)	(9,827,741)
Loss from discontinued operations (including loss on disposal of life settlement contracts of $8,438,584 for the three months and six months ended February 28, 2013), net of tax	(114,966)	(53,798)	(114,966)	(4,318,440)	(114,966)
Net loss	(1,933,378)	(703,584)	(3,128,347)	(5,391,765)	(9,942,707)
Basic and diluted loss per common share
Continuing operations	$ (0.02)	$ (0.01)	$ (0.03)	$ (0.01)
Discontinued operations				$ (0.04)
Net loss per common share	$ (0.02)	$ (0.01)	$ (0.03)	$ (0.05)
Basic weighted average shares outstanding	99,855,165	98,226,463	99,566,969	98,228,040
Diluted weighted average shares outstanding	99,855,165	98,226,463	99,566,969	98,228,040
Net loss	(1,933,378)	(703,584)	(3,128,347)	(5,391,765)	(9,942,707)
Foreign currency translation adjustments	(11,431)		(17,232)		(18,654)
Comprehensive loss	$ (1,944,809)	$ (703,584)	$ (3,145,579)	$ (5,391,765)	$ (9,961,361)

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COMMITMENTS AND CONTINGENT LIABILITIES

6 Months Ended

Feb. 28, 2014

COMMITMENTS AND CONTINGENT LIABILITIES [Abstract]

COMMITMENTS AND CONTINGENT LIABILITIES

NOTE 6: COMMITMENTS AND CONTINGENT LIABILITIES

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 based on foreign exchange rate as of February 28, 2014). During the three months ended February 28, 2014 Infinity Israel and the former employee have agreed on a settlement of the Claim of a lump sum payment of 50,000 NIS (approximately $16,500) by Infinity Israel to the former employee and, on January 26, 2014 the board of directors approved to issue the former employee options (the "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 will expire on June 23, 2014. The fair value of this grant was $31,311.

Effective November 1, 2013, Infinity Israel entered into an Employment Agreement with Ortal Zanzuri pursuant to which she will serve as the Chief Financial Officer of Infinity Israel. On November 11, 2013, the Board of the Company unanimously resolved to approve her employment agreement and resolved to appoint Ms. Zanzuri as the Secretary, Treasurer and Chief Financial Officer of the Company, effective on January 1, 2014. In connection with her appointment as Chief Financial Officer, Ms. Zanzuri will receive annual compensation of 480,000 New Israeli Shekel (approximately $136,000) and was granted options to purchase 400,000 shares of the Company with an exercise price of $0.10 (the "Options"). The options will vest semiannually over the next 2 years, beginning April 30, 2014 and continuing through October 31, 2015 and expire on February 22, 2019. Total fair value of this grant was $87,875.

The Board also accepted the resignation of Mr. Joshua Yifat, effective as of December 31, 2013.

On December 29, 2013, Infinity Israel entered into an employment agreements with Motti Kushnir ("Motti") and Matan Protter ("Matan") according to which Motti has been serving as the Chief Operation Officer ("COO") since December 29, 2013 and Matan has been serving as the Chief Technology Officer ("CTO") since January 1, 2014. In connection with their appointment as COO and CTO, Motti and Matan will receive annual compensation of approximately 630,000 and 531,600 NIS (approximately $179,000 and $151,000), respectively, and each of them was granted options to purchase 1,375,000 shares of the Company with an exercise price of $0.40 (the "Options"), vesting semiannually over the next 3 years, and expire on February 22, 2019.  Total fair value of these grants was $422,410.

Effective September 1, 2013, the Company terminated the At-Will Employment Agreement with Helen Papagiannis and entered into a consulting agreement pursuant to which Ms. Papagiannis continued to serve as the Chief Innovation Officer of the Company. The essential terms of the consulting agreement are similar to the prior At-Will Employment Agreement except for minor amended terms.

On January 31, 2014, the Company terminated the consulting agreement with the Company's Chief Innovation Officer, Helen Papagiannis, effective as of April 30, 2014.

