The accompanying notes are an integral part
of the unaudited consolidated financial statements.
The accompanying notes are an integral part
of the unaudited consolidated financial statements.
The accompanying notes are an integral part
of the unaudited consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 (Unaudited)
NOTE 1
- GENERAL
InnoVision Labs, Inc. (the
“Company”), was incorporated on December 8, 2004 under the laws of the State of Nevada. On December 29, 2015, the Company
changed its name from GlassesOff Inc. to InnoVision Labs, Inc.
The Company is a visual neuroscience
software technology company, utilizing patented technology to develop and commercialize consumer-oriented software applications
for improving, through exercise, vision sharpness and vision performance by improving the image processing function in the visual
cortex of the brain.
The Company has developed a
non-invasive neuroscience platform technology that can potentially be utilized on computers, tablets and mobile devices in the
following areas:
|
1.
|
Improvement, through visual stimulation exercises,
of vision sharpness and vision performance by improving the image processing function in the visual cortex of the brain. The Company
used this technology in its first app, GlassesOff™, which aims to eliminate, through exercise, the dependency on reading
glasses by people over the age of 40 who experience natural age-related changes in their near vision sharpness. The GlassesOff™
app is currently implemented on the Android and Apple iOS platforms (iPhone, iPod, iPad) and is available on the main app markets,
such as the Apple App Store and The Google Play store.
|
|
2.
|
Improvement, through visual stimulation exercises, of image processing speed by improving the image processing function in
the visual cortex of the brain. The Company believes that this could be used to improve the ability to process visual information
faster within the context of sports or other situations requiring swift responses to visual events, such as in the military defense
context. On March 3, 2016, using this technology, the Company introduced its new app, Game Vision, which is based on a sports theme.
|
|
3.
|
Detection, through visual stimulation tasks, of anomalies in vision performance that could potentially be attributable to certain
diseases, such as glaucoma and diabetic retinopathy, as well as dyslexia and attention deficit disorders.
|
The Company has accumulated
various intellectual property assets, including several granted patents and patents currently under examination. In the second
quarter of 2016, the Company decided to modify its business strategy and focus on licensing its products, intellectual property
and technologies or otherwise entering into partnerships, in each case with parties who have strategic interests in any of the
three areas of focus outlined above. The Company plans to continue supporting its first app, GlassesOff™, and cease its independent
marketing and development efforts with respect to Game Vision for the currently foreseeable future.
Given its change in strategic
focus, the Company decided to reduce its headcount to two full-time and four part-time employees, which the Company believes will
both reduce demands on its cash resources while still allowing the Company to continue to support its GlassesOff™ app. In
addition the Company plans to move to smaller offices.
The Company conducts its activity
through its wholly owned Israeli subsidiary, Eyekon E.R.D Ltd.
The
Company started generating revenues in 2014; however, the Company has not yet generated significant revenue from operations and
is devoting efforts to licensing its products or otherwise entering into partnerships, in each case as described above. The Company’s
accumulated deficit during the development stage aggregated $23,567 through June 30, 2016. There is no assurance that profitable
operations, if ever achieved, could be sustained on a continuing basis. The Company plans to continue to finance its operations
with issuances of its equity securities and, in the longer term, revenues. There are no assurances, however, that the Company will
be successful in obtaining an adequate level of financing needed for its planned principal operations.
The Company’s ability to continue to operate as a going concern is dependent upon additional financial support. These financial statements do not include any adjustments relating to the recoverability and classification of assets’ carrying amounts or the amount and classification of liabilities that may be required should the Company be unable to continue as a going concern.
INNOVISION LABS, INC. AND SUBSIDIARIES
U.S DOLLARS IN THOUSANDS (Except shares
and per share amounts)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 (Unaudited)
NOTE 2 -
SIGNIFICANT ACCOUNTING POLICIES
|
a.
|
Basis of presentation:
|
|
|
The accompanying unaudited financial statements of the Company are presented in accordance with
the requirements of Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US
GAAP”) have been condensed or omitted pursuant to applicable U.S. Securities and Exchange Commission (“SEC”)
rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been made. The results for these interim periods are not necessarily indicative of the results for
the entire year. The accompanying financial statements should be read in conjunction with the Company’s audited consolidated
financial statements for the year ended December 31, 2015 and the notes thereto filed with the SEC on Form 10-K on March 31, 2016.
|
|
b.
|
Principles
of consolidation:
|
|
|
The consolidated financial statements include the accounts of the Company and its wholly owned
subsidiaries, Ucansi Inc. and Eyekon E.R.D. Ltd.
|
|
|
|
|
|
Intercompany transactions
and balances have been eliminated upon consolidation.
|
Revenues are derived from subscription
fees for access to and use of the Company’s on-demand application services. The Company delivers its products through cloud-based
client server architecture to hand-held devices, currently implemented on the Apple iOS platform (iPhone, iPod, iPad) and Android
platform.
Under such subscription arrangements,
the customer does not have the contractual right to take possession of the software at any time during the subscription period.
