10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended February 28, 2015

☐. 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.)
228 Park Ave. S #61130, New-York. NY	10003-1502
(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 Securities Exchange Act of 1934 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 ☒ . No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ . No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," "non-accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐. (Do not check if a smaller reporting company)	Smaller reporting company	☒ .

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

Yes ☐. No ☒

State the number of shares outstanding of each of the registrant's classes of common equity, as of the latest practicable date. 110,123,545 shares of common stock as of April 14, 2015.

INFINITY AUGMENTED REALITY, INC.

Quarterly Report On Form 10-Q

For The Quarterly Period Ended

February 28, 2015

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	18
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
	Item 4.	Controls and Procedures	24
PART II - OTHER INFORMATION
	Item 1.	Legal Proceedings	24
	Item 1A.	Risk Factors	25
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
	Item 3.	Defaults Upon Senior Securities	25
	Item 4.	Mine Safety Disclosures	25
	Item 5.	Other Information	25
	Item 6.	Exhibits	25

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", "our", "the Company" or "our Company") are included in this quarterly report on Form 10-Q:

	Page
Condensed Consolidated Balance Sheets at February 28, 2015 (unaudited) and August 31, 2014	4
Condensed Consolidated Statements of Operations and Comprehensive loss for the three months and six months ended February 28, 2015 and February 28, 2014 (unaudited)	5
Condensed Consolidated Statements of Cash Flows for the six months ended February 28, 2015 and February 28, 2014 (unaudited)	6
Notes to Condensed Consolidated Financial Statements	7

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INFINITY AUGMENTED REALITY, INC. AND ITS SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

	February 28, 2015 (unaudited)			August 31, 2014
ASSETS
Current Assets
Cash and cash equivalents	$	726,926		$	875,438
Prepaid expenses and other receivables		44,674			178,394
Total current assets		771,600			1,053,832
Property and equipment, net		68,724			84,885
Investment in Meta Company		50,000			50,000
TOTAL ASSETS	$	890,324		$	1,188,717
LIABILITIES
Current Liabilities
Accounts payable and accrued expenses	$	95,971		$	191,046
Interest payable		90,106			54,871
Current liabilities of discontinued operations		-			27,835
Total current liabilities		186,077			273,752
Convertible debentures, net of debt discount		3,191,433			3,291,930
TOTAL LIABILITES		3,377,510			3,565,682
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS’ DEFICIT
Common stock ($ 0.00001 par value; 500,000,000 authorized; 105,235,038 issued and 104,879,570 outstanding at February 28, 2015; 95,316,155 issued and 94,960,687 outstanding at August 31, 2014)		1,052			953
Additional paid in capital		66,156,982			63,866,965
Treasury stock, at cost 355,468 shares of common stock February 28, 2015 and August 31, 2014		(49,766	)		(49,766	)
Accumulated deficit		(68,531,679	)		(66,180,566	)
Accumulated other comprehensive loss		(63,775	)		(14,551	)
Total Stockholders' Deficit		(2,487,186	)		(2,376,965	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	890,324		$	1,188,717

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

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INFINITY AUGMENTED REALITY, INC. AND ITS SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
UNAUDITED

	Three months ended February 28, 2015			Three months ended February 28, 2014			Six months ended February 28, 2015			Six months ended February 28, 2014
Research and Development expenses	$	(237,285	)	$	(484,692	)	$	(419,360	)	$	(829,491	)
Marketing, General and administrative expenses		(834,477	)		(1,150,593	)		(1,868,540	)		(1,881,026	)
Total Operating expenses		(1,071,762	)		(1,635,285	)		(2,287,900	)		(2,710,517	)
Interest and other finance income (expense)		188,567			(183,127	)		(63,213	)		(302,864	)
Loss from continuing operations before income tax		(883,195	)		(1,818,412	)		(2,351,113	)		(3,013,381	)
Provision for income tax		-			-			-			-
Loss from continuing operations		(883,195	)		(1,818,412	)		(2,351,113	)		(3,013,381	)
Loss from discontinued operations		-			(114,966	)		-			(114,966	)
Net loss	$	(883,195	)	$	(1,933,378	)	$	(2,351,113	)	$	(3,128,347	)
Basic and diluted loss per common share
Continuing operations	$	(0.01	)	$	(0.02	)	$	(0.02	)	$	(0.03	)
Discontinued operations		-			-			-			-
Net loss per common share	$	(0.01	)	$	(0.02	)	$	(0.02	)	$	(0.03	)
Basic weighted average shares outstanding		103,715,932			99,855,165			102,330,698			99,566,969
Diluted weighted average shares outstanding		103,715,932			99,855,165			102,330,698			99,566,969
Net loss	$	(883,195	)	$	(1,933,378	)	$	(2,351,113	)	$	(3,128,347	)
Foreign currency translation adjustments		(10,077	)		(11,431	)		(49,224	)		(17,232	)
Comprehensive loss	$	(893,272	)	$	(1,944,809	)	$	(2,400,337	)	$	(3,145,579	)

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

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INFINITY AUGMENTED REALITY, INC. AND ITS SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

	Six months ended February 28,
	2015			2014
OPERATING ACTIVITIES
Net loss	$	(2,351,113	)	$	(3,128,347	)
Loss from discontinued operations		-			114,966
Adjustments to reconcile net loss to net cash (used in) provided by operations
Amortization of debt discount		460,243			287,703
Stock-based compensation		1,412,213			294,622
Finance income from conversion of convertible debt and warrants		(442,956	)
Foreign exchange gain on investment in subsidiary		-			(19,884	)
Loss on disposition of equipment		-			25,385
Issuance of stock for in-process research and development		-			26,110
Depreciation		17,081			24,818
Changes in operating assets and liabilities:
Prepaid expenses and other receivables and long-term receivables		122,408			3,223
Accounts payable and accrued expenses		(89,916	)		376,447
Interest payable		45,354			18,077
Net cash used in operating activities- continuing operations		(826,686	)		(1,976,880	)
Net cash (used in) provided by operating activities- discontinued operations		(22,987	)		(197,023	)
Net cash (used in) provided by operating activities		(849,673	)		(2,173,903	)
INVESTING ACTIVITIES
Purchase of leasehold improvements and equipment		(9,169	)		(70,803	)
Net cash used in investing activities		(9,169	)		(70,803	)
FINANCING ACTIVITIES
Proceeds from convertible debentures		750,000			2,030,000
Proceeds from exercise of stock options		-			69,926
Net cash provided by financing activities		750,000			2,099,926
Effect of exchange rate on cash and cash equivalents		(39,670	)		944
Change in cash and cash equivalents		(148,512	)		(143,836	)
Cash and cash equivalents, beginning		875,438			431,760
Cash and cash equivalents of continuing operations, ending	$	726,926		$	287,924
Supplemental disclosure of cash flow information:
Tax paid in cash	$	22,987		$	197,023
Non-cash Investing and Financing activities:
Warrants issued in connection with convertible debentures	$	249,145		$	834,272
Beneficial conversion feature	$	-		$	1,110,285
Conversion of convertible note receivables to preferred shares of Meta Company	$	-		$	50,000
Conversion of convertible note	$	1,061,595		$	-

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

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INFINITY AUGMENTED REALITY, INC. AND ITS SUBSIDIARY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1: NATURE AND CONTINUANCE OF OPERATIONS

Infinity Augmented Reality, Inc. (formerly known as Absolute Life Solutions, Inc.) (the “Company”) was originally incorporated as Shimmer Gold, Inc. in the State of Nevada on September 7, 2006. The Company was in the business of acquisition and exploration of mineral resources during the period from September 7, 2006 to May 21, 2010. Subsequently, a majority of our shareholders approved an amendment to our Articles of Incorporation changing our name to Absolute Life Solutions, Inc. During the fiscal year ended August 31, 2010, the Company commenced operations as a specialty financial services company engaged in the business of purchasing life settlement contracts for long-term investment purposes. Effective November 15, 2012, the Company is no longer engaged in its prior primary activity as a specialty financial services company primarily engaged in the purchase of life settlement contracts.

In May 2012, we formed a wholly-owned subsidiary Infinity Augmented Reality, LLC, (“IAR Subsidiary”), and commenced activities to enable it to be actively engaged in the development of software applications which is intended to utilize augmented reality. Effective March 7, 2013, the Company changed its name from Absolute Life Solutions, Inc. to Infinity Augmented Reality, Inc. On that same date, IAR Subsidiary was merged into the Company. Effective June 30, 2013, the Company formed a wholly owned Israeli subsidiary, Infinity Augmented Reality Israel Ltd. (“Infinity Israel”).

The Company is actively engaged in the development of an augmented reality software platform which will provide end users with a fully three dimensional (3D) interactive augmented reality experience with full hand controls and a completely natural user interface. Augmented reality (”AR”), is a technology which allows the projection of visual content that the viewer perceives as a real life experience and allows the viewer to intuitively interact with augmented content in his or her physical surroundings. The Company’s technology platform is made up of computer vision algorithms which will interface with any hardware including mobile or wearable devices that have two dimensional (2D) stereoscopic cameras. The Company’s technology will turn such hardware into a powerful content augmentation platform, will be usable both outdoors and indoors and will feature a lower power consumption.

The Company is developing three software development kits (“SDKs”), which will serve as the core platform for augmented reality software developers and wearable device manufacturers. Our solution is designed to assist application developers in easily and efficiently developing advanced augmented reality applications, in a shorter time-to-market, while still providing a rich augmented reality experience.

On February 2, 2015, the Company and certain of its debenture holders and stockholders and their affiliates holding a majority of the Company’s outstanding voting equity securities (the “Security Holders”) entered into a definitive agreement to restructure a portion of the Company’s existing debt, provide for the assumption by certain of the stockholders of liabilities arising from the Company’s former business and serving as a first step in efforts to effect a recapitalization of the Company (the “Master Agreement”). Under the terms of the Master Agreement, Credit Strategies LLC, Platinum Partners Value Arbitrage Fund L.P. (“Platinum”) and ALS Capital Ventures LLC for itself and as agent for each of its affiliates on behalf of whom it holds the assets relating to our former business, the Life Settlement Business ( “ALS” and collectively, the “Indemnitors”) have assumed all liabilities relating to the Company’s former activities in the life settlement business and have agreed to indemnify the Company and its directors and officers from and against any losses related to such former business. In connection therewith, the Indemnitors have agreed to indemnify the Company for all legal fees and expenses and to assume all liability relating to the legal suit currently proceeding in State Court in New York which was commenced by CMS Life Insurance Opportunity Fund, L.P., and have agreed to reimburse the Company for all legal fees that have already been paid to the Company’s attorneys in respect of said proceeding.

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INFINITY AUGMENTED REALITY, INC. AND ITS SUBSIDIARY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1: NATURE AND CONTINUANCE OF OPERATIONS (Cont.)

The Company has issued debentures in an aggregate principal amount of $7,793,543 convertible into shares of the Company’s common stock, par value $0.00001 per share (“Common Stock”), at a rate of $0.25 per share (the “Debentures”). In connection with the issuance of the Debentures, the Company also issued warrants to purchase up to 31,174,172 additional shares of Common Stock at an exercise price of $0.50 per share (the “Warrants”). Under the Master Agreement, the Security Holders, with the exception of ALS, have agreed to exchange these Debentures, accrued interest and Warrants for 52,767,193 shares of newly designated Preferred A Convertible Stock par value $0.00001 per share (the “Series A Preferred Stock”). ALS has agreed to convert all of its Debentures, accrued interest and Warrants into 9,918,883 shares of our Common Stock.

The Series A Preferred Stock will be authorized in accordance with an amendment to the Certificate of Designation of Preferences, Rights and Limitations of Series A Preferred Stock to be filed with the Nevada Secretary of State once the Authorized Capital Increase described below has been implemented. A total of 52,767,193 shares of Series A Preferred Stock will be so authorized.

The holders of Series A Preferred Stock will be entitled to a liquidation preference of an aggregate of $6,634,256, plus interest of 1.2% per annum commencing from January 1, 2015 (“Liquidation Preference”) payable upon the liquidation, consolidation or merger of the Company or upon the sale of all of substantially all of the assets or outstanding share capital of the Company (each, a “Deemed Liquidation”). Upon the occurrence of a Deemed Liquidation and after receipt of the Liquidation Preference, the holders of the Series A Preferred Stock shall not be entitled to share in the remainder of the proceeds of such Deemed Liquidation transaction with the remaining stockholders of the Company. Notwithstanding the foregoing, the holders of Series A Preferred Stock shall not be entitled to receive the Liquidation Preference if such Series A Preferred Stock holders would have received an amount exceeding the Liquidation Preference pursuant to any Deemed Liquidation.