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CONVERTIBLE DEBENTURES

6 Months Ended

Feb. 28, 2014

CONVERTIBLE DEBENTURES [Abstract]

CONVERTIBLE DEBENTURES

NOTE 5: CONVERTIBLE DEBENTURES

During the six months ended February 28, 2014, the Company completed a private placement of (i) five-year Convertible Debentures (the "Debentures") for an aggregate principal amount of $2,030,000, bearing interest at 1.2% per annum, convertible into shares (the "Conversion Shares") of common stock, at a conversion price of $0.25, and (ii) a five-year Warrant (the "Warrants") to purchase 8,120,000 shares of common stock (the "Warrant Shares"), to certain accredited investors (the "Purchasers") pursuant to several Securities Purchase Agreements.

The Debentures bear interest at 1.2% per annum payable semi-annually in arrears in either cash or common stock (at the discretion of the Company). There are no provisions for early redemption by the Company.

The Purchasers were issued Warrants to purchase the Company's common stock, exercisable for a period of five years at an initial exercise price of $0.50, subject to adjustment. The Warrants provide for customary adjustments to the exercise price in the event of stock splits, stock dividends and other similar corporate events and may be exercised on a cashless basis. The Warrants do not confer any voting rights or any other rights as a shareholder.

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. The Company recorded an aggregate of $1,944,557 for the calculated fair value of the warrants and BCF, in conjunction with the convertible notes issued on September 17, 2013 through February 13, 2014.

The Company valued the warrants at the date the warrants were issued, using the Black-Scholes valuation model and the following assumptions:

	September 17 , 2013			October 9, 2013			November 7, 2013			December 5, 2013			December 19, 2013			February 4, 2014			February 13, 2014
Contractual term (Years)		5.0			5.0			5.0			5.0			5.0			5.0			5.0
Volatility		68.5	%		67.3	%		66.3	%		64.6	%		91.9	%		92.8	%		92.7	%
Dividend yield		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
Risk-free interest rate		1.65	%		1.43	%		1.34	%		1.45	%		1.55	%		1.44	%		1.59	%

	February 28, 2014
1.2% convertible debentures		3,957,543
Debt discount/ beneficial conversion feature		(3,456,070	)
Balance	$	501,473

On March 24, 2014, the Company's board of directors terminated any further offering of Convertible Debentures Series A-13 and Warrants pursuant to the 2013 SPA.

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DISCONTINUED OPERATIONS (Narrative) (Details) (USD $)	3 Months Ended		6 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 28, 2014	Feb. 28, 2013	Aug. 31, 2013
DISCONTINUED OPERATIONS [Abstract]
Proceeds from life settlement contract maturity				$ 10,000,000
Deferred income tax asset, NOL from discontinued operations	145,781		145,781		145,781
Income taxes payable	873,921		873,921		955,978
Interest and penalties	70,392		70,392		70,392
Additional tax expense from discontinued operations	114,966	(21,202)	114,966	(3,879,477)
ALS Capital Ventures LLC [Member]
Debt Instrument [Line Items]
Premiums payable		1,170,526		1,170,526
Term Loan [Member]
Debt Instrument [Line Items]
Interest payable		2,123,281		2,123,281
Revolving Loan [Member]
Debt Instrument [Line Items]
Debt, gross amount		$ 6,085,000		$ 6,085,000

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COMMON STOCK, WARRANTS AND OPTIONS (Tables)

6 Months Ended

Feb. 28, 2014

COMMON STOCK, WARRANTS AND OPTIONS [Abstract]

Schedule of Warrant Transactions

Warrant transactions are summarized as follows:

	Number of warrants		Weighted average exercise price		Weighted average life remaining (in years)
Balance as at August 31, 2013 Issued		13,710,172		0.28	3.51 years
Additions as of February 28, 2014 Issued		8,120,000		0.50	4.74 years
Balance as at February 28, 2014		21,830,172		0.36	3.66 years

Schedule of Stock Option Fair Value Assumptions

The following assumptions were used:

	Three Months ended February 28, 2014	Six Months ended February 28, 2014
Exercise price	$0.10 - $0.40	$0.10 - $0.40
Expected stock price volatility	87.9% - 92.4%	66.3% - 92.4%
Risk-free rate of interest	0.04% - 1.65%	0.04% - 1.72%
Expected life of options	1-4 Years	1-4 Years

Schedule of Stock-Based Compensation Expense

The following table summarizes the stock-based compensation expense from stock option, employee stock purchase programs and restricted Common Stock awards for the six months and three months ended February 28, 2014 and 2013:

	Three months ended February 28,				Six months ended February 28,
	2014		2013		2014		2013
Employee awards	$	236,995	$	1,803	$	258,633	$	3,511
Non- employee awards, net of forfeitures		35,989			$	35,989
Total stock options compensation expense	$	272,984	$	1,803	$	294,622	$	3,511

Schedule of Stock Option Activity

The following table summarizes stock option activity:

	Number of Shares			Weighted Average Exercise Price		Total Weighted Average Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding at August 31, 2013		22,430,000			0.11		0.19		4.51
Options granted		6,318,750			0.28		0.05		4.93
Options exercised		(699,260	)		0.10		-		-
Options forfeited		-			-		-		-
Options cancelled		-			-		-		-
Outstanding at February 28, 2014		28,049,490			0.15		0.13		4.22
Options exercisable at February 28, 2014		22,832,623			0.11		0.15		4.00

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SUBSEQUENT EVENTS

6 Months Ended

Feb. 28, 2014

SUBSEQUENT EVENTS [Abstract]

SUBSEQUENT EVENTS

NOTE 9:            SUBSEQUENT EVENTS

On March 4, 2014, a consultant exercised 947,910 options at an exercise price of $0.10 per share. The Company received cash proceeds of $94,791 on exercise of those options.

On March 4, 2013, the Company entered into four separate Consulting Agreements (each, a "2013 Consulting Agreement") with each of Agam Technologies LLC, SmartEyes Technologies LLC, XO Marketing LLC, and Gili Revensary as the managing member of GiliTech LLC (each, a "2013 Consultant") and, in connection with each such 2013 Consulting Agreement, issued to the such 2013 Consultant, options to purchase shares of the Company's Common Stock under the Existing Plans and Nonqualified Stock Option Agreements, dated March 4, 2013 (each, the "2013 Consultant's Options" and the "2013 Option Agreement", respectively). In accordance with the 2013 Option Agreements, all the 2013 Consultant's Options which are vested at the termination of the 2013 Consulting Agreements may be exercised during a period of ninety (90) days after such termination date, and at the end of such ninety (90) day period, any unexercised 2013 Consultant's Options shall automatically expire and in accordance with the terms of the Existing Plans, shall be returned to the pool of shares available under the Existing Plans. Effective March 4, 2014 the Company terminated each of the 2013 Consulting Agreements. Any 2013 Consultant's Options which shall not be exercised within ninety (90) days after the termination date, shall expire and shall be returned to the pool of shares available under the Existing Plans. As of April 10, 2014, there are 19,852,830 exercisable options to these consultants.

On March 5, 2014, the Company issued Debentures and 400,000 warrants and received aggregate proceeds of $100,000.

On March 24, 2014, the  Company's board of directors adopted the 2014 Equity Incentive Plan, pursuant to which the Company may issue up to 30,000,000 shares (or options to purchase shares) of the Company's Common Stock to designated officers, directors, employees and service provides of the Company pursuant to the terms of the 2014 Plan.

On March 24, 2014, the Company's board of directors elected Moshe Hogeg ("Mr. Hogeg"), a Director of the Company, to serve as Chairman of the Board until the next Annual Meeting of the Board or until his successor is duly qualified and elected. In consideration of his services as Chairman of the Board, the Company issued to Mr. Hogeg options to acquire 20,000,000 shares of the Company's Common Stock under the Company's 2014 Plan, such options, in the aggregate, to vest in 24 equal monthly installments (with the first vesting date being one month following the date of grant), provided he continues to serve as Chairman of the Board as of the relevant vesting date, and to have an exercise price of $0.01 per share and an expiration date which is March 24, 2024 (or earlier as provided in the 2014 Plan), and which will be subject to the execution and the terms of an option agreement between the Company and Mr. Hogeg.