Thus, revenue for the Company’s subscription services are recognized in accordance with accounting standards for service
contracts in accordance with the provisions of SAB Topic 13.
The criteria in SAB Topic 13
are met when: 1) persuasive evidence of an arrangement exists; 2) delivery of the product has occurred; 3) a fixed or determinable
fee; and 4) the collection of the fee is reasonably assured. Accordingly, revenue are recognized on a straight-line basis over
the contractual cloud-based subscription services period, commencing on the date the service is made available to the customer,
provided all of the applicable revenue recognition criteria have been met. In a case of a lifetime subscription the revenue are
recognized on a straight-line basis over the estimated expected period of use.
|
d.
|
Research and development costs:
|
Research and development, or
R&D, costs are expensed as they are incurred and consist of salaries, stock-based compensation, benefits and other personnel-related
costs, fees paid to consultants, clinical trials and related clinical manufacturing costs, license and milestone fees, and facilities
and overhead costs.
InnoVision reviews the carrying
value of its long-lived assets, including intangible assets subject to amortization, for impairment whenever events and circumstances
indicate that the carrying value of the assets may not be recoverable. Recoverability of these assets is measured by comparing
the carrying value of the assets to the undiscounted cash flows estimated to be generated by those assets over their remaining
economic life. If the undiscounted cash flows are not sufficient to recover the carrying value of the assets, the assets are considered
impaired. The impairment loss is measured by comparing the fair value of the assets to their carrying value. Impairment losses
for the three and six months ended June 30, 2016 and 2015 were $92, $0, $92 and $0, respectively. The losses were related to the
termination of marketing and development of the Game Vision App. See Note 5.
INNOVISION LABS, INC. AND SUBSIDIARIES
U.S DOLLARS IN THOUSANDS (Except shares
and per share amounts)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 (Unaudited)
NOTE 2 - SIGNIFICANT ACCOUNTING
POLICIES (continued)
R&D costs are expensed
as incurred with the exception of software development costs incurred subsequent to establishing technological feasibility and
up to the general release of the software products, which costs are capitalized. Technological feasibility is demonstrated by the
completion of a working model or a detailed program design. The capitalized costs with a finite life are amortized using the straight-line
method over the estimated useful life of the assets. The amortization period is three years for software and technology related
assets. Intangible assets with a finite life are tested for impairment upon the occurrence of certain triggering events.
Basic and Diluted losses per
share are presented in accordance with ASC 260-10 “Earnings per share”. Outstanding restricted stock, options, warrants
and convertible notes have been excluded from the calculation of the diluted loss per share because all such securities are antidilutive.
The total weighted average number of shares of common stock related to outstanding restricted stock, options, warrants and convertible notes excluded from the calculations of diluted loss per share was 5,363,151, 2,030,393, 5,142,543 and 2,046,276 for the three months and for the six months ended June 30, 2016 and 2015, respectively.
|
h.
|
Fair value measurements:
|
As defined
in ASC 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”), fair value is based on the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. ASC 820-10 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value
into three broad levels, which are described below:
Level 1:
Quoted
prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy
gives the highest priority to Level 1 inputs.
Level 2:
Other inputs
that are observable, directly or indirectly, such as quoted prices for similar assets and liabilities or market corroborated inputs.
Level 3:
Unobservable
inputs are used when little or no market data is available, which requires the Company to develop its own assumptions about how
market participants would value the assets or liabilities. The fair value hierarchy gives the lowest priority to Level 3 inputs.
In determining fair value, the
Company utilizes valuation techniques in its assessment that maximize the use of observable inputs and minimize the use of unobservable
inputs.
The following table presents
the Company’s financial assets and liabilities that are carried at fair value, classified according to the three categories
described above:
|
|
Fair Value Measurements at June 30, 2016
|
|
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Cash and cash equivalents
|
|
$
|
519
|
|
|
$
|
519
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total assets at fair value, net
|
|
$
|
519
|
|
|
$
|
519
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
Fair Value Measurements at December 31, 2015
|
|
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Cash and cash equivalents
|
|
$
|
630
|
|
|
$
|
630
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Restricted cash
|
|
|
65
|
|
|
|
65
|
|
|
|
-
|
|
|
|
-
|
|
Total assets at fair value, net
|
|
$
|
695
|
|
|
$
|
695
|
|
|
$
|
-
|
|
|
$
|
-
|
|
INNOVISION LABS, INC. AND SUBSIDIARIES
U.S DOLLARS IN THOUSANDS (Except shares
and per share amounts)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 (Unaudited)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
|
i.
|
Recent accounting pronouncements:
|
Accounting Standards Issued
In April 2016, the Financial
Accounting Standards Board (“FASB”) issued Update 2016-10—Revenue from Contracts with Customers (Topic 606):
Identifying Performance Obligations and Licensing. The amendments in this Update do not change the core principle of the guidance
in Topic 606. Rather, the amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations
and the licensing implementation guidance, while retaining the related principles for those areas. The amendments in this Update
affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606).