The Series A Preferred Stock shall vote together with the Common Stock as a single class, and shall not confer upon the holders thereof any rights senior to, or otherwise different from, the rights conferred upon the holders of Common Stock, other than the Liquidation Preference. At the option of the Series A Preferred Stock holder(s), the shares of Series A Preferred Stock shall be convertible into shares of Common Stock on a one-for-one basis, as adjusted for subdivision, combination or consolidation of Common Stock, stock dividends and other distributions. The Series A Preferred Stock shall automatically be converted into Common Stock upon the closing of a public offering of the Company’s Common Stock with net proceeds to the Company of at least $20,000,000 or upon the consent of the holders of a majority of the outstanding Series A Preferred Stock at such time, to so convert.

In addition, it was agreed under the Master Agreement that the Company should take all steps necessary in order to reduce the number of record holders of the Company’s Common Stock to below 300 holders of record, which would cause the Company’s reporting obligations under The Exchange Act of 1934, as amended (the “Exchange Act”) to become eligible for suspension under Rule12h-3 or Section 15(d) thereunder, and cause the Company’s Common Stock to become eligible for termination of registration under Rule 12g-4 and Section 12(g) of the Exchange Act. The purpose of these efforts is to reduce the administrative burden and costs associated with the Company’s reporting obligations under the Exchange Act. In addition, the prospect of additional financing (discussed further below) is premised on the Company successfully suspending its reporting obligation under the Exchange Act.

8

INFINITY AUGMENTED REALITY, INC. AND ITS SUBSIDIARY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 

NOTE 1: NATURE AND CONTINUANCE OF OPERATIONS (Cont.)

In furtherance of the Company’s efforts to suspend its reporting obligation under the Act, the Master Agreement contemplates that the Company will implement a 101-for-1 reverse stock split of the Company’s outstanding Common Stock (the “Reverse Stock Split”) immediately followed by a 1-for-101 forward stock split of the Company’s outstanding Common Stock (the “Forward Stock Split”, and collectively with the Reverse Stock Split, the “Reverse/Forward Stock Split”). Holders of record of less than one share of Common Stock after the Reverse Stock Split would be cashed out at the rate of $0.15 per pre-split share. Holders of record of more than one share of Common Stock after the Reverse Stock Split will participate in the Forward Stock Split. Such amendments would not change the par value per share or the number of authorized shares of Common Stock. The Company has received the consent of the holders of the requisite number of its outstanding Common Stock under Nevada law to implement the Reverse/Forward Stock Split.

If the Reverse/Forward Stock Split is implemented as contemplated, the number of record holders of the Company’s Common Stock would fall below 300 holders of record and the Company would no longer be required to file periodic reports with the Securities Exchange Commission (the “SEC”). The Company believes that the deregistration of its Common Stock under the Exchange Act should reduce significant outlays currently expended in complying with the Company’s reporting obligations and allow management to expend its time and resources to otherwise managing the growth of its business and maximizing long-term shareholder value.

Subject to the successful completion of all of the transactions contemplated under the Master Agreement, including the suspension of the Company’s reporting obligations under the Exchange Act, and approval by the Company’s board of directors, the Security Holders comprising the holders of a majority of the Company’s outstanding Common Stock have agreed that the Company seek investment in the Company for an aggregate purchase price of up to $5,000,000 at a Company pre-money valuation of no less than $6,000,000. Any such investment would be on terms and conditions approved by the Company’s board of directors.

On April 6, 2015, the Company entered into a definitive agreement (the “Agreement”) with Singulariteam Fund II L.P. (“Singulariteam II”), Platinum Partners Value Arbitrage Fund, LP, both existing stockholders of the Company, and SUNCORPORATION of Japan (collectively, the “Investors”), for the purpose of raising funds for the Company’s operation and activities. According to the Agreement, the Investors will invest $1.25 million at the initial closing and receive convertible notes (the “Notes”) which will be convertible into Series B Preferred Stock upon the creation thereof. The Agreement also provides that if the Company shall have an effective certificate of designation of Series B Preferred Stock of the Company, par value $0.00001 each filed with the Secretary of State of Nevada, the Investors have agreed to invest an additional $3.75 million.  

The Master Agreement contemplates an increase of the authorized share capital (the “Authorized Capital Increase”) of Common Stock from 500,000,000 shares of Common Stock, to 1,000,000,000 shares of Common Stock, and an increase of the Company’s authorized shares of preferred stock from 100,000,000 shares of preferred stock, par value $0.00001 per share (the “Preferred Stock”) to 500,000,000 shares of Preferred Stock.

The Authorized Capital Increase is intended, among other things, to provide for the issuance of the Series A Preferred Stock, issuance of additional series of Preferred Stock to prospective investors and for the issuance of up to 155,000,000 shares of Common Stock to our directors and employees pursuant to the Company’s new incentive plan and to enhance corporate flexibility to finance and develop the operations of our business. Increasing the Company’s authorized shares of Common Stock will provide the Company with greater flexibility and allow for the issuance of additional shares of Common Stock at such times that the Company’s board may deem such issuance to be in the service of the Company’s interest, without the expense or delay of seeking approval from the stockholders. The Company has received the consent of the holders of the requisite number of its outstanding Common Stock under Nevada law to the Authorized Share Increase.

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INFINITY AUGMENTED REALITY, INC. AND ITS SUBSIDIARY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1: NATURE AND CONTINUANCE OF OPERATIONS (Cont.)

The Master Agreement contemplates that the Company approve an equity incentive plan in order to facilitate the grant of Restricted Stock Units and/or options to purchase Common Stock of the Company to such executive officers, employees and consultants of the Company and its subsidiary, as the Board of Directors deems fit, from time to time (the “2015 Incentive Plan”)

The intended purpose of the 2015 Incentive Plan is to attract and retain highly qualified and experienced directors, employees and consultants and to give such directors, employees and consultants a continued proprietary interest in the success of the Company. The 2015 Incentive Plan provides for the issuance of options (including incentive stock options for employees only), restricted or unrestricted common stock and other awards under the 2015 Incentive Plan.

It is anticipated that the Company will issue 60 million Restricted Stock Units to each of Motti Kushnir, our Chief Executive Officer and Matan Protter, the Chief Technology Officer of our Infinity Israel and 12.6 million Restricted Stock Units to Ortal Zanzuri, our Chief Financial Officer.

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. The Company intends to finance the future capital required for continued operations from a combination of traditional debt and equity markets. However, there is no assurance that (a) traditional debt and equity markets may be accessible as required, or if so, on acceptable terms and, or (b) the demand for and selling prices of the Company’s augmented reality products, may not be sufficient to meet cash flow expectations. The outcome of these matters cannot be predicted with certainty and therefore the Company may not be able to continue or expand operations as planned. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These unaudited financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.

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INFINITY AUGMENTED REALITY, INC. AND ITS SUBSIDIARY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of February 28, 2015 and for the three months and six months ended February 28, 2015 and 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 EC 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, 2015, Statements of Operations and comprehensive loss for the three months and six months ended February 28, 2015 and February 28, 2014, and Statements of Cash Flows for the six months ended February 28, 2015 and 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, 2015 are not necessarily indicative of results to be expected for the year ending August 31, 2015 or for any future interim period. In addition, the balance sheet data at August 31, 2014 was derived from the audited financial statements but does not include all disclosures required by GAAP. The accompanying financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K, filed with the SEC on November 26, 2014.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to these financial statements relate to deferred income tax amounts and rates and timing of the reversal of income tax differences.

Loss per Share

Basic loss per share is calculated using the weighted average number of shares of common stock outstanding during the period. Included in basic loss per share calculations for each period presented are the effects of 6,000,000 warrants exercisable at $0.01. Diluted earnings per share reflect the potential dilution that could occur if potentially dilutive securities were exercised or converted to common stock. The dilutive effect of options and warrants and their equivalent is computed by application of the treasury stock method and the effect of convertible securities by the "if converted" method. As of February 28, 2015, 78,310,344 shares of common stock, comprised of 26,230,172 convertible debentures with a conversion price of $0.25, 26,230,172 warrants with an exercise price of $0.50, and stock options exercisable into 25,850,000 common shares are not included in diluted loss per share since their effect would be anti-dilutive. 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.

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INFINITY AUGMENTED REALITY, INC. AND ITS SUBSIDIARY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Stock-Based Compensation

The Company records stock-based compensation expense in accordance with ASC 718, Compensation - Stock Compensation. The Company expenses stock-based compensation to employees over the requisite service period based on the estimated grant-date fair value of the awards and forfeiture rates. For stock-based compensation awards to non-employees, the Company re-measures the fair value of the non-employee awards at each reporting period prior to vesting and finally at the vesting date of the award. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

Valuation Assumptions

The Company estimates the fair value of stock option grants using a Black-Scholes option pricing model. In applying this model, the Company uses the following assumptions: 

· Risk-Free Interest Rate: The Company determined the risk-free interest rate equivalent to the expected term based on the U.S. Treasury constant maturity rate.

· Expected Volatility: The Company determined its future stock price volatility based on the average historical stock price volatility of comparable peer companies.

· Expected Term: Due to the limited exercise history of the Company’s stock options, the Company determined the expected term based on the stratification of employee groups and the expected effect of events that have indications on future exercise activity. Expected life for options granted to employees uses the Simplified Method, while options granted to non-employees uses an expected term equal to the life of the contract.

· Expected Dividend Rate: The Company has not paid and does not anticipate paying any cash dividends in the near future.

The fair value of each option award was estimated on the grant date using the Black Scholes option-pricing model and expensed under the straight line method. The following assumptions were used:

	Three Months ended February 28,		Six Months ended February 28,
	2015	2014	2015	2014
Exercise price	$0.07	$0.10 - $0.40	$0.07	$0.10 - $0.40
Expected stock price volatility	94.29% - 105.62%	87.9% - 92.4%	94.29% -105.62%	66.3% - 92.4%
Risk-free rate of interest	0.98% - 1.39%	0.04% - 1.65%	0.98% - 1.39%	0.04% - 1.72%
Expected life of options	2.75-4 Years	1-4 Years	2.75-4 Years	1-4 Years

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INFINITY AUGMENTED REALITY, INC. AND ITS SUBSIDIARY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Recent Accounting Pronouncements

In November 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-17, Pushdown Accounting. This ASU provides companies with the option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. The election to apply pushdown accounting can be made either in the period in which the change of control occurred, or in a subsequent period. This ASU is effective as of November 18, 2014. The adoption will not have a material impact on the Company’s results of operations, cash flows or financial position.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, as a new Topic, Accounting Standards Codification (ASC) Topic 606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU is effective for annual periods beginning after December 15, 2016 (fiscal 2018) and shall be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is evaluating the effect of adopting this new accounting guidance but does not expect adoption will have a material impact on the Company’s results of operations, cash flows or financial position.

In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This ASU raises the threshold for a disposal to qualify as discontinued operations and requires new disclosures for individually material disposal transactions that do not meet the definition of a discontinued operation. Under the new standard, companies report discontinued operations when they have a disposal that represents a strategic shift that has or will have a major impact on operations or financial results. This update will be applied prospectively and is effective for annual periods, and interim periods within those years, beginning after December 15, 2014 (fiscal 2016). Early adoption is permitted provided the disposal was not previously disclosed. This update will not have a material impact on the Company's reported results of operations and financial position. The impact is non-cash in nature and will not affect the Company's cash position.

Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to be significant to the condensed financial statements of the Company.

13

INFINITY AUGMENTED REALITY, INC. AND ITS SUBSIDIARY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3: CONVERTIBLE DEBENTURES

During the six months ended February 28, 2015, the Company issued a (i) five-year Convertible Series A-14 Debentures (the “A-14 Debentures”) for an aggregate principal amount of $750,000, bearing interest at 1.2% per annum, convertible into shares of Common Stock, at a conversion price of $0.25, and (ii) a five-year Warrant (the “2014 Warrants”) to purchase 3,000,000 shares of Common Stock, to Credit Strategies, LLC, pursuant to Securities Purchase Agreements dated March 26, 2014.

The Company accounts for the beneficial conversion feature (“BCF”) and warrant valuation in accordance with ASC 470-20, Debt with Conversion and Other Options. The Company records a BCF related to the issuance of convertible debt that has conversion features at fixed rates that are “in-the-money” when issued and the fair value of warrants issued in connection with those instruments. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds to warrants, based on their relative fair value, and as a reduction to the carrying amount of the convertible debt equal to the intrinsic value of the conversion feature. The discount recorded in connection with the BCF and warrant valuation is recognized as non-cash interest expense and is amortized over the terms of the convertible notes.

During the six months ended February 28, 2015, the Company recorded an aggregate of $249,145 for the calculated fair value of 2014 Warrants and BCF, in conjunction with A-14 Debentures issued on September 15 and November 7, 2014.