On March 26, 2014, the Company entered into a Securities Purchase Agreement with Genesis Angels Fund, LP, ("Genesis Angels") an affiliate of Moshe Hogeg, the Chairman of the Board of Directors of the Company. Pursuant to the terms of the Securities Purchase Agreement, the investor will invest  $1,000,000 in the Company and the Company will issue its Convertible Debentures Series A-14 (the "Convertible Debenture"), which will be convertible into shares of Common Stock at an initial conversion price of $0.25 per share, to the investor. The Company also received a commitment from Credit Strategies, LLC (the "Lead Investor"), for itself and/or its affiliates, which are major investors in the Company, to purchase an additional $1,500,000 upon similar terms within 90 days.

The Convertible Debentures have a term of five years and an interest rate of 1.20% per annum, payable semi-annually in cash or in kind at the option of the Company. If in kind, interest will be paid at the rate of $0.25 per share. The Company will also issue warrants ("Warrants") to purchase a number of shares of the Company's Common Stock equal to the number of shares that a Convertible Debenture could be converted into (i.e., a warrant to purchase 400,000 shares for each $100,000 in principal amount of Convertible Debenture). The Warrants have an exercise price of $0.50 per share, with cashless exercise rights, and expire five (5) years from the issuance date.

On March 24, 2014, the Board of Directors accepted Mr. Enon Landenberg's resignation as Chief Executive Officer of the Company and its wholly-owned subsidiary, Infinity Israel effective April 1, 2014. Mr. Landenberg's resignation was not the result of any disagreement regarding the operations, policies and procedures of the Company.   Mr. Landenberg will remain as President and a director of the Company.

Pursuant to the terms of an Agreement between the Company and Mr. Landenberg, Mr. Landenberg will continue to receive his current salary and full benefits until June 30, 2014. Mr. Landenberg had previously been granted options to purchase 1,500,000 shares of the Common Stock, of which 750,000 options had already vested.  He will also receive acceleration of the remaining currently unvested options to purchase 750,000 shares of Common Stock, so that they will vest in nine monthly installments beginning April 30, 2014 through December 31, 2014.

Effective as of the same date, the Board of Directors elected Mr. Motti Kushnir, currently the Chief Operating Officer of IAR Israel, to the additional role of Chief Executive Officer of the Company. He has also been elected as the Chief Executive Officer of IAR Israel.

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.

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COMMON STOCK, WARRANTS AND OPTIONS

6 Months Ended

Feb. 28, 2014

COMMON STOCK, WARRANTS AND OPTIONS [Abstract]

COMMON STOCK, WARRANTS AND OPTIONS

NOTE 7: COMMON STOCK, WARRANTS AND OPTIONS

Common Stock

On December 29, 2013, the Company entered into an agreement to purchase certain intellectual property ("IP") from Motti Kushnir and Matan Protter (the "Sellers"). In consideration for the purchase of the IP, the Company issued 84,226 shares of common stock, valued at approximately 100,000 New Israeli Shekels (approximately $26,000), of the Company which shall be restricted for a period of six months from the date of issuance.

During the six months ended February 28, 2014, a consultant exercised 699,260 options at an exercise price of $0.10 per share. The Company received cash proceeds of $69,926 on exercise of those options.

As of February 28, 2014, there are 355,468 shares of common stock in the Company's treasury.

Warrants

Warrant transactions are summarized as follows:

	Number of warrants		Weighted average exercise price		Weighted average life remaining (in years)
Balance as at August 31, 2013 Issued		13,710,172		0.28	3.51 years
Additions as of February 28, 2014 Issued		8,120,000		0.50	4.74 years
Balance as at February 28, 2014		21,830,172		0.36	3.66 years

As of February 28, 2014, there were 21,830,172 warrants outstanding and exercisable with expiration dates commencing June 2015through February 2019.