In March 2016, the FASB issued
guidance revising certain elements of the accounting for share-based payments - Update 2016-09—Compensation—Stock Compensation
(Topic 718): Improvements to Employee Share-Based Payment Accounting. The new standard is intended to simplify several aspects
of the accounting for share-based payment award transactions including: (a) income tax consequences; (b) classification of awards
as either equity or liabilities; and (c) classification on the statement of cash flows. The new guidance will be effective in the
first quarter of 2017, with early adoption permitted. The Company is currently evaluating the impact of adoption of this guidance.
Based on the Company’s initial analysis, the adoption of this update is not expected to have a significant impact on its
consolidated Financial Statements and disclosures.
In February 2016, the FASB issued
revised guidance on accounting for leases - Update 2016-02—Leases (Topic 842). The new standard requires a lessee to recognize
in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to
use the underlying asset for the lease term for all leases with terms longer than 12 months. Leases with a term of 12 months or
less will be accounted for similar to existing guidance for operating leases. Recognition, measurement and presentation of expenses
will depend on classification as a finance or operating lease. The new guidance will be effective for us in our first quarter of
2019 and early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating
leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements.
The Company is currently evaluating the impact of adoption of this guidance. Based on the Company’s initial analysis, the
adoption of this update is not expected to have a significant impact on its consolidated Financial Statements and disclosures.
In August 2014, the FASB issued
ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” This
ASU establishes specific guidance to an organization’s management on their responsibility to evaluate whether there is substantial
doubt about the organization’s ability to continue as a going concern. The provisions of this ASU are effective for interim
and annual periods beginning after December 15, 2016. This ASU is not expected to have an impact on our financial statements or
disclosures.
In May 2014, the FASB issued
ASU No. 2014-09, Revenue from Contracts with Customers. This ASU will supersede most of the existing revenue recognition requirements
in U.S. GAAP and will require entities to recognize revenue at an amount that reflects the consideration to which the Company expects
to be entitled in exchange for transferring goods or services to a customer. The new standard also requires significantly expanded
disclosures regarding the qualitative and quantitative information of an entity’s nature, amount, timing, and uncertainty
of revenue and cash flows arising from contracts with customers. The pronouncement is effective for annual reporting periods beginning
after December 15, 2016, including interim periods within that reporting period and is to be applied retrospectively, with early
application not permitted. The Company is currently evaluating the impact the pronouncement will have on its consolidated financial
statements and related disclosures.
INNOVISION LABS, INC. AND SUBSIDIARIES
U.S DOLLARS IN THOUSANDS (Except shares
and per share amounts)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 (Unaudited)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
Accounting Standards Adopted
In April 2015, the FASB issued
ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs.” ASU 2015-03 requires that debt issuance costs related
to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability,
consistent with debt discounts. The ASU is effective for annual periods beginning after December 15, 2015, and interim periods
within those annual periods. The adoption of this ASU did not have an impact on the Company’s financial statements or disclosures.
In January 2015, the FASB issued
ASU 2015-01, “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” ASU 2015-01
eliminates from U.S. GAAP the concept of an extraordinary item. The FASB released the new guidance as part of its simplification
initiative, which is intended to “identify, evaluate, and improve areas of U.S. GAAP for which cost and complexity can be
reduced while maintaining or improving the usefulness of the information provided to users of financial statements.” The
ASU is effective for annual periods beginning after December 15, 2015, and interim periods within those annual periods. The adoption
of this pronouncement did not have a material impact on the Company’s consolidated financial statements.
In June 2014, the FASB issued
ASU No. 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could
Be Achieved after the Requisite Service Period.” This ASU requires a reporting entity to treat a performance target that
affects vesting and that could be achieved after the requisite service period as a performance condition, and apply existing guidance
under the Stock Compensation Topic of the ASC as it relates to awards with performance conditions that affect vesting to account
for such awards. The provisions of this ASU are effective for interim and annual periods beginning after December 15, 2015. The
adoption of this ASU did not have a significant impact on the Company’s financial statements or disclosures.
There were various other updates
recently issued, none of which are expected to a have a material impact on the Company’s financial position, results of operations
or cash flows.
