InnoVision Labs, Inc - FORM 10-K

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EX-21 - EXHIBIT 21 - InnoVision Labs, Inc	s102832_ex21.htm
EX-32.2 - EXHIBIT 32.2 - InnoVision Labs, Inc	s102832_ex32-2.htm
EX-31.2 - EXHIBIT 31.2 - InnoVision Labs, Inc	s102832_ex31-2.htm
EX-32.1 - EXHIBIT 32.1 - InnoVision Labs, Inc	s102832_ex32-1.htm
EX-31.1 - EXHIBIT 31.1 - InnoVision Labs, Inc	s102832_ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

TRANSITION REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER 333-175212

INNOVISION LABS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada	26-4574088
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

5 Jabotinski St.

Ramat Gan, POB 12

Israel 5252006

(Address of principal executive offices) (zip code)

Registrant’s Telephone Number, Including Area Code: (855) 393-7243

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes ¨ No x

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 preceding 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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 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 x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨		Accelerated filer ¨

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

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

Yes ¨ No x

The aggregate market value of the registrant’s outstanding common stock held by non-affiliates of the registrant computed by reference to the price at which the common stock was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was $5,404,496 (based on a closing price of $1.68 per share for the registrant’s common stock on the OTCBB on June 30, 2015). For purposes of determining this number, all named executive officers and directors of the registrant as of December 31, 2015 were considered affiliates of the registrant. This number is provided only for the purposes of this Annual Report on Form 10-K and does not represent an admission by either the registrant or any such person as to the affiliate status of such person.

As of March 16, 2016, the registrant had 6,102,449 shares of common stock outstanding.

INDEX AND CROSS REFERENCE SHEET

PART I		4
Item 1.	Business	4

Item 1A.	Risk Factors	11

Item 1B.	Unresolved Staff Comments	24

Item 2.	Properties	24

Item 3.	Legal Proceedings	24

Item 4.	Mine Safety Disclosures	24

PART II		24
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24

Item 6.	Selected Financial Data	25

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	25

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 8.	Financial Statements and Supplementary Data	32

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	32

Item 9A.	Controls and Procedures	33

Item 9B.	Other Information.	33

PART III		33
Item 10.	Directors, Executive Officers and Corporate Governance.	33

Item 11.	Executive Compensation.	35

Item 12.	Security Ownership of Certain Beneficial Owners and Management.	39

Item 13.	Certain Relationships and Related Transactions, and Director Independence	42

Item 14.	Principal Accounting Fees and Services.	43

PART IV		43
Item 15.	Exhibits and Financial Statement Schedules	43

cautionary STATEMENT regarding forward-looking statements

This Annual Report on Form 10-K contains “forward-looking statements”. Forward-looking statements include statements about our expectations, beliefs or intentions regarding our product offerings, business, financial condition, results of operations, strategies or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These forward-looking statements reflect our views as of the date they are made with respect to future events and financial performance. We undertake no obligation to update, and we do not have a policy of updating or revising, these forward-looking statements.

Risks and uncertainties, the occurrence of which could adversely affect our business, include, without limitation, the following:

We have a limited operating history, and we do not expect to become profitable in the near future.

We began commercializing our first product only two years ago, and we have not generated significant revenues thus far and we may never become profitable.

Our Game Vision™ product launched in partnership with 9 times All-Star Chris Paul, under a 12 month agreement and there is no guarantee that we will be able to extend the agreement period if we are interested to do so.

Our future potential products in our application pipeline are in the early development stages and may never be commercially successful.

We are dependent on a small number of distribution channels, none of which we control, and changes in such channels could impair our ability to distribute our products and adversely impact our financial performance.

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.

It is highly likely that we will need to raise additional capital to meet our business requirements in the future, and such capital raising may be costly or difficult to obtain and could dilute current stockholders’ ownership interests.

If we fail to obtain necessary funds for our operations, we will be unable to maintain and improve our technology, and we will be unable to develop and commercialize our products and technologies.

We depend on key members of our management and advisory team and will need to add and retain additional leading experts.

Under current U.S. and Israeli law, we may not be able to enforce employees’ covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees.

We only recently established limited sales and marketing capabilities, and we may be unable to effectively sell, market and distribute our products in the future, and the failure to do so would have an adverse effect on our business and results of operations.

We may suffer losses from product liability claims if our products cause harm to customers.

Failure by our customers to use our products correctly could lead to less than optimal results and customer dissatisfaction, which could have a material adverse effect on our business and results of operations.

Regulatory requirements may have an adverse effect on our business and results of operations.

If we acquire or license additional technology or products, we may incur a number of costs, may have integration difficulties and may experience other risks that could harm our business and results of operations.

We may not be able to successfully grow and expand our business.

We may encounter difficulties in managing our growth, which could increase our losses.

If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss or damage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtaining adequate directors’ and officers’ liability insurance.

We are a holding company that depends, in addition to our capital raising activities, on cash flows from our wholly owned subsidiaries to meet our obligations.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or detect fraud. Consequently, investors could lose confidence in our financial reporting and this may decrease the trading price of our common stock.

Potential political, economic and military instability in the State of Israel, where key members of our senior management and our main research and development facilities are located, may adversely affect our results of operations.

Disruptions in the financial markets and economic conditions could affect our ability to raise capital and could disrupt or delay the performance of our third-party contractors and suppliers.