Except as set forth under limited circumstances, the warrants do not permit net cash settlement.

Stock Options

During the six months ended February 28, 2014, the Board of Directors granted to a director 100,000 Non-Qualified Stock Options with an exercise price of $0.29, vesting semiannually over the next 2 years (at the beginning of the Company's quarterly reporting date), and expiring on September 1, 2018.  25,000 (or 25%) of the Options shall initially vest on March 1, 2014 through September 1, 2015.

During the three months ended November 31, 2013, the Company's Chief Financial Officer, Mr. Joshua Yifat, entered into a consulting agreement effective on January 1, 2014. Pursuant to the consulting agreement, the Board of Directors granted him 200,000 Non-Qualified Stock Options on November 7, 2013, at an exercise price of $0.35 vesting on April 16, 2014 and expiring on November 6, 2018.

During the six months ended February 28, 2014, the Board of Directors unanimously resolved to approve the appointments of Professor Steve Mann and Mr. Ido Sadeh as members of the Company's Technology Advisory Board (the "Advisory Board").

Professor Steve Mann was granted 200,000 Non-Qualified Stock Options with an exercise price of $0.33 (the "Options"), vesting semiannually over the next 2 years, and expiring on January 13, 2019.  50,000 (or 25%) of the Options shall initially vest on June 30, 2014 through December 31, 2015.

Mr. Ido Sadeh was granted 400,000 Non-Qualified Stock Options with an exercise price of $0.285 (the "Options"), vesting semiannually over the next 2 years, and expiring on February 21, 2019.  100,000 (or 25%) of the Options shall initially vest on August 31, 2014 through February 28, 2016.

During the six months ended February 28, 2014, the Board of Directors granted to a director 200,000 Non-Qualified Stock Options with an exercise price of $0.285. 100,000 options will be vested immediately and 100,000 options vesting semiannually over the next 2 years, and expiring on February 22, 2019.

During the six months ended February 28, 2014, the Board of Directors granted to Infinity Israel employees 300,000 Non-Qualified Stock Options with an exercise price of $0.285 (the "Options"), vesting semiannually over the next 3 years, and expiring on February 22, 2019.

During the six months ended February 28, 2014, the Board of Directors granted to certain of the Company's officers 4,650,000 Non-Qualified Stock Options with exercise prices ranging from $0.10-$0.40 (the "Options"), vesting semiannually over the next 2-3 years, and will expiring on February 22, 2019.

During the six month ended February 28, 2014, the Board of Directors granted to a former employee of Infinity Israel 218,750 Non-Qualified Stock Options with an exercise price of $0.25 (the "Options"). The options vested immediately and will expire on June 23, 2014.

During the six month ended February 28, 2014, the Board of Directors granted to a former employee of Infinity Israel 50,000 Non-Qualified Stock Options with an exercise price of $0.285 (the "Options"). The options vested immediately and will expire on May 24, 2014.

Total grant date fair value of these options was $ 1,111,163. As of February 28, 2014, the unamortized stock compensation expense is $841,217, which will be amortized over the period ended November 30, 2016.

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 a 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 February 28, 2014	Six Months ended February 28, 2014
Exercise price	$0.10 - $0.40	$0.10 - $0.40
Expected stock price volatility	87.9% - 92.4%	66.3% - 92.4%
Risk-free rate of interest	0.04% - 1.65%	0.04% - 1.72%
Expected life of options	1-4 Years	1-4 Years

The following table summarizes the stock-based compensation expense from stock option, employee stock purchase programs and restricted Common Stock awards for the six months and three months ended February 28, 2014 and 2013:

	Three months ended February 28,				Six months ended February 28,
	2014		2013		2014		2013
Employee awards	$	236,995	$	1,803	$	258,633	$	3,511
Non- employee awards, net of forfeitures		35,989			$	35,989
Total stock options compensation expense	$	272,984	$	1,803	$	294,622	$	3,511

The following table summarizes stock option activity:

	Number of Shares			Weighted Average Exercise Price		Total Weighted Average Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding at August 31, 2013		22,430,000			0.11		0.19		4.51
Options granted		6,318,750			0.28		0.05		4.93
Options exercised		(699,260	)		0.10		-		-
Options forfeited		-			-		-		-
Options cancelled		-			-		-		-
Outstanding at February 28, 2014		28,049,490			0.15		0.13		4.22
Options exercisable at February 28, 2014		22,832,623			0.11		0.15		4.00

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INCOME TAXES

6 Months Ended

Feb. 28, 2014

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 8:            INCOME TAXES

Income tax expense consists of the following components for the three months and six months ended February 28, 2014 and 2013:

	Three Months ended February 28,				Six Months ended February 28,
	2014		2013		2014		2013
Current tax expense	$	-	$	-	$	-	$	-
Deferred tax expense (benefit)		-		27,783		-		190,652
Total income tax expense (benefit)	$	-	$	27,783	$	-	$	190,652

The Company calculates its interim tax provision in accordance with the provisions of ASC 740-270, Income Taxes; Interim Reporting. For interim periods, the Company estimates its annual effective income tax rate and applies the estimated rate to the year-to-date income or loss before income taxes. The Company also computes the tax provision or benefit related to items reported separately and recognizes the items net of their related tax effect in the interim periods in which they occur. The Company also recognizes the effect of changes in enacted tax laws or rates in the interim periods in which the changes occur.

In computing the annual estimated effective tax rate the Company makes certain estimates and judgments, such as estimated annual taxable income or loss, the nature and timing of permanent and temporary differences between taxable income for financial reporting and tax reporting, and the recoverability of deferred tax assets. These estimates and assumptions may change as new events occur, additional information is obtained, or as the tax environment changes. The difference between the statutory rate of 35% and the effective rate of 0% is primarily attributable to the effect of state and local taxes and offset by an increase in the valuation allowance.

As of August 31, 2013, the Company had approximately $1,974,000 of federal, state and local net operating losses ("NOL"). The federal NOL carryforward expires in the fiscal year ending August 31, 2032. As of August 31, 2013, the Company had approximately $340,000 of NOLs in Israel available to be carried forward indefinitely. The Company recorded a valuation allowance against its deferred tax asset resulting from its NOLs since management concluded that it was more likely than not that the Company would not realize the benefit of this portion of its deferred tax assets by generating sufficient taxable income in future years.

As of February 28, 2014, the Company has filed income tax returns through the fiscal 2012 tax year. The Company is required to file income tax returns in the United States (federal) and in New York State and City, and in Israel. Based on the Company's evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company's financial statements.

The evaluation was performed for the August 31, 2008 - August 31, 2012 tax years, which remain subject to examination. At this time, the fiscal year 2011 tax return has been selected for examination by the Internal Revenue Service. The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in material changes to its financial position.

There are no significant amounts accrued for penalties or interest as of or during the six months ended February 28, 2014 and 2013. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Feb. 28, 2014

SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of February 28, 2014 and for the three months and six months ended February 28, 2014 and 2013 and for the period from November 15, 2012 to February 28, 2014 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 our wholly-owned subsidiary. All significant intercompany accounts and transactions are eliminated in the consolidation process. The unaudited Balance Sheet as of February 28, 2014, Statements of Operations and comprehensive loss for the three months and six months ended February 28, 2014 and February 28, 2013 and for the period from November 15, 2012 to February 28, 2014, and Statements of Cash Flows for the six months ended February 28, 2014 and February 28, 2013 and for the period from November 15, 2012 to February 28, 2014, 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 and six months ended February 28, 2014 and for the period from November 15, 2012 to February 28, 2014 are not necessarily indicative of results to be expected for the year ending August 31, 2014 or for any future interim period. In addition, the balance sheet data at August 31, 2013 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 December 23, 2013.

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 deferred income tax amounts and rates and timing of the reversal of income tax differences.

Reclassifications

Reclassifications

The Company reclassified certain amounts in the historical balance sheet for presentation purposes. The reclassification had no effect on working capital or previously stated net income.  The Company identified certain amounts in accounts payable and accrued expenses that should have been included in current liabilities of discontinued operations. 