INNOVISION LABS, INC. AND SUBSIDIARIES
U.S DOLLARS IN THOUSANDS (Except shares
and per share amounts)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 (Unaudited)
NOTE 3 - OTHER RECEIVABLES AND PREPAID
EXPENSES
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Israeli government authorities
|
|
$
|
18
|
|
|
$
|
50
|
|
Prepaid expenses
|
|
|
39
|
|
|
|
297
|
|
|
|
$
|
57
|
|
|
$
|
347
|
|
NOTE 4 - PROPERTY AND EQUIPMENT, NET
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Cost:
|
|
|
|
|
|
|
|
|
Office furniture and equipment
|
|
$
|
41
|
|
|
$
|
42
|
|
Computers and electronic equipment
|
|
|
59
|
|
|
|
122
|
|
Laboratory equipment
|
|
|
35
|
|
|
|
35
|
|
Leasehold improvements
|
|
|
59
|
|
|
|
67
|
|
|
|
$
|
194
|
|
|
$
|
266
|
|
Accumulated depreciation:
|
|
|
|
|
|
|
|
|
Office furniture and equipment
|
|
$
|
17
|
|
|
$
|
16
|
|
Computers and electronic equipment
|
|
|
42
|
|
|
|
92
|
|
Laboratory equipment
|
|
|
31
|
|
|
|
30
|
|
Leasehold improvements
|
|
|
56
|
|
|
|
18
|
|
|
|
|
146
|
|
|
|
156
|
|
Depreciated cost
|
|
$
|
48
|
|
|
$
|
110
|
|
Depreciation expenses for the
three and six months ended June 30, 2016 and 2015 were $50, $10, $59 and $19, respectively.
The increase in depreciation
expenses derived primarily from the reevaluation of the expected life of leasehold improvements, resulting in additional depreciation
expenses of $42 in connection with the Company’s decision to move to smaller offices.
During the three-month period
ended June 30, 2016, the Company disposed of fixed assets primarily consisting of computer equipment and furniture due to the decrease
in the Company’s headcount and its planned relocation to new offices as of August 31, 2016. The net loss on disposal of fixed
assets for the six months ended June 30, 2016 was $2.
INNOVISION LABS, INC. AND SUBSIDIARIES
U.S DOLLARS IN THOUSANDS (Except shares
and per share amounts)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 (Unaudited)
NOTE
5 - OTHER ASSETS, NET
The Company’s
intangible assets are associated with the capitalization of the costs of producing product masters incurred subsequent to establishing
technological feasibility of GlassesOff app and Game Vision app. These costs include coding, testing and product design.
In accordance
with applicable accounting guidance, we perform impairment tests when events occur or circumstances change that indicate that the
carrying amount of long-lived assets may not be recoverable. Based on the revenue generated from our Game Vision app, which we
launched in March 2016, we concluded that sufficient indicators of impairment existed to require the performance of an interim
assessment of the capitalized value of that app. Based upon that assessment, we determined that the implied value of the app is
zero, as the cash flow from using the app was negligible, we are planning to cease utilizing it and no future cash flow was likely
to result from the Game Vision app. This assessment resulted in the recognition of impairment charges of $92 included in cost of
sales in the statement of operations related to the Game Vision app for the three and six months ended June 30, 2016.
Following
the results of the quarter ended June 30, 2016, the Company assessed the recoverability of the net capitalized amount related to
the Game Vision app, by determining whether the carrying value of the app may be recoverable by undiscounted expected future cash
flow. Based on this assessment, the Company recognized an impairment of the Game Vision app’s entire net capitalized amount
of $92. The impairment loss was recorded in the cost of revenues.
The Company
included amortization expenses of intangible assets in cost of revenues.
Amortization
expenses for the three and six months ended June 30, 2016 and 2015 were $48, $48, $99 and $91, respectively.
Data with
respect to Company’s intangible assets associated with its products were as follows:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
GlassesOff app:
|
|
|
|
|
|
|
|
|
Gross Carrying Value at the begging of the period -
|
|
$
|
581
|
|
|
$
|
528
|
|
Capitalized during the period
|
|
|
-
|
|
|
|
53
|
|
Less: Accumulated Amortization
|
|
|
(358
|
)
|
|
|
(261
|
)
|
Net Carrying Value
|
|
$
|
223
|
|
|
$
|
320
|
|
|
|
|
|
|
|
|
|
|
Game Vision app:
|
|
|
|
|
|
|
|
|
Gross Carrying Value at the begging of the period
|
|
|
-
|
|
|
|
-
|
|
Capitalized during the period
|
|
|
92
|
|
|
|
-
|
|
Impairment of Game Vision app.
|
|
|
(92
|
)
|
|
|
-
|
|
Net Carrying Value
|
|
$
|
-
|
|
|
$
|
-
|
|
INNOVISION LABS, INC. AND SUBSIDIARIES
U.S DOLLARS IN THOUSANDS (Except shares
and per share amounts)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 (Unaudited)
NOTE 6 – CONVERTIBLE NOTES PAYABLE
On February
4, 2016, the Company issued and sold to investors in a private placement (the “Private Placement”) $1,060 aggregate
principal amount of the Company’s 8.0% Senior Convertible Notes (the “Notes”), which were issued together with
warrants (“Warrants”) to acquire an aggregate of 726,031 shares of the Company’s common stock, par value $0.001
per share (“Common Stock”), at an exercise price of $2.19 per share.
The Notes
are general senior unsecured obligations of the Company and rank equal in right of payment with all of the Company’s existing
and future unsubordinated indebtedness. The Notes accrue interest at 8.00% per annum, payable at maturity. The Notes mature on
August 3, 2018 unless earlier converted or redeemed. The Company may, at its option, redeem all, but not less than all, of the
then issued and outstanding Notes at any time prior to maturity by delivering notice thereof to the holders not less than 30 nor
more than 60 days prior to the date of redemption.