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

	September 15, 2014			November 7, 2014
Contractual term (Years)		5.0			5.0
Volatility		139.6	%		162.5	%
Dividend yield		0.0	%		0.0	%
Risk-free interest rate		1.80	%		1.60	%

The Company has issued Debentures in an aggregate principal amount of $7,793,543 convertible into shares of the Company’s Common Stock, at a rate of $0.25 per share. In connection with the issuance of the Debentures, the Company also issued Warrants to purchase up to 31,174,172 additional shares of Common Stock at an exercise price of $0.50 per share. Under the Master Agreement, all the Debenture and Warrant holders, with the exception of ALS, agreed to exchange such Debentures, accrued interest and Warrants for 52,767,193 shares of newly designated Series A Preferred Stock. ALS has agreed to convert all of its Debentures, accrued interest and Warrants into 9,918,883 shares of Common Stock.

As of February 28, 2015 the Company issued 9,918,883 shares of Common Stock to ALS in exchange for its Debentures, accrued interest and Warrants. The entire unamortized discount remaining at the date of the conversion in amount of approximately $443,000 was recognized immediately as interest income. The carrying amount of the debt was credited to equity to reflect the stock issued.

	February 28, 2015			August 31, 2014
1.2% convertible debentures		6,557,543			7,043,543
Debt discount/ beneficial conversion feature		(3,366,110	)		(3,751,613	)
Balance	$	3,191,433		$	3,291,930

14

INFINITY AUGMENTED REALITY, INC. AND ITS SUBSIDIARY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 4: COMMITMENTS AND CONTINGENT LIABILITIES

With respect to our prior activities in the life insurance settlement business, we were recently joined as a defendant in a lawsuit captioned as CMS Life Ins. Opportunity Fund L.P., et al. v. Progressive Capital Solutions in the New York State Supreme Court, New York County. The intervening plaintiffs, Genesis Merchant Partners, LP and Genesis Merchant Partners II, LP, to which we collectively refer to herein as Genesis, claim that we owned certain unidentified "Life Settlement" insurance policies, that are subject to Genesis' rights.

Genesis is seeking declaratory and injunctive relief (but no money damages). We exited the life settlement insurance business in November 2012 and do not own or claim any rights in any such life settlement insurance policies. Accordingly, we believe that the claims are frivolous and intends to vigorously defend against the allegations.

On December 8, 2014, the Company filed a Motion to Dismiss Genesis’ Complaint as it relates to both of the claims against the Company. On March 5, 2015 oral argument was held and the Judge partially granted and partially denied the Motion to Dismiss dismissing the preliminary injunction cause of action in Genesis’ Complaint, and denied the Motion to Dismiss the declaratory judgement cause of action. The Company is preparing an Answer to the Genesis Complaint, including affirmative defenses, which is required to be filed by April 6, 2015.

The case is currently in the discovery stage of the litigation. Genesis has noticed depositions of the Company’s representatives for September of 2015. Following the close of discovery, the Company may file a summary judgment motion to dismiss the Genesis Complaint. The Company is continuing to vigorously defend against Genesis’ baseless declaratory judgment claim.

NOTE 5: COMMON STOCK, WARRANTS AND STOCK OPTIONS

Common Stock

As of February 28, 2015 the Company issued 9,918,883 shares of Common Stock to ALS in exchange for its Debentures, accrued interest and Warrants.

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, 2014 – Issued		34,174,172			0.41		3.97 years
Additions		3,000,000			0.50		4.61 years
Conversions into Common Shares		(4,944,000	)		0.00		-
Balance as at February 28, 2015		32,230,172			0.41		3.21 years

As of February 28, 2015, there were 32,230,172 warrants outstanding and exercisable with expiration dates from June 2015 through November 2019.

15

INFINITY AUGMENTED REALITY, INC. AND ITS SUBSIDIARY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 5: WARRANTS AND STOCK OPTIONS (Cont.)

Stock options

On December 7, 2014, the Board of Directors granted to an Infinity Israel employee 50,000 Non-Qualified Stock Options with an exercise price of $0.07, vesting semiannually over the next 3 years and expiring on December 7, 2019.

The 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, 2015 and 2014:

	Three months ended February 28,				Six months ended February 28,
	2015		2014		2015		2014
Employee awards	$	583,525	$	236,995	$	1,412,213	$	258,633
Non- employee awards, net of forfeitures		-		35,989	$	-		35,989
Total stock options compensation expense	$	583,525	$	272,984	$	1,412,213	$	294,622

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, 2014		25,800,000		0.07		0.07		8.41
Options granted		50,000		0.07		0.01		4.77
Options exercised		-		-		-		-
Options forfeited		-		-		-		-
Options cancelled		-		-		-		-
Outstanding at February 28, 2015		25,850,000		0.07		0.05		7.91
Options exercisable at February 28, 2015		12,541,667		0.07		0.05		7.68

16

INFINITY AUGMENTED REALITY, INC. AND ITS SUBSIDIARY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 6: SUBSEQUENT EVENTS

On March 17, 2015 Coventry Enterprises, LLC exercised 5,957,227 warrants at a cashless exercise. The Company issued 5,510,435 Common Shares.

On April 6, 2015, the Company entered into a definitive agreement (the “Agreement”) with Singulariteam Fund II L.P. (f/k/a Genesis Angels Fund, LP) (“Singulariteam II”), Platinum Partners Value Arbitrage Fund, LP, both existing stockholders of the Company, and SUNCORPORATION of Japan (collectively, the “Investors”), for the purpose of raising funds for the Company’s operation and activities. According to the Agreement, the Investors will invest $1.25 million at the initial closing and receive convertible notes (the “Notes”) which will be convertible into Series B Preferred Stock upon the creation thereof. The Agreement also provides that if the Company shall have an effective certificate of designation of Series B Preferred Stock of the Company, par value $0.00001 each filed with the Secretary of State of Nevada, the Investors have agreed to invest an additional $3.75 million.

The Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws and may not be offered or sold in the United States absent an effective registration statement or an applicable exemption from registration requirements or a transaction not subject to the registration requirements of the Securities Act or any state securities laws.

The shares of Preferred B Stock shares shall have a liquidation preference of 3 times the amount that has been invested plus 1.2% per year, provided that if the amount of proceeds to be received in an actual or deemed liquidation which be distributed on an as converted basis prior to calculating of the liquidation preference, the preferred shares will instead be converted to Common Stock. The Preferred Stock may be converted to common stock at any time and shall be automatically converted to Common Stock if the Company has a public offering raising at least $20 million. The Series B Stock will have special approval rights, will have a right to elect a director, a preemptive right and a right of first refusal. In addition, 75% of the shareholders of the Company will have a right to cause the other shareholders of the Company to sell their shares.

The Notes to be issued at the initial closing shall bear interest at the rate of 1.2% per annum, commencing on the date of its purchase and until the conversion or repayment thereof, and shall be converted immediately upon the effectiveness of the Certificate of Designation of the Series B Preferred Stock. The holders of the Notes may convert the Note into Common Stock at any time prior to such Series Preferred Stock being created.

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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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, 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, or the SEC, including our Annual Report on Form 10-K for the Company's fiscal year ended August 31, 2014, 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:

· Market Acceptance of our products;

· Market acceptance of Augmented Reality products;

· the risks associated with the adequacy of our existing cash resources and our ability to continue as a going concern;

· the risks associated with dependence upon key personnel;

· the cost, delays and uncertainties associated with our product development;

· regulatory announcements, proceedings or changes;

· competitive product developments and legal developments;

· our history of operating losses since our inception and since we began to develop augmented reality in 2012;

· risks associated with our ability to protect our intellectual property;

· risks associate with our ability to raise additional funds; and

· our liquidity.

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

In May, 2012, we formed a wholly-owned subsidiary Infinity Augmented Reality, LLC, or IAR Subsidiary, which was actively engaged in the development of software applications which were intended to utilize augmented reality.

Effective March 7, 2013, we changed our name from Absolute Life Solutions, Inc. to Infinity Augmented Reality, Inc. On that same date, we merged IAR Subsidiary into our Company. On June 30, 2013, we formed a wholly owned Israeli subsidiary, Infinity Augmented Reality Israel Ltd, or Infinity Israel.

We are currently actively engaged in the development of Augmented Reality software. Our objective is to establish ourselves 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.

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We are a company engaged in the development of an augmented reality software platform which will provide end users with a fully three dimensional (3D), interactive augmented reality experience with full hand controls and a completely natural user interface. Augmented reality, or AR, is a technology which allows the projection of visual content that the viewers feel is a real life experience despite the fact that the visual content is not physically right in front of them, and allows them to intuitively interact with augmented content in their physical surroundings. Our technology platform is made up of computer vision algorithms which will interface with any hardware, including mobile or wearable devices, that have two small and light two dimensional (2D) stereoscopic cameras. Our technology will turn such hardware into a powerful content augmentation platform. Our technology will be usable both outdoors and indoors and will feature a lower power consumption that focuses mainly on the user’s point of view.

We are developing three software development kits, or SDKs, that will serve as the core platform for augmented reality software developers and wearable device manufacturers. Our solution is designed to assist application developers to easily and efficiently develop advanced augmented reality applications using our platform, in a shorter time-to-market, while still providing a rich augmented reality experience.

Currently, augmented reality technology is mainly used to provide mobile device users with an additional layer of visual content while looking at the world around them through the screen on their smart phones or tablets. New technologies are emerging to combine both wearable devices like AR glasses and mobile devices. Such a combination will enable the users to benefit from a many different augmented reality experiences that are not available today. However, such technologies rely on expensive cameras and sensors requiring vast energy consumption and are overall unsuitable for incorporation into everyday wearable and mobile devices because they require either connection to electricity or relatively heavy batteries.

Our platform will provide application developers and wearable device manufacturers with a light, simple platform utilizing only simple, passive 2D cameras, requiring only one tenth (1/10) the power consumption of current AR solutions thus can be operated by light batteries. Our technology enables the extraction, representation and digitization of the physical world and provides an intelligent understanding of the 3D scene. Furthermore, the technology is designed to provide a unique advanced “hand controlled” Natural User Interface, which enables, empowering the augmented reality application developers’ community to create a real life experience for application users that focuses mainly on the user’s point of view.

On February 2, 2015, we and certain of our debenture holders and stockholders and their affiliates holding a majority of our outstanding voting equity securities, or the Security Holders, entered into a definitive agreement, or the Master Agreement, to restructure a portion of our existing debt, provide for the assumption by certain of the stockholders of liabilities arising from our former business and serving as a first step in efforts to effect a recapitalization of our Company. Under the terms of the Master Agreement, Credit Strategies LLC, or Credit, Platinum Partners Value Arbitrage Fund L.P., or Platinum, and ALS Capital Ventures LLC for itself and as agent for each of its affiliates on behalf of whom it holds the assets relating to our former business, the Life Settlement Business, or ALS, to which we may refer to collectively as the Indemnitors, have assumed all liabilities relating to our former activities in the life settlement business and have agreed to indemnify us and our directors and officers from and against any losses related to such former business. In connection therewith, the Indemnitors have agreed to indemnify us for all legal fees and expenses and to assume all liability relating to the legal suit currently proceeding in State Court in New York which was commenced by CMS Life Insurance Opportunity Fund, L.P., and have agreed to reimburse us for all legal fees that have already been paid to our attorneys in respect of said proceeding.

We have issued debentures in an aggregate principal amount of $7,793,543 convertible into our shares of common stock, par value $0.00001 per share, or the Common Stock, at a rate of $0.25 per share, or the Debentures. In connection with the issuance of the Debentures, we also issued warrants to purchase up to 31,174,172 additional shares of Common Stock at an exercise price of $0.50 per share, or the Warrants. Under the Master Agreement, the Security Holders, with the exception of ALS, have agreed to exchange these Debentures, accrued interest and Warrants for 52,767,193 shares of newly designated Preferred A Convertible Stock par value $0.00001 per share, or the Series A Preferred Stock. ALS has agreed to convert all of its Debentures, accrued interest and Warrants into 9,918,883 shares of our Common Stock.

The Series A Preferred Stock will be authorized in accordance with an amendment to the Certificate of Designation of Preferences, Rights and Limitations of Series A Preferred Stock to be filed with the Nevada Secretary of State once the Authorized Capital Increase described below has been implemented. A total of 52,767,193 shares of Series A Preferred Stock will be so authorized.