Development Stage Company

Development Stage Company

Effective November 15, 2012, the Company is considered a development stage company, having no operating revenues during the period from November 15, 2012 ("Inception") to February 28, 2014, as defined by ASC 915-205, Development-Stage Entities. ASC 915-205 requires companies to report their operations, shareholders equity and cash flows upon entering the development stage through the date that revenues are generated. From November 15, 2012 through February 28, 2014, all operating expenses of the Company related to its augmented reality business and is included in the Condensed Consolidated Statements of Operations and comprehensive loss.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. The Company maintains cash balances that may be uninsured or in deposit accounts that exceed Federal Deposit Insurance Corporation limits. The Company maintains its cash deposits with major financial institutions.

Financial Instruments

Financial Instruments

The fair value of certain of the Company's financial instruments, consisting of cash, accounts payable and accrued expenses are estimated to be equal to their carrying value due to the short-term nature of these instruments. It is management's opinion that the Company is not exposed to significant interest, currency and credit risks arising from these financial instruments.

Leasehold Improvements and Equipment

Leasehold Improvements and Equipment

Leasehold Improvements and Equipment consists of computer hardware and furniture and is recorded at cost. Computer hardware and furniture are depreciated on a straight-line basis over their estimated lives of three to five years. Leasehold Improvements are amortized on a straight-line basis over the life of the lease of two years.

Foreign Currency Translation

Foreign Currency Translation

The financial statements are presented in United States dollars. In accordance with ASC 830, Foreign Currency Matters, foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary assets and liabilities are translated at exchange rates prevailing at the transaction date. Revenue and expenses are translated at average rates of exchange during the periods presented. Related translation adjustments are reported as a separate component of stockholders' deficit, whereas gains or losses resulting from foreign currency transactions and re-measurement are included in results of operations. Infinity Israel maintains its books and record using its functional currency which is the New Israeli Shekel ("NIS").

Income Taxes

Income Taxes

Deferred income taxes are provided for tax effects of temporary differences between the tax basis of asset and liabilities and their reported amounts in the financial statements. The Company uses the liability method to account for income taxes, which requires deferred taxes to be recorded at the statutory rate expected to be in effect when the taxes are paid. Valuation allowances are provided for a deferred tax asset when it is more likely than not that such asset will not be realized.

Management evaluates tax positions taken or expected to be taken in a tax return. The evaluation of a tax position includes a determination of whether a tax position should be recognized in the financial statements, and such a position should only be recognized if the Company determines that it is more likely than not that the tax position will be sustained upon examination by the tax authorities, based upon the technical merits of the position. For those tax positions that should be recognized, the measurement of a tax position is determined as being the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.

The Company's policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense.

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 are the effects of 6,000,000 warrants exercisable at $.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 February 28, 2014, 59,709,834 shares of common stock, comprised of 15,830,172 convertible debentures with a conversion price of $0.25, 15,830,172 warrants with an exercise price of $0.50, and stock options exercisable into 28,049,490 common shares are not included in diluted loss per share since their effect would be anti-dilutive. There are no other potential common shares at February 28, 2013.

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.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

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 consolidated financial statements of the Company.

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INCOME TAXES (Schedule of Income Tax Expense (Benefit)) (Details) (USD $)	3 Months Ended		6 Months Ended		15 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 28, 2014	Feb. 28, 2013	Feb. 28, 2014
INCOME TAXES [Abstract]
Current tax expense
Deferred tax expense (benefit)		27,783		190,652
Total income tax expense (benefit)		$ 27,783		$ 190,652	$ 78,637

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SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)	6 Months Ended
	Feb. 28, 2014
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Warrants outstanding	6,000,000
Exercise price of warrants	$ 0.01
Computer hardware [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	3 years
Computer hardware [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	5 years
Furniture [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	3 years
Furniture [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	5 years
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	2 years
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	59,709,834
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	15,803,172
Conversion price	$ 0.25
Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Exercise price of warrants	$ 0.50
Antidilutive securities not included in computation of earnings per common share	15,830,172
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities not included in computation of earnings per common share	28,049,490