The Notes
may be converted into shares of Common Stock (the “Conversion Shares”) at an initial conversion price of $2.19 per
share, or approximately 457 shares for each $1 principal amount of Notes (not including accrued and unpaid interest). The conversion
price is subject to adjustment for stock splits, recapitalizations, reorganizations and certain fundamental transactions involving
the Company, as set forth in the Notes. Except as described below, upon any conversion of the Notes, the holders thereof would
receive a number of Conversion Shares equal to (i) the sum of aggregate principal amount of the Notes converted plus all accrued
and unpaid interest thereon, divided by (ii) the conversion price then in effect.
The Notes
will convert automatically if (i) at any time prior to the maturity date the closing price of the Common Stock exceeds 500% of
the conversion price for any 90 days in any 120 consecutive trading-day period or (ii) the Company consummates a new round of financing
providing gross cash proceeds to the Company (before deduction of any underwriters’ or placement agents’ discounts
or commissions) of not less than $2.5 million, in which case holders of Notes may either convert their respective Notes into Conversion
Shares, as described above, or they may elect to convert their respective Notes into such round of financing.
The Notes
provide for customary events of default which include (subject in certain cases to customary grace and cure periods), among others,
the following: nonpayment of principal or interest; breach of covenants or other agreements in the Notes; and certain events of
bankruptcy or insolvency. Generally, if an event of default occurs and is continuing under a Note, the holder thereof may declare
the principal of, and accrued interest on, such Note immediately due and payable. In the case of certain events of bankruptcy or
insolvency, all amounts outstanding under the Notes, together with accrued and unpaid interest thereon, would automatically become
due and payable.
The Warrants
are exercisable for shares of Common Stock (the “Warrant Shares”) at any time during the five-year period following
the date of issuance. Any Warrant exercise effected during the first year following issuance must be in cash, following which period,
if a registration statement covering the Warrant Shares has not been filed with and declared effective by the SEC, then a holder
of a Warrant may exercise such Warrant through a cashless exercise. The number of Warrant Shares underlying the outstanding Warrants
is subject to adjustment for stock splits, recapitalizations, reorganizations and certain fundamental transactions involving the
Company, as set forth in the Warrant.
The Company
accounted for the issuance of the Notes in accordance with ASC 470-20. The proceeds from the issuance of the Notes were assigned
between the Warrants and the Notes. Additionally, the instruments were evaluated for consideration of any beneficial conversion
features. It was concluded that a beneficial conversion feature existed for the Notes because the effective conversion price is
less than the fair value of the issuer’s capital stock. As a result, the proceeds of $1,058 (net of the transaction cost
of $2 from the sale of the Notes) were recorded net of debt discount of $705 due to the relative fair value of warrants and of
$247 due to a beneficial conversion feature. The warrant and beneficial conversion feature were recorded as additional paid in
capital. The debt discount is being amortized to interest expenses over the life of the Notes using the effective interest
method.
INNOVISION LABS, INC. AND SUBSIDIARIES
U.S DOLLARS IN THOUSANDS (Except shares
and per share amounts)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 (Unaudited)
NOTE 6 – CONVERTIBLE NOTES PAYABLE
(continued)
The fair value of the Warrants
at the issuance date was estimated using the Black-Scholes option pricing model using the following assumptions:
Weighted average risk-free interest rate
|
|
|
1.25
|
%
|
Weighted average expected life of grants in years
|
|
|
5.00
|
|
Weighted average expected volatility of underlying stock
|
|
|
1.08
|
|
Dividends
|
|
|
0.00
|
|
The fair value of the Notes
at the issuance date was estimated by the Company’s management by evaluating the present value of the monetary sum at various
next round and liquidation scenarios.
Amortization expenses recorded
as interest expense of debt discount and issuance costs for the three and six months ended June 30, 2016 and 2015, were $223, $0,
$427 and $0, respectively.
For the three and six months
ended June 30, 2016 and 2015, the Company recorded accrued interest at 8.00% per annum of $57, $0, $105 and $0, respectively.