The holders of Series A Preferred Stock will be entitled to a liquidation preference of an aggregate of $6,634,256, plus interest of 1.2% per annum commencing from January 1, 2015, or the Liquidation Preference, payable upon the liquidation, consolidation or merger of our Company or upon the sale of all of substantially all of the assets or outstanding share capital of our Company, or a Deemed Liquidation. Upon the occurrence of a Deemed Liquidation and after receipt of the Liquidation Preference, the holders of the Series A Preferred Stock shall not be entitled to share in the remainder of the proceeds of such Deemed Liquidation transaction with the remaining stockholders of our Company. Notwithstanding the foregoing, the holders of Series A Preferred Stock shall not be entitled to receive the Liquidation Preference if such Series A Preferred Stock holders would have received an amount exceeding the Liquidation Preference pursuant to any Deemed Liquidation.

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The Series A Preferred Stock shall vote together with the Common Stock as a single class, and shall not confer upon the holders thereof any rights senior to, or otherwise different from, the rights conferred upon the holders of Common Stock, other than the Liquidation Preference. At the option of the Series A Preferred Stock holder(s), the shares of Series A Preferred Stock shall be convertible into shares of Common Stock on a one-for-one basis, as adjusted for subdivision, combination or consolidation of Common Stock, stock dividends and other distributions. The Series A Preferred Stock shall automatically be converted into Common Stock upon the closing of a public offering of our Common Stock with net proceeds to us of at least $20,000,000 or upon the consent of the holders of a majority of the outstanding Series A Preferred Stock at such time, to so convert.

In addition, it was agreed under the Master Agreement that we shall take all steps necessary in order to reduce the number of record holders of our Common Stock to below 300 holders of record, which would cause our reporting obligations under The Exchange Act of 1934, as amended, or Exchange Act, to become eligible for suspension under Rule12h-3 or Section 15(d) thereunder, and cause the our Common Stock to become eligible for termination of registration under Rule 12g-4 and Section 12(g) of the Exchange Act. The purpose of these efforts is to reduce the administrative burden and costs associated with our reporting obligations under the Exchange Act. In addition, the prospect of additional financing (discussed further below) is premised on us successfully suspending our reporting obligation under the Exchange Act.

In furtherance of our efforts to suspend its reporting obligation under the Act, the Master Agreement contemplates that we will implement a 101-for-1 reverse stock split of our outstanding Common Stock, or the Reverse Stock Split, immediately followed by a 1-for-101 forward stock split of our outstanding Common Stock, or Forward Stock Split. We refer to the Reverse Stock Split and the Forward Stock Split collectively as the Stock Splits. Holders of record of less than one share of Common Stock after the Reverse Stock Split would be cashed out at the rate of $0.15 per pre-split share. Holders of record of more than one share of Common Stock after the Reverse Stock Split will participate in the Forward Stock Split. Such amendments would not change the par value per share or the number of authorized shares of Common Stock. We have received the consent of the holders of the requisite number of its outstanding Common Stock under Nevada law to implement the Stock Splits.

If the Stock Splits are implemented as contemplated, the number of record holders of our Common Stock would fall below 300 holders of record and we would no longer be required to file periodic reports with the Securities Exchange Commission, or the SEC. We believe that the deregistration of our Common Stock under the Exchange Act should reduce significant outlays currently expended in complying with our reporting obligations and allow our management to expend its time and resources to otherwise managing the growth of its business and maximizing long-term shareholder value.

Subject to the successful completion of all of the transactions contemplated under the Master Agreement, including the suspension of our reporting obligations under the Exchange Act, and approval by our board of directors, the Security Holders comprising the holders of a majority of our outstanding Common Stock have agreed that we seek investment(s) in our Company in an amount of up to an aggregate purchase price of up to $5,000,000 at a Company pre-money valuation of no less than $6,000,000. Any such investment would be on terms and conditions approved by our board of directors.

On April 6, 2015, the Company entered into a definitive agreement (the “Agreement”) with Singulariteam Fund II L.P. (“Singulariteam II”), Platinum Partners Value Arbitrage Fund, LP, both existing stockholders of the Company, and SUN CORPORATION of Japan (collectively, the “Investors”), for the purpose of raising funds for the Company’s operation and activities. According to the Agreement, the Investors will invest $1.25 million at the initial closing and receive convertible notes (the “Notes”) which will be convertible into Series B Preferred Stock upon the creation thereof. The Agreement also provides that if the Company shall have an effective certificate of designation of Series B Preferred Stock of the Company, par value $0.00001 each filed with the Secretary of State of Nevada, the Investors have agreed to invest an additional $3.75 million.

The Master Agreement contemplates an increase of the authorized share capital, or the Authorized Capital Increase, of our Common Stock from 500,000,000 shares of Common Stock, to 1,000,000,000 shares of Common Stock, and an increase of our authorized shares of preferred stock from 100,000,000 shares of preferred stock, par value $0.00001 per share, or the Preferred Stock, to 500,000,000 shares of Preferred Stock.

The Authorized Capital Increase is intended, among other things, to provide for the issuance of the Series A Preferred Stock, issuance of additional series of Preferred Stock to prospective investors and for the issuance of up to 155,000,000 shares of Common Stock to our directors and employees pursuant to our new incentive plan and to enhance corporate flexibility to finance and develop the operations of our business. Increasing our authorized shares of Common Stock will provide us with greater flexibility and allow for the issuance of additional shares of Common Stock at such times that our board of directors may deem such issuance to be in the service of our interest, without the expense or delay of seeking approval from the stockholders. We have received the consent of the holders of the requisite number of its outstanding Common Stock under Nevada law to the Authorized Share Increase.

The Master Agreement contemplates that we approve an equity incentive plan in order to facilitate the grant of Restricted Stock Units and/or options to purchase our Common Stock to such executive officers, and employees and consultants of our Company and its subsidiary, as our board of directors deems fit, from time to time, or the 2015 Incentive Plan.

20

The intended purpose of the 2015 Incentive Plan is to attract and retain highly qualified and experienced directors, employees and consultants and to give such directors, employees and consultants a continued proprietary interest in our success. The 2015 Incentive Plan provides for the issuance of options (including incentive stock options for employees only), restricted or unrestricted common stock and other awards under the 2015 Incentive Plan.

It is anticipated that we will issue 60 million Restricted Stock Units to each of Motti Kushnir, our Chief Executive Officer and Matan Protter, the Chief Technology Officer of our Infinity Israel and 12.6 million Restricted Stock Units to Ortal Zanzuri, our Chief Financial Officer.

Our continued existence is dependent upon its ability to generate profit from its augmented reality business and to meet our obligations as they become due. We intend 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 our augmented reality products, may not be sufficient to meet cash flow expectations. The outcome of these matters cannot be predicted with certainty and therefore we may not be able to continue or expand operations as planned. These conditions raise substantial doubt about our ability to continue as a going concern.

Results of Operations

Our results of operations for the three months and six months ended February 28, 2015 and 2014, consisted of operating and administrative expenses for personnel, leased office space and professional fees.

Three months and six months ended February 28, 2015 compared to three months and six months ended February 28, 2014

INFINITY AUGMENTED REALITY INC.

	Three months ended February 28, 2015			Three months ended February 28, 2014			Six months ended February 28, 2015			Six months ended February 28, 2014
Research and Development expenses	$	(237,285	)	$	(484,692	)	$	(419,360	)	$	(829,491	)
Marketing, general and administrative expenses		(834,477	)		(1,150,593	)		(1,868,540	)		(1,881,026	)
Total Operating expenses		(1,071,762	)		(1,635,285	)		(2,287,900	)		(2,710,517	)
Other income (expense)
Interest and other income (expense)		188,567			(183,127	)		(63,213	)		(302,864	)
Loss from continuing operations before income tax		(883,195	)		(1,818,412	)		(2,351,113	)		(3,013,381	)
Provision for income tax		-			-			-			-
Loss from continuing operations		(883,195	)		(1,818,412	)		(2,351,113	)		(3,013,381	)
Loss from discontinued operations, net of tax		-			(114,966	)		-			(114,966	)
Net loss	$	(883,195	)	$	(1,933,378	)	$	(2,351,113	)	$	(3,128,347	)

Research and development. Research and development expenses decreased from $484,692 and $829,491 for the three months and six months ended February 28, 2014, respectively, to $237,285 and $419,360 for the three months and six months ended February 28, 2015, respectively. The decrease of $247,407 and $410,131, respectively, is primarily attributable to a decrease in payroll expenses, mainly in Infinity Israel, due to a decrease of employees in the R&D department.

Marketing, general and administrative expenses. Marketing, general and administrative expenses decreased from $1,150,593 and $1,881,026 for the three months and six months ended February 28, 2014, respectively, to $834,477 and $1,868,540 for the three months and six months ended February 28, 2015, respectively. The decrease of approximately $316,000 for the three months ended February 28, 2015, is primarily attributable to an increase of approximately $311,000 related to the fair value of stock options issued to employees and directors of our Company and of Infinity Israel, offset by a decrease of approximately $380,000 in professional fees and consulting expenses due to cost reduction efforts, a decrease of approximately $170,000 in payroll expenses, and a decrease of approximately $77,000 in travel, rent and other office expenses due to cost reduction efforts.

21

Interest and other Income (Expense): We recorded $63,213 as interest and other expense for the six months ended February 28, 2015 as compared to $302,864 for the six months ended February 28, 2014. We recorded interest and other income of approximately $188,567 in the three months ended February 28, 2015 as compared to interest and other expenses of approximately $183,127 in the three months ended February 28, 2014. During the three months ended February 28, 2015 we issued 9,918,883 shares of Common Stock to ALS in exchange for its Debentures, accrued interest and Warrants. The entire unamortized discount remaining at the date of the conversion in amount of approximately $443,000 was recognized immediately as interest income.

Interest expenses include interest on Convertible Debts and amortization of debt discount related to convertible debt.

Income Tax:  There were no income tax expenses in the three months and six month ended February 28, 2015 and 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 $883,195 and $2,351,113 for the three months and six months ended February 28, 2015 respectively compared to a net loss of $1,818,412 and $3,013,381 for the three months and six months ended February 28, 2014 respectively. The decrease of $935,217 and $662,267 is primarily attributable to a decrease of $247,407 and $410,131 in research and development expenses, a decrease of $316,116 and $12,486 in marketing and general and administrative expenses, a decrease of $380,384 and $259,535 in interest expense. Refer to preceding discussions for explanation of variances.

Liquidity and Capital Resources

Net cash used in operating activities for the six months ended February 28, 2015 was $849,673. Net cash used in investing activities was $9,169 arising from purchase of computer equipment. Net cash provided by financing activities was $750,000 arising from proceeds from convertible debentures. This resulted in a decrease in cash of $148,512.

Working Capital and Capital Availability: As of February 28, 2015, we had working capital of $585,523. We anticipate, that barring unforeseen developments, proceeds received from convertible debt financing(s) will be sufficient to sustain our operations for approximately 5 months. 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.

On April 6, 2015, we entered into a definitive agreement (the “Agreement”) with Singulariteam Fund II L.P. (f/k/a Genesis Angels Fund, LP) (“Singulariteam II”), Platinum Partners Value Arbitrage Fund, LP, both existing stockholders of the Company, and SUNCORPORATION of Japan (collectively, the “Investors”), for the purpose of raising funds for the Company’s operation and activities. According to the Agreement, the Investors will invest $1.25 million at the initial closing and receive convertible notes (the “Notes”) which will be convertible into Series B Preferred Stock upon the creation thereof. The Agreement also provides that if the Company shall have an effective certificate of designation of Series B Preferred Stock of the Company, par value $0.00001 each filed with the Secretary of State of Nevada, the Investors have agreed to invest an additional $3.75 million.

The Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws and may not be offered or sold in the United States absent an effective registration statement or an applicable exemption from registration requirements or a transaction not subject to the registration requirements of the Securities Act or any state securities laws.

The shares of Preferred B Stock shares shall have a liquidation preference of 3 times the amount that has been invested plus 1.2% per year, provided that if the amount of proceeds to be received in an actual or deemed liquidation which be distributed on an as converted basis prior to calculating of the liquidation preference, the preferred shares will instead be converted to Common Stock. The Preferred Stock may be converted to common stock at any time and shall be automatically converted to Common Stock if the Company has a public offering raising at least $20 million. The Series B Stock will have special approval rights, will have a right to elect a director, a preemptive right and a right of first refusal. In addition, 75% of the shareholders of the Company will have a right to cause the other shareholders of the Company to sell their shares.

The Notes to be issued at the initial closing shall bear interest at the rate of 1.2% per annum, commencing on the date of its purchase and until the conversion or repayment thereof, and shall be converted immediately upon the effectiveness of the Certificate of Designation of the Series B Preferred Stock. The holders of the Notes may convert the Note into Common Stock at any time prior to such Series Preferred Stock being created.