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CONVERTIBLE DEBENTURES (Fair Value Assumptions of Warrants) (Details) (Warrant [Member])	6 Months Ended
	Feb. 28, 2014
Issued on September 17, 2013 [Member]
Class of Warrant or Right [Line Items]
Contractual term (Years)	5 years
Volatility	68.50%
Dividend yield	0.00%
Risk-free interest rate	1.65%
Issued on October 9, 2013 [Member]
Class of Warrant or Right [Line Items]
Contractual term (Years)	5 years
Volatility	67.30%
Dividend yield	0.00%
Risk-free interest rate	1.43%
Issued on November 7, 2013 [Member]
Class of Warrant or Right [Line Items]
Contractual term (Years)	5 years
Volatility	66.30%
Dividend yield	0.00%
Risk-free interest rate	1.34%
Issued on December 5, 2013 [Member]
Class of Warrant or Right [Line Items]
Contractual term (Years)	5 years
Volatility	64.60%
Dividend yield	0.00%
Risk-free interest rate	1.45%
Issued on December 19, 2013 [Member]
Class of Warrant or Right [Line Items]
Contractual term (Years)	5 years
Volatility	91.90%
Dividend yield	0.00%
Risk-free interest rate	1.55%
Issued on February 4, 2014 [Member]
Class of Warrant or Right [Line Items]
Contractual term (Years)	5 years
Volatility	92.80%
Dividend yield	0.00%
Risk-free interest rate	1.44%
Issued on February 13, 2014 [Member]
Class of Warrant or Right [Line Items]
Contractual term (Years)	5 years
Volatility	92.70%
Dividend yield	0.00%
Risk-free interest rate	1.59%

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) (USD $)	3 Months Ended	6 Months Ended
	Feb. 28, 2013	Feb. 28, 2013
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract]
Loss on disposal of life settlement contracts	$ 8,438,584	$ 8,438,584

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INVESTMENT IN META COMPANY

6 Months Ended

Feb. 28, 2014

INVESTMENT IN META COMPANY [Abstract]

INVESTMENT IN META COMPANY

NOTE 4: INVESTMENT IN META COMPANY

On July 10, 2013, the Company was issued a $50,000 par value Convertible Promissory Note from Meta Company ("Meta"), a Delaware company.  The Note bare a 5% annual coupon and was to mature on July 31, 2014.  The Note was convertible into shares of Meta at a conversion price of 80% of the price of common equity sold in a Qualified Offering of at least $1,000,000. The note was carried at cost which approximate fair value.  On January 27, 2014, Meta completed a qualified offering and converted the Convertible Promissory Note into 3,916 series A preferred shares of Meta at a purchase price of $16.397. The Company accounts for its investment in Meta in accordance with the cost method of accounting based on the guidance in ASC 325-20 "Investments-Other - Cost Method Investments" because the Company owns approximately 1% of the preferred shares issued in the Qualified Offering and does not exert influence over the operating and financial decisions of Meta management.

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CONVERTIBLE DEBENTURES (Schedule of Convertible Debentures) (Details) (USD $)	Feb. 28, 2014	Aug. 31, 2013
Debt Instrument [Line Items]
Balance	$ 501,473	$ 128,327
Convertible Debentures [Member]
Debt Instrument [Line Items]
Amount	3,957,543
Interest rate	1.20%
Debt discount/ beneficial conversion feature	(3,456,070)
Balance	$ 501,473

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INCOME TAXES (Tables)

6 Months Ended

Feb. 28, 2014

INCOME TAXES [Abstract]

Schedule of Income Tax Expense (Benefit)

Income tax expense consists of the following components for the three months and six months ended February 28, 2014 and 2013:

	Three Months ended February 28,				Six Months ended February 28,
	2014		2013		2014		2013
Current tax expense	$	-	$	-	$	-	$	-
Deferred tax expense (benefit)		-		27,783		-		190,652
Total income tax expense (benefit)	$	-	$	27,783	$	-	$	190,652