The table below summarizes the
Notes activity during the three months ended June 30, 2016:
|
|
Principal
Balance
|
|
|
Debt
Discount
|
|
|
Accrued
Interest
|
|
|
Total
|
|
Balance at December 31, 2015
|
|
$
|
1,800
|
|
|
$
|
(1,602
|
)
|
|
$
|
39
|
|
|
$
|
237
|
|
Issued February 2016
|
|
|
1,060
|
|
|
|
(954
|
)
|
|
|
-
|
|
|
|
106
|
|
Amortization of debt discount
|
|
|
-
|
|
|
|
427
|
|
|
|
-
|
|
|
|
427
|
|
Interest accrued
|
|
|
-
|
|
|
|
-
|
|
|
|
105
|
|
|
|
105
|
|
Balance at June 30, 2016
|
|
$
|
2,860
|
|
|
$
|
(2,129
|
)
|
|
$
|
144
|
|
|
$
|
875
|
|
NOTE 7 - ACCRUED EXPENSES AND OTHER
LIABILITIES
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Employees and payroll accruals
|
|
$
|
167
|
|
|
$
|
233
|
|
Accrued expenses and other
|
|
|
99
|
|
|
|
178
|
|
Deferred revenues
|
|
|
30
|
|
|
|
44
|
|
|
|
$
|
296
|
|
|
$
|
455
|
|
NOTE
8 - RELATED PARTIES
On
January 11, 2016, the Company’s board of directors (the “Board”) granted each of Mr. Shai Novik, the Company’s
Chairman of the Board, and Mr. Ram Shaffir, the Company’s Chief Technology Officer and a director, 20,000 shares of Common
Stock valued at $64. In addition, the Board granted Mr. Yuval Bar-Gil, a director of the Company, 10,000 shares of Common Stock
valued at $16. All of the grants vest in substantially equal monthly installments over a period of 12 months following the date
of grant.
The
Company’s Chief Executive Officer and President, Mr. Nimrod Madar, Chief Scientific Officer, Dr. Uri Polat, and Chief Technology
Officer, Mr. Ram Shaffir, have agreed to waive their respective salaries going forward, effective as of June 1, 2016. Mr. Shai
Novik, the Chairman of the Board, has agreed to waive his annual director fee going forward, effective as of June 1, 2016.
The Company’s
Chief
Financial Officer, Mr. Steve Schaeffer has agreed to waive his fees in amount of $36,000 that accrued from the prior
periods and his salary going forward, effective as of June 1, 2016.
INNOVISION LABS, INC. AND SUBSIDIARIES
U.S DOLLARS IN THOUSANDS (Except shares
and per share amounts)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 (Unaudited)
NOTE 9 - STOCK OPTION PLAN
|
a.
|
In 2013, the Company adopted the GlassesOff Inc. 2013 Incentive Compensation Plan (the “Equity
Incentive Plan”) under which 1,400,000 shares of Common Stock are authorized for issuance. In January 2016, the Company increased
the number of shares of Common Stock authorized for issuance under the Equity Incentive Plan from 1,400,000 to 2,000,000 shares.
|
Options granted under the Equity
Incentive Plan and the related award agreements expire ten years from the date of grant, unless earlier terminated in accordance
with the terms of such grants. Options no longer vest following the termination of the grant recipient’s employment or other
relationship with the Company.
The Company accounts for employees’
and directors’ stock-based compensation in accordance with ASC 718, “Share-Based Payment”. ASC 718 requires companies
to estimate the fair value of equity-based payment awards at the date of grant. The value of the portion of the award that is ultimately
expected to vest is recognized as an expense over the requisite service periods in the Company’s consolidated income statements.
The Company recognizes compensation
expenses for the value of awards granted based on the straight line method over the requisite service period, net of estimated
forfeitures.
The Company applies ASC 505-50,
“Equity Based Payments to Non Employees” (“ASC 505-50”), with respect to options issued to non-employees.
The Company has accounted for these grants under the fair value method of ASC 505-50, estimated using the Black-Scholes Merton
option-pricing model.
|
b.
|
The following table summarizes all share-based compensation expenses related to grants under the
Equity Incentive Plan to employees, directors and consultants included in the unaudited consolidated statements of operations:
|
|
|
For the three months
|
|
|
For the six months
|
|
|
|
ended June 30,
|
|
|
ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Research & development
|
|
$
|
(35
|
)
|
|
$
|
68
|
|
|
$
|
(4
|
)
|
|
$
|
183
|
|
Sales & marketing
|
|
|
(21
|
)
|
|
|
4
|
|
|
|
(13
|
)
|
|
|
18
|
|
General & administrative
|
|
|
*
|
|
|
|
30
|
|
|
|
6
|
|
|
|
82
|
|
Total
|
|
$
|
(56
|
)
|
|
$
|
102
|
|
|
$
|
(11
|
)
|
|
$
|
283
|
|
In the second quarter of 2016,
following the decrease in a headcount, 75,554 stock options, which had been granted to employees and consultants, were forfeited
in accordance with their respective terms. As a result the Company recorded a reversal of $75 in stock-based compensation expense
related to the forfeited awards.
|
c.