Going Concern Qualification

We will require additional funds to finance our augmented reality operations. We are dependent upon the expected demand for our software platform and our ability to generate sufficient cash from our augmented reality business to meet our obligations as they come due. However, there can be no assurance that we will be successful in implementing our business plan, and it is uncertain whether we will be able to achieve a profitable level of operations and there can be no assurance that we will be able to obtain additional financing or that any such additional financings will be available to us on satisfactory terms and conditions, if at all. These conditions raise substantial doubt about our ability to continue as a going concern.

22

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.

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 three months and six months ended February 28, 2015.

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.

23

Outlook

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.

Not applicable.

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 or 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 SEC’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 our staff, we did not have sufficient segregation of duties to support our internal control over financial reporting.

There were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f)) during the fiscal quarter ended February 28, 2015, 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.

With respect to our prior activities in the life insurance settlement business, we were recently joined as a defendant in a lawsuit captioned as CMS Life Ins. Opportunity Fund L.P., et al. v. Progressive Capital Solutions in the New York State Supreme Court, New York County. The intervening plaintiffs, Genesis Merchant Partners, LP and Genesis Merchant Partners II, LP, to which we collectively refer to herein as Genesis, claim that we owned certain unidentified "Life Settlement" insurance policies, that are subject to Genesis' rights.

Genesis is seeking declaratory and injunctive relief (but no money damages). We exited the life settlement insurance business in November 2012 and do not own or claim any rights in any such life settlement insurance policies. Accordingly, we believe that the claims are frivolous and we intend to vigorously defend against the allegations.

On December 8, 2014, the Company filed a Motion to Dismiss Genesis’ Complaint as it relates to both of the claims against the Company. On March 5, 2015, oral argument was held and the Judge partially granted and partially denied the Motion to Dismiss dismissing the preliminary injunction cause of action in Genesis’ Complaint, and denied the Motion to Dismiss the declaratory judgement cause of action. The Company has filed an Answer to the Genesis Complaint, including affirmative defenses, on April 6, 2015.

The case is currently in the discovery stage of the litigation. Genesis has noticed depositions of the Company’s representatives for September of 2015. Following the close of discovery, the Company may file a summary judgment motion to dismiss the Genesis Complaint. The Company is continuing to vigorously defend against Genesis’ baseless declaratory judgment claim.

24

Item 1A. Risk Factors.

There have been no material changes to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended August 31, 2014.

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

During the quarter ended February 28, 2015, there were no unregistered sales of equity securities. Pursuant to the publicly announced Reverse/Forward Stock Split, we anticipate purchasing approximately 35,500 shares of Common Stock of the Company at a price of $0.15 per share.

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	Exhibit 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

25

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 14, 2015	/s/ Motti Kushnir
	Motti Kushnir
	Chief Executive Officer
April 14, 2015	/s/ Ortal Zanzuri
	Ortal Zanzuri Chief Financial Officer

26

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 registrant as of, and for, the periods present in this report;
4.	The registrant’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 registrant 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 registrant, 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 registrant’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 registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’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 registrant’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 registrant’s internal control over financial reporting.

Date: April 14, 2015

/s/ Motti Kushnir

Motti Kushnir

Chief Executive 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 registrant as of, and for, the periods presented in this report;
4.	The registrant’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 13a-15(f) and 15d-15(f)) for the registrant 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 registrant, 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 registrant’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 registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’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 registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 14, 2015

/s/ Ortal Zanzuri

Ortal Zanzuri

Chief Financial 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, 2015, I, Motti Kushnir, 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, 2015, 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, 2015, fairly represents in all material respects, the financial condition and results of operations of Infinity Augmented Reality, Inc.

Date: April 14, 2015

/s/ Motti Kushnir

Motti Kushnir

Chief Executive 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, 2015, 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, 2015, 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, 2015, fairly represents in all material respects, the financial condition and results of operations of Infinity Augmented Reality, Inc.

Date: April 14, 2015

/s/ Ortal Zanzuri

Ortal Zanzuri

Chief Financial Officer

XML

Common Stock, Warrants and Stock Options (Details Textual) (USD $)	0 Months Ended	6 Months Ended
	Dec. 07, 2014	Feb. 28, 2015	Aug. 31, 2014
Common Stock, Warrants And Stock Options [Textual]
Common stock, shares issued		105,235,038	95,316,155
Employee Stock Option [Member]
Common Stock, Warrants And Stock Options [Textual]
Stock option granted	50,000
Options granted	$ 0.07
Share-based compensation expiration period	3 years
Stock option, expiration date	Dec. 07, 2019
Warrant [Member]
Common Stock, Warrants And Stock Options [Textual]
Warrants outstanding and exercisable		32,230,172
Warrants outstanding and exercisable description		warrants outstanding and exercisable with expiration dates from June 2015 through November 2019.
Convertible Debt [Member]
Common Stock, Warrants And Stock Options [Textual]
Common stock, shares issued		9,918,883

XML

Commitments and Contingent Liabilities

6 Months Ended

Feb. 28, 2015

Commitments and Contingent Liabilities [Abstract]

COMMITMENTS AND CONTINGENT LIABILITIES

NOTE 4: COMMITMENTS AND CONTINGENT LIABILITIES

With respect to our prior activities in the life insurance settlement business, we were recently joined as a defendant in a lawsuit captioned as CMS Life Ins. Opportunity Fund L.P., et al. v. Progressive Capital Solutions in the New York State Supreme Court, New York County. The intervening plaintiffs, Genesis Merchant Partners, LP and Genesis Merchant Partners II, LP, to which we collectively refer to herein as Genesis, claim that we owned certain unidentified "Life Settlement" insurance policies, that are subject to Genesis' rights.

Genesis is seeking declaratory and injunctive relief (but no money damages). We exited the life settlement insurance business in November 2012 and do not own or claim any rights in any such life settlement insurance policies. Accordingly, we believe that the claims are frivolous and intends to vigorously defend against the allegations.

On December 8, 2014, the Company filed a Motion to Dismiss Genesis’ Complaint as it relates to both of the claims against the Company. On March 5, 2015 oral argument was held and the Judge partially granted and partially denied the Motion to Dismiss dismissing the preliminary injunction cause of action in Genesis’ Complaint, and denied the Motion to Dismiss the declaratory judgement cause of action. The Company is preparing an Answer to the Genesis Complaint, including affirmative defenses, which is required to be filed by April 6, 2015.

The case is currently in the discovery stage of the litigation. Genesis has noticed depositions of the Company’s representatives for September of 2015. Following the close of discovery, the Company may file a summary judgment motion to dismiss the Genesis Complaint. The Company is continuing to vigorously defend against Genesis’ baseless declaratory judgment claim.

XML

Convertible Debentures

6 Months Ended

Feb. 28, 2015

Convertible Debentures [Abstract]

CONVERTIBLE DEBENTURES

NOTE 3: CONVERTIBLE DEBENTURES

During the six months ended February 28, 2015, the Company issued a (i) five-year Convertible Series A-14 Debentures (the “A-14 Debentures”) for an aggregate principal amount of $750,000, bearing interest at 1.2% per annum, convertible into shares of Common Stock, at a conversion price of $0.25, and (ii) a five-year Warrant (the “2014 Warrants”) to purchase 3,000,000 shares of Common Stock, to Credit Strategies, LLC, pursuant to Securities Purchase Agreements dated March 26, 2014.

The Company accounts for the beneficial conversion feature (“BCF”) and warrant valuation in accordance with ASC 470-20, Debt with Conversion and Other Options. The Company records a BCF related to the issuance of convertible debt that has conversion features at fixed rates that are “in-the-money” when issued and the fair value of warrants issued in connection with those instruments. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds to warrants, based on their relative fair value, and as a reduction to the carrying amount of the convertible debt equal to the intrinsic value of the conversion feature. The discount recorded in connection with the BCF and warrant valuation is recognized as non-cash interest expense and is amortized over the terms of the convertible notes.

During the six months ended February 28, 2015, the Company recorded an aggregate of $249,145 for the calculated fair value of 2014 Warrants and BCF, in conjunction with A-14 Debentures issued on September 15 and November 7, 2014.

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

	September 15, 2014			November 7, 2014
Contractual term (Years)		5.0			5.0
Volatility		139.6	%		162.5	%
Dividend yield		0.0	%		0.0	%
Risk-free interest rate		1.80	%		1.60	%

The Company has issued Debentures in an aggregate principal amount of $7,793,543 convertible into shares of the Company’s Common Stock, at a rate of $0.25 per share. In connection with the issuance of the Debentures, the Company also issued Warrants to purchase up to 31,174,172 additional shares of Common Stock at an exercise price of $0.50 per share. Under the Master Agreement, all the Debenture and Warrant holders, with the exception of ALS, agreed to exchange such Debentures, accrued interest and Warrants for 52,767,193 shares of newly designated Series A Preferred Stock. ALS has agreed to convert all of its Debentures, accrued interest and Warrants into 9,918,883 shares of Common Stock.

As of February 28, 2015 the Company issued 9,918,883 shares of Common Stock to ALS in exchange for its Debentures, accrued interest and Warrants. The entire unamortized discount remaining at the date of the conversion in amount of approximately $443,000 was recognized immediately as interest income. The carrying amount of the debt was credited to equity to reflect the stock issued.

	February 28, 2015			August 31, 2014
1.2% convertible debentures		6,557,543			7,043,543
Debt discount/ beneficial conversion feature		(3,366,110	)		(3,751,613	)
Balance	$	3,191,433		$	3,291,930

XML

Condensed Consolidated Balance Sheets (USD $)	Feb. 28, 2015	Aug. 31, 2014
Current Assets
Cash and cash equivalents	$ 726,926	$ 875,438
Prepaid expenses and other receivables	44,674	178,394
Total current assets	771,600	1,053,832
Property and equipment, net	68,724	84,885
Investment in Meta Company	50,000	50,000
TOTAL ASSETS	890,324	1,188,717
Current Liabilities
Accounts payable and accrued expenses	95,971	191,046
Interest payable	90,106	54,871
Current liabilities of discontinued operations		27,835
Total current liabilities	186,077	273,752
Convertible debentures, net of debt discount	3,191,433	3,291,930
TOTAL LIABILITES	3,377,510	3,565,682
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' DEFICIT
Common stock ($ 0.00001 par value; 500,000,000 authorized; 105,235,038 issued and 104,879,570 outstanding at February 28, 2015; 95,316,155 issued and 94,960,687 outstanding at August 31, 2014)	1,052	953
Additional paid in capital	66,156,982	63,866,965
Treasury stock, at cost 355,468 shares of common stock February 28, 2015 and August 31, 2014	(49,766)	(49,766)
Accumulated deficit	(68,531,679)	(66,180,566)
Accumulated other comprehensive loss	(63,775)	(14,551)
Total Stockholders' Deficit	(2,487,186)	(2,376,965)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$ 890,324	$ 1,188,717

XML

Nature and Continuance of Operations

6 Months Ended

Feb. 28, 2015

Nature and Continuance of Operations [Abstract]

NATURE AND CONTINUANCE OF OPERATIONS

NOTE 1: NATURE AND CONTINUANCE OF OPERATIONS

Infinity Augmented Reality, Inc. (formerly known as Absolute Life Solutions, Inc.) (the “Company”) was originally incorporated as Shimmer Gold, Inc. in the State of Nevada on September 7, 2006. The Company was in the business of acquisition and exploration of mineral resources during the period from September 7, 2006 to May 21, 2010. Subsequently, a majority of our shareholders approved an amendment to our Articles of Incorporation changing our name to Absolute Life Solutions, Inc. During the fiscal year ended August 31, 2010, the Company commenced operations as a specialty financial services company engaged in the business of purchasing life settlement contracts for long-term investment purposes. Effective November 15, 2012, the Company is no longer engaged in its prior primary activity as a specialty financial services company primarily engaged in the purchase of life settlement contracts.

In May 2012, we formed a wholly-owned subsidiary Infinity Augmented Reality, LLC, (“IAR Subsidiary”), and commenced activities to enable it to be actively engaged in the development of software applications which is intended to utilize augmented reality. Effective March 7, 2013, the Company changed its name from Absolute Life Solutions, Inc. to Infinity Augmented Reality, Inc. On that same date, IAR Subsidiary was merged into the Company. Effective June 30, 2013, the Company formed a wholly owned Israeli subsidiary, Infinity Augmented Reality Israel Ltd. (“Infinity Israel”).

The Company is actively engaged in the development of an augmented reality software platform which will provide end users with a fully three dimensional (3D) interactive augmented reality experience with full hand controls and a completely natural user interface. Augmented reality (”AR”), is a technology which allows the projection of visual content that the viewer perceives as a real life experience and allows the viewer to intuitively interact with augmented content in his or her physical surroundings. The Company’s technology platform is made up of computer vision algorithms which will interface with any hardware including mobile or wearable devices that have two dimensional (2D) stereoscopic cameras. The Company’s technology will turn such hardware into a powerful content augmentation platform, will be usable both outdoors and indoors and will feature a lower power consumption.