|
The following is a summary of the stock options granted to employees under the Equity Incentive
Plan:
|
|
|
For the six months ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Number
of Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at the beginning of the period
|
|
|
575,186
|
|
|
$
|
4.69
|
|
|
|
639,688
|
|
|
$
|
4.32
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
22,400
|
|
|
$
|
5.10
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
(65,414
|
)
|
|
$
|
0.01
|
|
Forfeited
|
|
|
(72,962
|
)
|
|
$
|
3.98
|
|
|
|
(12,245
|
)
|
|
$
|
13.98
|
|
Outstanding at the end of the period
|
|
|
502,224
|
|
|
$
|
4.79
|
|
|
|
584,429
|
|
|
$
|
4.63
|
|
Options exercisable at the end of the period
|
|
|
483,067
|
|
|
$
|
4.25
|
|
|
|
505,422
|
|
|
$
|
3.03
|
|
INNOVISION LABS, INC. AND SUBSIDIARIES
U.S DOLLARS IN THOUSANDS (Except shares
and per share amounts)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 (Unaudited)
NOTE 9 - STOCK OPTION PLAN (continued)
The
following is a summary of changes in non-vested options to employees under the Equity Incentive Plan:
|
|
For the six months ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Number
of Options
|
|
|
Weighted
Average
Fair Value
|
|
|
Number
of Options
|
|
|
Weighted
Average
Fair Value
|
|
Balance at the beginning of the period
|
|
|
125,350
|
|
|
$
|
5.66
|
|
|
|
117,487
|
|
|
$
|
9.93
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
22,400
|
|
|
$
|
2.40
|
|
Vested
|
|
|
(33,431
|
)
|
|
$
|
9.19
|
|
|
|
(48,637
|
)
|
|
$
|
6.89
|
|
Forfeited
|
|
|
(72,762
|
)
|
|
$
|
2.22
|
|
|
|
(12,245
|
)
|
|
$
|
9.36
|
|
Balance at the end of the year
|
|
|
19,157
|
|
|
$
|
12.57
|
|
|
|
79,007
|
|
|
$
|
9.75
|
|
The total
unrecognized estimated compensation cost related to employees’ non-vested stock options granted through June 30, 2016 was
$37, which is expected to be recognized over a weighted average period of 0.6 year.
|
d.
|
The following is a summary of the stock options granted
to non-employees under the Equity Incentive Plan:
|
|
|
For the six months ended June30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Number
of Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding at the beginning of the period
|
|
|
375,949
|
|
|
$
|
0.60
|
|
|
|
360,549
|
|
|
$
|
0.43
|
|
Granted
|
|
|
17,500
|
|
|
$
|
1.25
|
|
|
|
13,600
|
|
|
$
|
5.10
|
|
Forfeited
|
|
|
(2,592
|
)
|
|
$
|
1.76
|
|
|
|
-
|
|
|
$
|
-
|
|
Outstanding at the end of the period
|
|
|
390,857
|
|
|
$
|
0.62
|
|
|
|
374,149
|
|
|
$
|
0.60
|
|
Options exercisable at the end of the period
|
|
|
365,257
|
|
|
$
|
0.48
|
|
|
|
360,149
|
|
|
$
|
0.60
|
|
The
following is a summary of changes in non-vested options to non-employees:
|
|
For the six months ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Number
of Options
|
|
|
Weighted
Average
Fair Value
|
|
|
Number
of Options
|
|
|
Weighted
Average
Fair Value
|
|
Balance at the beginning of the period
|
|
|
13,030
|
|
|
$
|
0.89
|
|
|
|
600
|
|
|
$
|
0.25
|
|
Granted
|
|
|
17,500
|
|
|
$
|
0.18
|
|
|
|
13,600
|
|
|
$
|
0.24
|
|
Vested
|
|
|
(4,073
|
)
|
|
$
|
0.67
|
|
|
|
(200
|
)
|
|
$
|
0.22
|
|
Forfeited
|
|
|
(857
|
)
|
|
$
|
0.18
|
|
|
|
-
|
|
|
$
|
-
|
|
Balance at the end of the year
|
|
|
25,600
|
|
|
$
|
0.46
|
|
|
|
14,000
|
|
|
$
|
0.24
|
|
The total unrecognized estimated
compensation cost related to non-employees’ for non-vested stock options granted through June 30, 2016 was $1, which is expected
to be recognized over a weighted average period of 0.95 years.
INNOVISION LABS, INC. AND SUBSIDIARIES
U.S DOLLARS IN THOUSANDS (Except shares
and per share amounts)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 (Unaudited)
NOTE 9 - STOCK OPTION PLAN (continued)
|
e.
|
The options outstanding to employees and non-employees
as of June 30, 2016 have been separated by exercise prices, as follows:
|
Exercise Price
|
|
|
Number of
Options
Outstanding
|
|
|
Average
Remaining
Contractual Life
(years)
|
|
|
Number of Options
Exercisable
|
|
$
|
0.013
|
|
|
|
662,725
|
|
|
|
5.78
|
|
|
|
662,725
|
|
$
|
2.440
|
|
|
|
57,610
|
|
|
|
7.61
|
|
|
|
57,610
|
|
$
|
19.300
|
|
|
|
119,271
|
|
|
|
7.61
|
|
|
|
101,119
|
|
$
|
18.600
|
|
|
|
942
|
|
|
|
7.94
|
|
|
|
942
|
|
$
|
4.600
|
|
|
|
10,000
|
|
|
|
8.47
|
|
|
|
10,000
|
|
$
|
5.100
|
|
|
|
19,933
|
|
|
|
8.57
|
|
|
|
10,828
|
|
$
|
1.66
|
|
|
|
5,100
|
|
|
|
9.09
|
|
|
|
5,100
|
|
$
|
1.25
|
|
|
|
17,500
|
|
|
|
9.56
|
|
|
|
-
|
|
|
|
|
|
|
893,081
|
|
|
|
|
|
|
|
848,324
|
|
NOTE
10 – WARRANTS
During the six months ended
June 30, 2016, the Company issued Warrants to acquire an aggregate of 726,031 shares of Common Stock in connection with the issuance
of the Notes described in Note 6 —Convertible Notes Payable.