The Company is developing three software development kits (“SDKs”), which will serve as the core platform for augmented reality software developers and wearable device manufacturers. Our solution is designed to assist application developers in easily and efficiently developing advanced augmented reality applications, in a shorter time-to-market, while still providing a rich augmented reality experience.

On February 2, 2015, the Company and certain of its debenture holders and stockholders and their affiliates holding a majority of the Company’s outstanding voting equity securities (the “Security Holders”) entered into a definitive agreement to restructure a portion of the Company’s existing debt, provide for the assumption by certain of the stockholders of liabilities arising from the Company’s former business and serving as a first step in efforts to effect a recapitalization of the Company (the “Master Agreement”). Under the terms of the Master Agreement, Credit Strategies LLC, Platinum Partners Value Arbitrage Fund L.P. (“Platinum”) and ALS Capital Ventures LLC for itself and as agent for each of its affiliates on behalf of whom it holds the assets relating to our former business, the Life Settlement Business ( “ALS” and collectively, the “Indemnitors”) have assumed all liabilities relating to the Company’s former activities in the life settlement business and have agreed to indemnify the Company and its directors and officers from and against any losses related to such former business. In connection therewith, the Indemnitors have agreed to indemnify the Company for all legal fees and expenses and to assume all liability relating to the legal suit currently proceeding in State Court in New York which was commenced by CMS Life Insurance Opportunity Fund, L.P., and have agreed to reimburse the Company for all legal fees that have already been paid to the Company’s attorneys in respect of said proceeding.

The Company has issued debentures in an aggregate principal amount of $7,793,543 convertible into shares of the Company’s common stock, par value $0.00001 per share (“Common Stock”), at a rate of $0.25 per share (the “Debentures”). In connection with the issuance of the Debentures, the Company also issued warrants to purchase up to 31,174,172 additional shares of Common Stock at an exercise price of $0.50 per share (the “Warrants”). Under the Master Agreement, the Security Holders, with the exception of ALS, have agreed to exchange these Debentures, accrued interest and Warrants for 52,767,193 shares of newly designated Preferred A Convertible Stock par value $0.00001 per share (the “Series A Preferred Stock”). ALS has agreed to convert all of its Debentures, accrued interest and Warrants into 9,918,883 shares of our Common Stock.

The Series A Preferred Stock will be authorized in accordance with an amendment to the Certificate of Designation of Preferences, Rights and Limitations of Series A Preferred Stock to be filed with the Nevada Secretary of State once the Authorized Capital Increase described below has been implemented. A total of 52,767,193 shares of Series A Preferred Stock will be so authorized.

The holders of Series A Preferred Stock will be entitled to a liquidation preference of an aggregate of $6,634,256, plus interest of 1.2% per annum commencing from January 1, 2015 (“Liquidation Preference”) payable upon the liquidation, consolidation or merger of the Company or upon the sale of all of substantially all of the assets or outstanding share capital of the Company (each, a “Deemed Liquidation”). Upon the occurrence of a Deemed Liquidation and after receipt of the Liquidation Preference, the holders of the Series A Preferred Stock shall not be entitled to share in the remainder of the proceeds of such Deemed Liquidation transaction with the remaining stockholders of the Company. Notwithstanding the foregoing, the holders of Series A Preferred Stock shall not be entitled to receive the Liquidation Preference if such Series A Preferred Stock holders would have received an amount exceeding the Liquidation Preference pursuant to any Deemed Liquidation.

The Series A Preferred Stock shall vote together with the Common Stock as a single class, and shall not confer upon the holders thereof any rights senior to, or otherwise different from, the rights conferred upon the holders of Common Stock, other than the Liquidation Preference. At the option of the Series A Preferred Stock holder(s), the shares of Series A Preferred Stock shall be convertible into shares of Common Stock on a one-for-one basis, as adjusted for subdivision, combination or consolidation of Common Stock, stock dividends and other distributions. The Series A Preferred Stock shall automatically be converted into Common Stock upon the closing of a public offering of the Company’s Common Stock with net proceeds to the Company of at least $20,000,000 or upon the consent of the holders of a majority of the outstanding Series A Preferred Stock at such time, to so convert.

In addition, it was agreed under the Master Agreement that the Company should take all steps necessary in order to reduce the number of record holders of the Company’s Common Stock to below 300 holders of record, which would cause the Company’s reporting obligations under The Exchange Act of 1934, as amended (the “Exchange Act”) to become eligible for suspension under Rule12h-3 or Section 15(d) thereunder, and cause the Company’s Common Stock to become eligible for termination of registration under Rule 12g-4 and Section 12(g) of the Exchange Act. The purpose of these efforts is to reduce the administrative burden and costs associated with the Company’s reporting obligations under the Exchange Act. In addition, the prospect of additional financing (discussed further below) is premised on the Company successfully suspending its reporting obligation under the Exchange Act.

In furtherance of the Company’s efforts to suspend its reporting obligation under the Act, the Master Agreement contemplates that the Company will implement a 101-for-1 reverse stock split of the Company’s outstanding Common Stock (the “Reverse Stock Split”) immediately followed by a 1-for-101 forward stock split of the Company’s outstanding Common Stock (the “Forward Stock Split”, and collectively with the Reverse Stock Split, the “Reverse/Forward Stock Split”). Holders of record of less than one share of Common Stock after the Reverse Stock Split would be cashed out at the rate of $0.15 per pre-split share. Holders of record of more than one share of Common Stock after the Reverse Stock Split will participate in the Forward Stock Split. Such amendments would not change the par value per share or the number of authorized shares of Common Stock. The Company has received the consent of the holders of the requisite number of its outstanding Common Stock under Nevada law to implement the Reverse/Forward Stock Split.

If the Reverse/Forward Stock Split is implemented as contemplated, the number of record holders of the Company’s Common Stock would fall below 300 holders of record and the Company would no longer be required to file periodic reports with the Securities Exchange Commission (the “SEC”). The Company believes that the deregistration of its Common Stock under the Exchange Act should reduce significant outlays currently expended in complying with the Company’s reporting obligations and allow management to expend its time and resources to otherwise managing the growth of its business and maximizing long-term shareholder value.

Subject to the successful completion of all of the transactions contemplated under the Master Agreement, including the suspension of the Company’s reporting obligations under the Exchange Act, and approval by the Company’s board of directors, the Security Holders comprising the holders of a majority of the Company’s outstanding Common Stock have agreed that the Company seek investment in the Company for an aggregate purchase price of up to $5,000,000 at a Company pre-money valuation of no less than $6,000,000. Any such investment would be on terms and conditions approved by the Company’s board of directors.

On April 6, 2015, the Company entered into a definitive agreement (the “Agreement”) with Singulariteam Fund II L.P. (“Singulariteam II”), Platinum Partners Value Arbitrage Fund, LP, both existing stockholders of the Company, and SUNCORPORATION of Japan (collectively, the “Investors”), for the purpose of raising funds for the Company’s operation and activities. According to the Agreement, the Investors will invest $1.25 million at the initial closing and receive convertible notes (the “Notes”) which will be convertible into Series B Preferred Stock upon the creation thereof. The Agreement also provides that if the Company shall have an effective certificate of designation of Series B Preferred Stock of the Company, par value $0.00001 each filed with the Secretary of State of Nevada, the Investors have agreed to invest an additional $3.75 million.   

The Master Agreement contemplates an increase of the authorized share capital (the “Authorized Capital Increase”) of Common Stock from 500,000,000 shares of Common Stock, to 1,000,000,000 shares of Common Stock, and an increase of the Company’s authorized shares of preferred stock from 100,000,000 shares of preferred stock, par value $0.00001 per share (the “Preferred Stock”) to 500,000,000 shares of Preferred Stock.

The Authorized Capital Increase is intended, among other things, to provide for the issuance of the Series A Preferred Stock, issuance of additional series of Preferred Stock to prospective investors and for the issuance of up to 155,000,000 shares of Common Stock to our directors and employees pursuant to the Company’s new incentive plan and to enhance corporate flexibility to finance and develop the operations of our business. Increasing the Company’s authorized shares of Common Stock will provide the Company with greater flexibility and allow for the issuance of additional shares of Common Stock at such times that the Company’s board may deem such issuance to be in the service of the Company’s interest, without the expense or delay of seeking approval from the stockholders. The Company has received the consent of the holders of the requisite number of its outstanding Common Stock under Nevada law to the Authorized Share Increase.

The Master Agreement contemplates that the Company approve an equity incentive plan in order to facilitate the grant of Restricted Stock Units and/or options to purchase Common Stock of the Company to such executive officers, employees and consultants of the Company and its subsidiary, as the Board of Directors deems fit, from time to time (the “2015 Incentive Plan”)

The intended purpose of the 2015 Incentive Plan is to attract and retain highly qualified and experienced directors, employees and consultants and to give such directors, employees and consultants a continued proprietary interest in the success of the Company. The 2015 Incentive Plan provides for the issuance of options (including incentive stock options for employees only), restricted or unrestricted common stock and other awards under the 2015 Incentive Plan.

It is anticipated that the Company will issue 60 million Restricted Stock Units to each of Motti Kushnir, our Chief Executive Officer and Matan Protter, the Chief Technology Officer of our Infinity Israel and 12.6 million Restricted Stock Units to Ortal Zanzuri, our Chief Financial Officer.

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. The Company intends to finance the future capital required for continued operations from a combination of traditional debt and equity markets. However, there is no assurance that (a) traditional debt and equity markets may be accessible as required, or if so, on acceptable terms and, or (b) the demand for and selling prices of the Company’s augmented reality products, may not be sufficient to meet cash flow expectations. The outcome of these matters cannot be predicted with certainty and therefore the Company may not be able to continue or expand operations as planned. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These unaudited financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.

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Common Stock, Warrants and Stock Options (Details) (Warrant [Member], USD $)	6 Months Ended
	Feb. 28, 2015	Feb. 28, 2014
Warrant [Member]
Number of warrants
Balance	34,174,172
Additions	3,000,000
Conversions Into Common Shares	(4,944,000)
Balance	32,230,172
Weighted average exercise price
Balance	$ 0.41
Additions	$ 0.50
Conversions Into Common Shares Price	$ 0.00
Balance	$ 0.41
Weighted average life remaining (in years)
Balance	3 years 2 months 16 days	3 years 11 months 19 days
Additions	4 years 7 months 10 days

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Common Stock, Warrants and Stock Options (Details 2) (Employee Stock Option [Member], USD $)	6 Months Ended	12 Months Ended
	Feb. 28, 2015	Aug. 31, 2014
Employee Stock Option [Member]
Number of Shares
Outstanding	25,800,000
Options granted	50,000
Options exercised
Options forfeited
Options cancelled
Outstanding	25,850,000	25,800,000
Options exercisable	12,541,667
Weighted Average Exercise Price
Outstanding	$ 0.07
Options granted	$ 0.07
Options exercised
Options forfeited
Options cancelled
Outstanding	$ 0.07	$ 0.07
Options exercisable	$ 0.07
Total Weighted Average Intrinsic Value
Outstanding	$ 0.07
Options granted	$ 0.01
Options exercised
Options forfeited
Options cancelled
Outstanding	$ 0.05	$ 0.07
Options exercisable	$ 0.05
Weighted Average Remaining Contactual Life (in years)
Options granted	4 years 9 months 7 days
Options outstanding	7 years 10 months 28 days	8 years 4 months 28 days
Options exercisable	7 years 8 months 5 days

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Significant Accounting Policies

6 Months Ended

Feb. 28, 2015

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, 2015 and for the three months and six months ended February 28, 2015 and 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 EC 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, 2015, Statements of Operations and comprehensive loss for the three months and six months ended February 28, 2015 and February 28, 2014, and Statements of Cash Flows for the six months ended February 28, 2015 and 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, 2015 are not necessarily indicative of results to be expected for the year ending August 31, 2015 or for any future interim period. In addition, the balance sheet data at August 31, 2014 was derived from the audited financial statements but does not include all disclosures required by GAAP. The accompanying financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K, filed with the SEC on November 26, 2014.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to these financial statements relate to deferred income tax amounts and rates and timing of the reversal of income tax differences.

Loss per Share

Basic loss per share is calculated using the weighted average number of shares of common stock outstanding during the period. Included in basic loss per share calculations for each period presented are the effects of 6,000,000 warrants exercisable at $0.01. Diluted earnings per share reflect the potential dilution that could occur if potentially dilutive securities were exercised or converted to common stock. The dilutive effect of options and warrants and their equivalent is computed by application of the treasury stock method and the effect of convertible securities by the "if converted" method. As of February 28, 2015, 78,310,344 shares of common stock, comprised of 26,230,172 convertible debentures with a conversion price of $0.25, 26,230,172 warrants with an exercise price of $0.50, and stock options exercisable into 25,850,000 common shares are not included in diluted loss per share since their effect would be anti-dilutive. 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.

Stock-Based Compensation

The Company records stock-based compensation expense in accordance with ASC 718, Compensation - Stock Compensation. The Company expenses stock-based compensation to employees over the requisite service period based on the estimated grant-date fair value of the awards and forfeiture rates. For stock-based compensation awards to non-employees, the Company re-measures the fair value of the non-employee awards at each reporting period prior to vesting and finally at the vesting date of the award. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

Valuation Assumptions

The Company estimates the fair value of stock option grants using a Black-Scholes option pricing model. In applying this model, the Company uses the following assumptions: 

· Risk-Free Interest Rate: The Company determined the risk-free interest rate equivalent to the expected term based on the U.S. Treasury constant maturity rate.

· Expected Volatility: The Company determined its future stock price volatility based on the average historical stock price volatility of comparable peer companies.

· Expected Term: Due to the limited exercise history of the Company’s stock options, the Company determined the expected term based on the stratification of employee groups and the expected effect of events that have indications on future exercise activity. Expected life for options granted to employees uses the Simplified Method, while options granted to non-employees uses an expected term equal to the life of the contract.

· Expected Dividend Rate: The Company has not paid and does not anticipate paying any cash dividends in the near future.

The fair value of each option award was estimated on the grant date using the Black Scholes option-pricing model and expensed under the straight line method. The following assumptions were used:

	Three Months ended  February 28,		Six Months ended  February 28,
	2015	2014	2015	2014
Exercise price	$0.07	$0.10 - $0.40	$0.07	$0.10 - $0.40
Expected stock price volatility	94.29% - 105.62%	87.9% - 92.4%	94.29% -105.62%	66.3% - 92.4%
Risk-free rate of interest	0.98% - 1.39%	0.04% - 1.65%	0.98% - 1.39%	0.04% - 1.72%
Expected life of options	2.75-4 Years	1-4 Years	2.75-4 Years	1-4 Years

Recent Accounting Pronouncements

In November 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-17, Pushdown Accounting. This ASU provides companies with the option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. The election to apply pushdown accounting can be made either in the period in which the change of control occurred, or in a subsequent period. This ASU is effective as of November 18, 2014. The adoption will not have a material impact on the Company’s results of operations, cash flows or financial position.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, as a new Topic, Accounting Standards Codification (ASC) Topic 606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU is effective for annual periods beginning after December 15, 2016 (fiscal 2018) and shall be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is evaluating the effect of adopting this new accounting guidance but does not expect adoption will have a material impact on the Company’s results of operations, cash flows or financial position.

In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This ASU raises the threshold for a disposal to qualify as discontinued operations and requires new disclosures for individually material disposal transactions that do not meet the definition of a discontinued operation. Under the new standard, companies report discontinued operations when they have a disposal that represents a strategic shift that has or will have a major impact on operations or financial results. This update will be applied prospectively and is effective for annual periods, and interim periods within those years, beginning after December 15, 2014 (fiscal 2016). Early adoption is permitted provided the disposal was not previously disclosed. This update will not have a material impact on the Company's reported results of operations and financial position. The impact is non-cash in nature and will not affect the Company's cash position.

Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to be significant to the condensed financial statements of the Company.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Feb. 28, 2015	Aug. 31, 2014
Consolidated Balance Sheets [Abstract]
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	105,235,038	95,316,155
Common stock, shares outstanding	104,879,570	94,960,687
Treasury stock	355,468	355,468

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Significant Accounting Policies (Details) (USD $)	3 Months Ended		6 Months Ended
	Feb. 28, 2015	Feb. 28, 2014	Feb. 28, 2015	Feb. 28, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price	$ 0.07		$ 0.07
Expected stock price volatility, minimum	94.29%	87.90%	94.29%	66.30%
Expected stock price volatility, maximum	105.62%	92.40%	105.62%	92.40%
Risk-free rate of interest, minimum	0.98%	0.04%	0.98%	0.04%
Risk-free rate of interest, maximum	1.39%	1.65%	1.39%	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	2 years 9 months	1 year	2 years 9 months	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	4 years	4 years

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Document and Entity Information	6 Months Ended
	Feb. 28, 2015	Apr. 14, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	Infinity Augmented Reality, Inc.
Entity Central Index Key	0001421538
Amendment Flag	false
Current Fiscal Year End Date	--08-31
Document Type	10-Q
Document Period End Date	Feb. 28, 2015
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2015
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		110,123,545

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Significant Accounting Policies (Details Textual) (USD $)	6 Months Ended
	Feb. 28, 2015	Feb. 28, 2014
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Warrants exercisable	6,000,000
Exercise price of warrants	0.01
Common stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities not included in computation of earnings per common share	78,310,344	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	26,230,172	15,830,172
Conversion price	0.25	0.25
Stock option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities not included in computation of earnings per common share	25,850,000	28,049,490
Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities not included in computation of earnings per common share	26,230,172	15,830,172
Exercise price of warrants	0.50	0.50

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Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Feb. 28, 2015	Feb. 28, 2014	Feb. 28, 2015	Feb. 28, 2014
Income Statement [Abstract]
Research and Development expenses	$ (237,285)	$ (484,692)	$ (419,360)	$ (829,491)
Marketing, General and administrative expenses	(834,477)	(1,150,593)	(1,868,540)	(1,881,026)
Total Operating expenses	(1,071,762)	(1,635,285)	(2,287,900)	(2,710,517)
Interest and other finance income (expense)	188,567	(183,127)	(63,213)	(302,864)
Loss from continuing operations before income tax	(883,195)	(1,818,412)	(2,351,113)	(3,013,381)
Provision for income tax
Loss from continuing operations	(883,195)	(1,818,412)	(2,351,113)	(3,013,381)
Loss from discontinued operations		(114,966)		(114,966)
Net loss	(883,195)	(1,933,378)	(2,351,113)	(3,128,347)
Basic and diluted loss per common share
Continuing operations	$ (0.01)	$ (0.02)	$ (0.02)	$ (0.03)
Discontinued operations
Net loss per common share	$ (0.01)	$ (0.02)	$ (0.02)	$ (0.03)
Basic weighted average shares outstanding	103,715,932	99,855,165	102,330,698	99,566,969
Diluted weighted average shares outstanding	103,715,932	99,855,165	102,330,698	99,566,969
Net loss	(883,195)	(1,933,378)	(2,351,113)	(3,128,347)
Foreign currency translation adjustments	(10,077)	(11,431)	(49,224)	(17,232)
Comprehensive loss	$ (893,272)	$ (1,944,809)	$ (2,400,337)	$ (3,145,579)

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Significant Accounting Policies (Policies)

6 Months Ended

Feb. 28, 2015

Significant Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of February 28, 2015 and for the three months and six months ended February 28, 2015 and 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 EC 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, 2015, Statements of Operations and comprehensive loss for the three months and six months ended February 28, 2015 and February 28, 2014, and Statements of Cash Flows for the six months ended February 28, 2015 and 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, 2015 are not necessarily indicative of results to be expected for the year ending August 31, 2015 or for any future interim period. In addition, the balance sheet data at August 31, 2014 was derived from the audited financial statements but does not include all disclosures required by GAAP. The accompanying financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K, filed with the SEC on November 26, 2014.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to these financial statements relate to deferred income tax amounts and rates and timing of the reversal of income tax differences.

Loss per Share

Loss per Share

Basic loss per share is calculated using the weighted average number of shares of common stock outstanding during the period. Included in basic loss per share calculations for each period presented are the effects of 6,000,000 warrants exercisable at $0.01. Diluted earnings per share reflect the potential dilution that could occur if potentially dilutive securities were exercised or converted to common stock. The dilutive effect of options and warrants and their equivalent is computed by application of the treasury stock method and the effect of convertible securities by the "if converted" method. As of February 28, 2015, 78,310,344 shares of common stock, comprised of 26,230,172 convertible debentures with a conversion price of $0.25, 26,230,172 warrants with an exercise price of $0.50, and stock options exercisable into 25,850,000 common shares are not included in diluted loss per share since their effect would be anti-dilutive. 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.

Stock-Based Compensation

Stock-Based Compensation

The Company records stock-based compensation expense in accordance with ASC 718, Compensation - Stock Compensation. The Company expenses stock-based compensation to employees over the requisite service period based on the estimated grant-date fair value of the awards and forfeiture rates. For stock-based compensation awards to non-employees, the Company re-measures the fair value of the non-employee awards at each reporting period prior to vesting and finally at the vesting date of the award. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

Valuation Assumptions

The Company estimates the fair value of stock option grants using a Black-Scholes option pricing model. In applying this model, the Company uses the following assumptions: 

· Risk-Free Interest Rate: The Company determined the risk-free interest rate equivalent to the expected term based on the U.S. Treasury constant maturity rate.

· Expected Volatility: The Company determined its future stock price volatility based on the average historical stock price volatility of comparable peer companies.

· Expected Term: Due to the limited exercise history of the Company’s stock options, the Company determined the expected term based on the stratification of employee groups and the expected effect of events that have indications on future exercise activity. Expected life for options granted to employees uses the Simplified Method, while options granted to non-employees uses an expected term equal to the life of the contract.

· Expected Dividend Rate: The Company has not paid and does not anticipate paying any cash dividends in the near future.

The fair value of each option award was estimated on the grant date using the Black Scholes option-pricing model and expensed under the straight line method. The following assumptions were used:

	Three Months ended  February 28,		Six Months ended  February 28,
	2015	2014	2015	2014
Exercise price	$0.07	$0.10 - $0.40	$0.07	$0.10 - $0.40
Expected stock price volatility	94.29% - 105.62%	87.9% - 92.4%	94.29% -105.62%	66.3% - 92.4%
Risk-free rate of interest	0.98% - 1.39%	0.04% - 1.65%	0.98% - 1.39%	0.04% - 1.72%
Expected life of options	2.75-4 Years	1-4 Years	2.75-4 Years	1-4 Years

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In November 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-17, Pushdown Accounting. This ASU provides companies with the option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. The election to apply pushdown accounting can be made either in the period in which the change of control occurred, or in a subsequent period. This ASU is effective as of November 18, 2014. The adoption will not have a material impact on the Company’s results of operations, cash flows or financial position.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, as a new Topic, Accounting Standards Codification (ASC) Topic 606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU is effective for annual periods beginning after December 15, 2016 (fiscal 2018) and shall be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is evaluating the effect of adopting this new accounting guidance but does not expect adoption will have a material impact on the Company’s results of operations, cash flows or financial position.

In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This ASU raises the threshold for a disposal to qualify as discontinued operations and requires new disclosures for individually material disposal transactions that do not meet the definition of a discontinued operation. Under the new standard, companies report discontinued operations when they have a disposal that represents a strategic shift that has or will have a major impact on operations or financial results. This update will be applied prospectively and is effective for annual periods, and interim periods within those years, beginning after December 15, 2014 (fiscal 2016). Early adoption is permitted provided the disposal was not previously disclosed. This update will not have a material impact on the Company's reported results of operations and financial position. The impact is non-cash in nature and will not affect the Company's cash position.

Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to be significant to the condensed financial statements of the Company.

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Subsequent Events

6 Months Ended

Feb. 28, 2015

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 6: SUBSEQUENT EVENTS

On March 17, 2015 Coventry Enterprises, LLC exercised 5,957,227 warrants at a cashless exercise. The Company issued 5,510,435 Common Shares.

On April 6, 2015, the Company entered into a definitive agreement (the “Agreement”) with Singulariteam Fund II L.P. (f/k/a Genesis Angels Fund, LP) (“Singulariteam II”), Platinum Partners Value Arbitrage Fund, LP, both existing stockholders of the Company, and SUNCORPORATION of Japan (collectively, the “Investors”), for the purpose of raising funds for the Company’s operation and activities. According to the Agreement, the Investors will invest $1.25 million at the initial closing and receive convertible notes (the “Notes”) which will be convertible into Series B Preferred Stock upon the creation thereof. The Agreement also provides that if the Company shall have an effective certificate of designation of Series B Preferred Stock of the Company, par value $0.00001 each filed with the Secretary of State of Nevada, the Investors have agreed to invest an additional $3.75 million.

The Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws and may not be offered or sold in the United States absent an effective registration statement or an applicable exemption from registration requirements or a transaction not subject to the registration requirements of the Securities Act or any state securities laws.