The following is a summary
of outstanding warrants:
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
|
|
Number of
outstanding
warrants
|
|
|
Weighted
Average
Exercise Price
|
|
|
Number of
outstanding
warrants
|
|
|
Weighted
Average
Exercise Price
|
|
Outstanding at the beginning of the period
|
|
|
2,234,247
|
|
|
$
|
5.67
|
|
|
|
1,001,369
|
|
|
$
|
9.96
|
|
Issued
|
|
|
726,031
|
|
|
$
|
2.19
|
|
|
|
-
|
|
|
$
|
-
|
|
Outstanding at the end of the period
|
|
|
2,960,278
|
|
|
$
|
4.82
|
|
|
|
1,001,369
|
|
|
$
|
9.96
|
|
The warrants outstanding as of June 30,
2016 have been separated by exercise prices, as follows:
exercise price
|
|
|
Number of Warrants
Outstanding
|
|
|
Average Remaining
Contractual Life (years)
|
|
$
|
5.47
|
|
|
|
250,794
|
|
|
|
1.36
|
|
$
|
10.94
|
|
|
|
501,575
|
|
|
|
1.36
|
|
$
|
12.50
|
|
|
|
249,000
|
|
|
|
2.08
|
|
$
|
2.19
|
|
|
|
1,958,909
|
|
|
|
4.36
|
|
|
|
|
|
|
2,960,278
|
|
|
|
|
|
NOTE
11 - COMMITMENTS AND CONTINGENT LIABILITIES
On May 9, 2016 the Company terminated its Standby
Equity Distribution Agreement, dated July 1, 2014, with YA Global Master SPV Ltd., a Cayman Islands exempt limited partnership
Aggregate
minimum rental commitments, under non-cancelable leases as of June 30, 2016, were as follows:
Period ended June30,
|
|
|
|
2017
|
|
$
|
12
|
|
INNOVISION LABS, INC. AND SUBSIDIARIES
U.S DOLLARS IN THOUSANDS (Except shares
and per share amounts)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 (Unaudited)
NOTE 12 - STOCK CAPITAL
In the first quarter of 2016,
the Company granted 20,000 shares of restricted Common Stock to a consultant, valued at $20, and 50,000 shares of restricted Common
Stock to three directors, valued at $80, vesting in substantially equal monthly installments over a period of 12 months following
the date of grant.
In the second quarter of 2016,
following the decrease in a headcount, 38,166 shares of restricted Common Stock, which had been granted to employees, were forfeited
in accordance with their respective terms. As a result the Company recorded a reversal of $48 in stock-based compensation expense
related to such forfeiture.
The total unrecognized estimated
compensation cost related to non-vested restricted shares of Common Stock granted through June 30, 2016 was $47, which is expected
to be recognized over a weighted average period of 0.4 year.
The following is a summary of
compensation expenses related to restricted shares of Common Stock for the six-month periods ended June 30, 2016 and 2015, including
the reversal of $48 as discussed above:
|
|
For the three months
|
|
|
For the six months
|
|
|
|
ended June 30,
|
|
|
ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Research & development
|
|
$
|
2
|
|
|
$
|
23
|
|
|
$
|
18
|
|
|
$
|
47
|
|
Sales & marketing
|
|
|
(32
|
)
|
|
|
1
|
|
|
|
(21
|
)
|
|
|
5
|
|
General & administrative
|
|
|
17
|
|
|
|
13
|
|
|
|
52
|
|
|
|
26
|
|
Total
|
|
$
|
(13
|
)
|
|
$
|
37
|
|
|
$
|
49
|
|
|
$
|
78
|
|
NOTE 13
- FINANCIAL (EXPENSES) INCOME, NET
|
|
For the three months
|
|
|
For the six months
|
|
|
|
ended June 30,
|
|
|
ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Financial income
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Financial (expenses) and bank fees
|
|
|
(281
|
)
|
|
|
(2
|
)
|
|
|
(536
|
)
|
|
|
(3
|
)
|
Exchange rate differences gain (loss)
|
|
|
1
|
|
|
|
18
|
|
|
|
(10
|
)
|
|
|
24
|
|
|
|
$
|
(280
|
)
|
|
$
|
16
|
|
|
$
|
(546
|
)
|
|
$
|
21
|
|
NOTE
14 - SUBSEQUENT EVENTS
The Company evaluates events that have
occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did
not identify any subsequent events that would require adjustment or disclosure in the financial statements.