The shares of Preferred B Stock shares shall have a liquidation preference of 3 times the amount that has been invested plus 1.2% per year, provided that if the amount of proceeds to be received in an actual or deemed liquidation which be distributed on an as converted basis prior to calculating of the liquidation preference, the preferred shares will instead be converted to Common Stock. The Preferred Stock may be converted to common stock at any time and shall be automatically converted to Common Stock if the Company has a public offering raising at least $20 million. The Series B Stock will have special approval rights, will have a right to elect a director, a preemptive right and a right of first refusal. In addition, 75% of the shareholders of the Company will have a right to cause the other shareholders of the Company to sell their shares.

The Notes to be issued at the initial closing shall bear interest at the rate of 1.2% per annum, commencing on the date of its purchase and until the conversion or repayment thereof, and shall be converted immediately upon the effectiveness of the Certificate of Designation of the Series B Preferred Stock. The holders of the Notes may convert the Note into Common Stock at any time prior to such Series Preferred Stock being created.

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 Stock Options (Details 1) (USD $)	3 Months Ended		6 Months Ended
	Feb. 28, 2015	Feb. 28, 2014	Feb. 28, 2015	Feb. 28, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock options compensation expense	$ 583,525	$ 272,984	$ 1,412,213	$ 294,622
Employee awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock options compensation expense	583,525	236,995	1,412,213	258,633
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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Convertible Debentures (Details) (Warrant [Member])	6 Months Ended
	Feb. 28, 2015
Issued on September 15, 2014 [Member]
Class of Warrant or Right [Line Items]
Contractual term (Years)	5 years
Volatility	139.60%
Dividend yield	0.00%
Risk-free interest rate	1.80%
Issued on November 07, 2014 [Member]
Class of Warrant or Right [Line Items]
Contractual term (Years)	5 years
Volatility	162.50%
Dividend yield	0.00%
Risk-free interest rate	1.60%

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Common Stock, Warrants and Stock Options (Tables)

6 Months Ended

Feb. 28, 2015

Common Stock, Warrants and Stock Options [Abstract]

Schedule of warrant transactions

	Number of warrants			Weighted  average  exercise  price		Weighted average life remaining  (in years)
Balance as at August 31, 2014 – Issued		34,174,172			0.41		3.97 years
Additions		3,000,000			0.50		4.61 years
Conversions into Common Shares		(4,944,000	)		0.00		-
Balance as at February 28, 2015		32,230,172			0.41		3.21 years

Schedule of stock-based compensation expense

	Three months ended February 28,				Six months ended February 28,
	2015		2014		2015		2014
Employee awards	$	583,525	$	236,995	$	1,412,213	$	258,633
Non- employee awards, net of forfeitures		-		35,989	$	-		35,989
Total stock options compensation expense	$	583,525	$	272,984	$	1,412,213	$	294,622

Schedule of stock-based compensation 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, 2014		25,800,000		0.07		0.07		8.41
Options granted		50,000		0.07		0.01		4.77
Options exercised		-		-		-		-
Options forfeited		-		-		-		-
Options cancelled		-		-		-		-
Outstanding at February 28, 2015		25,850,000		0.07		0.05		7.91
Options exercisable at February 28, 2015		12,541,667		0.07		0.05		7.68

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Significant Accounting Policies (Tables)

6 Months Ended

Feb. 28, 2015

Significant Accounting Policies [Abstract]

Fair value of option award was estimated on the grant date using the Black Scholes option-pricing model

	Three Months ended  February 28,		Six Months ended  February 28,
	2015	2014	2015	2014
Exercise price	$0.07	$0.10 - $0.40	$0.07	$0.10 - $0.40
Expected stock price volatility	94.29% - 105.62%	87.9% - 92.4%	94.29% -105.62%	66.3% - 92.4%
Risk-free rate of interest	0.98% - 1.39%	0.04% - 1.65%	0.98% - 1.39%	0.04% - 1.72%
Expected life of options	2.75-4 Years	1-4 Years	2.75-4 Years	1-4 Years

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Convertible Debentures (Tables)

6 Months Ended

Feb. 28, 2015

Convertible Debentures [Abstract]

Schedule of warrant valuation assumptions

	September 15, 2014			November 7, 2014
Contractual term (Years)		5.0			5.0
Volatility		139.6	%		162.5	%
Dividend yield		0.0	%		0.0	%
Risk-free interest rate		1.80	%		1.60	%

Schedule of senior convertible notes

	February 28, 2015			August 31, 2014
1.2% convertible debentures		6,557,543			7,043,543
Debt discount/ beneficial conversion feature		(3,366,110	)		(3,751,613	)
Balance	$	3,191,433		$	3,291,930

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Nature and Continuance of Operations (Details) (USD $)	6 Months Ended	0 Months Ended
	Feb. 28, 2015	Apr. 06, 2015	Aug. 31, 2014
Nature and Continuance of Operations (Textual)
Aggregate principal amount	$ 6,557,543		$ 7,043,543
Common stock, par value	$ 0.00001		$ 0.00001
Preferred stock, shares authorized	100,000,000
Common stock, shares authorized	500,000,000		500,000,000
Preferred stock, par value	$ 0.00001
Increase in common stock authorized	1,000,000,000
Increase in preferred shares authorized	500,000,000
Motti Kushnir [Member]
Nature and Continuance of Operations (Textual)
Restricted stock units	60,000,000
Matan Protter [Member]
Nature and Continuance of Operations (Textual)
Restricted stock units	60,000,000
Ortal Zanzuri [Member]
Nature and Continuance of Operations (Textual)
Restricted stock units	12,600,000
Directors And Employees [Member]
Nature and Continuance of Operations (Textual)
Issuance of additional common stock	155,000,000
Series A Preferred Stock [Member]
Nature and Continuance of Operations (Textual)
Aggregate principal amount	6,634,256
Warrants shares of newly designated	52,767,193
Preferred stock, shares authorized	52,767,193
Debt instrument, interest rate percentage	1.20%
Proceeds from issuance initial public offering	20,000,000
Preferred stock, par value	$ 0.00001
Series B Preferred Stock [Member] | Subsequent Event [Member]
Nature and Continuance of Operations (Textual)
Common stock, par value		$ 0.00001
Convertible notes to conversion of stock		1,250,000
Agreed to invest an additional amount		3,750,000
Common Stock [Member]
Nature and Continuance of Operations (Textual)
Aggregate principal amount	7,793,543
Common stock, par value	$ 0.00001
Conversion price	$ 0.25
Warrants issued to purchase maximum shares	31,174,172
Warrants exercise price	$ 0.50
Warrants shares of newly designated	9,918,883
Reverse stock split of outstanding common stock	101-for-1
Forward stock split of outstanding common stock	1-for-101
Pre split per share	$ 0.15
Purchase price of common stock	5,000,000
Pre money valuation of common stock	$ 6,000,000
Number of record holders	300

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Convertible Debentures (Details Textual) (USD $)	6 Months Ended
	Feb. 28, 2015	Aug. 31, 2014
Convertible Debentures (Textual)
Aggregate principal amount	$ 6,557,543	$ 7,043,543
Aggregate fair value of warrants and beneficial conversion feature	249,145
Common stock issued	105,235,038	95,316,155
Convertible Debt [Member]
Convertible Debentures (Textual)
Aggregate principal amount	7,793,543
Conversion price	$ 0.25
Warrants shares of newly designated	52,767,193
Warrants exercise price	$ 0.50
Warrants issued to purchase maximum shares	31,174,172
Common stock issued	9,918,883
Unamortized discount	443,000
Credit Strategies Llc [Member]
Convertible Debentures (Textual)
Aggregate principal amount	$ 750,000
Term	5 years
Interest rate	1.20%
Conversion price	$ 0.25
Term of warrants	5 years
Number of shares available for warrants exercised	3,000,000

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Subsequent Events (Details) (USD $) In Millions, except Share data, unless otherwise specified	0 Months Ended	1 Months Ended
	Apr. 06, 2015	Mar. 17, 2015	Feb. 28, 2015	Aug. 31, 2014
Subsequent Events (Textual)
Common stock, par value			$ 0.00001	$ 0.00001
Subsequent Event [Member]
Subsequent Events (Textual)
Warrant exercisable at cashless basis		5,957,227
Stock issued during period, shares, new issues		5,510,435
Sale of shares, Percentage	75.00%
Interest rate	1.20%
Subsequent Event [Member] | Series B Preferred Stock [Member]
Subsequent Events (Textual)
Common stock, par value	0.00001
Agreed to invest an additional amount	3.75
Liquidation preference percentage	1.20%
Converted to common stock public offering	20
Subsequent Event [Member] | Series B Preferred Stock [Member] | Investors [Member]
Subsequent Events (Textual)
Agreement of initial closing invest amount	1.25
Agreed to invest an additional amount	3.75

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended
	Feb. 28, 2015	Feb. 28, 2014
OPERATING ACTIVITIES
Net loss	$ (2,351,113)	$ (3,128,347)
Loss from discontinued operations		114,966
Adjustments to reconcile net loss to net cash (used in) provided by operations
Amortization of debt discount	460,243	287,703
Stock-based compensation	1,412,213	294,622
Finance income from conversion of convertible debt and warrants	(442,956)
Foreign exchange gain on investment in subsidiary		(19,884)
Loss on disposition of equipment		25,385
Issuance of stock for in-process research and development		26,110
Depreciation	17,081	24,818
Changes in operating assets and liabilities:
Prepaid expenses and other receivables and long-term receivables	122,408	3,223
Accounts payable and accrued expenses	(89,916)	376,447
Interest payable	45,354	18,077
Net cash used in operating activities- continuing operations	(826,686)	(1,976,880)
Net cash (used in) provided by operating activities- discontinued operations	(22,987)	(197,023)
Net cash (used in) provided by operating activities	(849,673)	(2,173,903)
INVESTING ACTIVITIES
Purchase of leasehold improvements and equipment	(9,169)	(70,803)
Net cash used in investing activities	(9,169)	(70,803)
FINANCING ACTIVITIES
Proceeds from convertible debentures	750,000	2,030,000
Proceeds from exercise of stock options		69,926
Net cash provided by financing activities	750,000	2,099,926
Effect of exchange rate on cash and cash equivalents	(39,670)	944
Change in cash and cash equivalents	(148,512)	(143,836)
Cash and cash equivalents, beginning	875,438	431,760
Cash and cash equivalents of continuing operations, ending	726,926	287,924
Supplemental disclosure of cash flow information:
Tax paid in cash	22,987	197,023
Non-cash Investing and Financing activities:
Warrants issued in connection with convertible debentures	249,145	834,272
Beneficial conversion feature		1,110,285
Conversion of convertible note receivables to preferred shares of Meta Company		50,000
Conversion of convertible note	$ 1,061,595

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Common Stock, Warrants and Stock Options

6 Months Ended

Feb. 28, 2015

Common Stock, Warrants and Stock Options [Abstract]

COMMON STOCK, WARRANTS AND STOCK OPTIONS

NOTE 5: COMMON STOCK, WARRANTS AND STOCK OPTIONS

Common Stock

As of February 28, 2015 the Company issued 9,918,883 shares of Common Stock to ALS in exchange for its Debentures, accrued interest and Warrants.

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, 2014 – Issued		34,174,172			0.41		3.97 years
Additions		3,000,000			0.50		4.61 years
Conversions into Common Shares		(4,944,000	)		0.00		-
Balance as at February 28, 2015		32,230,172			0.41		3.21 years

As of February 28, 2015, there were 32,230,172 warrants outstanding and exercisable with expiration dates from June 2015 through November 2019.

Stock options

On December 7, 2014, the Board of Directors granted to an Infinity Israel employee 50,000 Non-Qualified Stock Options with an exercise price of $0.07, vesting semiannually over the next 3 years and expiring on December 7, 2019.

The 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, 2015 and 2014:

	Three months ended February 28,				Six months ended February 28,
	2015		2014		2015		2014
Employee awards	$	583,525	$	236,995	$	1,412,213	$	258,633
Non- employee awards, net of forfeitures		-		35,989	$	-		35,989
Total stock options compensation expense	$	583,525	$	272,984	$	1,412,213	$	294,622

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, 2014		25,800,000		0.07		0.07		8.41
Options granted		50,000		0.07		0.01		4.77
Options exercised		-		-		-		-
Options forfeited		-		-		-		-
Options cancelled		-		-		-		-
Outstanding at February 28, 2015		25,850,000		0.07		0.05		7.91
Options exercisable at February 28, 2015		12,541,667		0.07		0.05		7.68

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Convertible Debentures (Details 1) (USD $)	Feb. 28, 2015	Aug. 31, 2014
Debt Instrument, Redemption [Line Items]
1.2% convertible debentures	$ 6,557,543	$ 7,043,543
Debt discount/ beneficial conversion feature	(3,366,110)	(3,751,613)
Balance	$ 3,191,433	$ 3,291,930