We license certain technology from Talshir Medical Technologies, Ltd, which purchased this license from RevitalVision LLC, and we could lose our rights to this license if a dispute with Talshir Medical Technologies, Ltd arises or if we fail to comply with the financial and other terms of the license.

The failure to obtain or maintain patents, licensing agreements and other intellectual property could impact our ability to compete effectively.

Costly litigation may be necessary to protect our intellectual property rights, and we may be subject to claims alleging the violation of the intellectual property rights of others.

We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual property to compete against us.

International patent protection is particularly uncertain, and if we are involved in opposition proceedings in foreign countries, we may have to expend substantial sums and management resources.

We may be unable to protect the intellectual property rights of the third parties from whom we license certain of our intellectual property or with whom we have entered into other strategic relationships.

We are potentially subject to government regulations, and we may experience delays in obtaining required regulatory approvals, if required, to market our proposed products.

We face significant competition and continuous technological change.

Our common stock has a limited trading history, and prospective investors may not be able to sell their shares at their purchase price, if at all.

We may not require or receive the full amount of proceeds available under the Standby Equity Distribution Agreement.

Our issuance of shares of common stock under the Standby Equity Distribution Agreement could contribute to the decline of the price of the common stock, which may also lead to additional dilution of the ownership interests of our existing stockholders.

We are not a fully reporting company under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act; therefore, we are subject only to the reporting requirements of Section 15(d) of the Exchange Act.

We cannot assure you that our common stock will become liquid or that it will be listed on a securities exchange.

Because our common stock may be a “penny stock,” it may be more difficult for investors to sell shares of our common stock, and the market price of our common stock may be adversely affected.

We do not expect to pay dividends on our common stock, and investors will be able to receive cash in respect of their shares of our common stock only upon the sale of the shares.

Securities analysts may not initiate coverage or continue to cover our common stock, and this may have a negative impact on its market price.

Stockholders may experience dilution of ownership interests because of the future issuance of additional shares of our common stock and our preferred stock, including issuances of shares of common stock pursuant to the Standby Equity Distribution Agreement.

A significant number of shares of our common stock are eligible for sale, which could depress the market price of our stock.

The other factors referenced in this Annual Report on Form 10-K, including, without limitation, under “Risk Factors.”

Other risks detailed from time to time in the reports filed by us with the Securities and Exchange Commission, which we refer to as the SEC.

We believe these forward-looking statements are reasonable; however, you should not place undue reliance on any forward-looking statements, which are based on current expectations. Furthermore, forward-looking statements speak only as of the date they are made. If any of these risks or uncertainties materialize, or if any of our underlying assumptions are incorrect, our actual results may differ significantly from the results that we express in, or imply by, any of our forward-looking statements. These and other risks are detailed in this Annual Report on Form 10-K, in the documents that we incorporate by reference into this Annual Report on Form 10-K and in other documents that we file with the Securities and Exchange Commission, which we refer to as the SEC. We do not undertake any obligation to publicly update or revise these forward-looking statements after the date of this Annual Report on Form 10-K to reflect future events or circumstances. We qualify any and all of our forward-looking statements by these cautionary factors.

PART I

Item 1.

Business

History

Originally incorporated on December 8, 2004 under the laws of the State of Nevada as Autovative Products, Inc., on June 26, 2013, we entered into that certain Agreement and Plan of Merger, as amended by that certain First Amendment to Agreement and Plan of Merger, dated as of July 2, 2013, which we refer to collectively as the Merger Agreement, with Ucansi Acquisition Corp., a Delaware corporation and our wholly owned subsidiary, which we refer to as Merger Sub, and Ucansi Inc., a Delaware corporation, which we refer to as Ucansi. Pursuant to the Merger Agreement, on July 30, 2013, which we refer to as the Closing Date, Merger Sub merged with and into Ucansi, referred to as the Merger, with Ucansi surviving the Merger as our wholly owned subsidiary.

On the Closing Date, we sold, assigned, transferred and conveyed to Mr. David Funderburk, our former Chairman of the Board and CEO, all of the issued and outstanding capital stock of Autovative Technologies, Inc., our former subsidiary to which we had contributed all of the operations, assets and liabilities of our historical business, which we refer to as the Legacy Business, generally comprising the distribution and development of automotive parts, in exchange for which Mr. Funderburk has agreed to indemnify us for, and hold us harmless from, any and all losses and liabilities arising out of, or relating to, the Legacy Business.

Upon consummation of the Merger, we changed our name from “Autovative Products, Inc.” to “GlassesOff Inc.”, and the consolidation effected by the Merger has been accounted for as a reverse acquisition wherein Ucansi has been treated as the acquirer for accounting purposes as it has acquired control of the combined enterprise.

On December 29, 2015, we changed our name from “GlassesOff Inc.” to “InnoVision Labs, Inc.” and, in connection with our name change, our common stock, which was traded on the OTCBB under the symbol “GLSO” is now traded under the symbol “INVS”.

Unless the context otherwise requires, all references in this Annual Report on Form 10-K to the “Company”, “InnoVision”, “we,” “us” and “our” refer to InnoVision Labs, Inc., a Nevada corporation, including its direct and indirect wholly owned subsidiaries, Ucansi Inc., a Delaware corporation, which we refer to as Ucansi, and EYEKON E.R.D. Ltd, an Israeli company.

Overview

We are 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. We deliver our scientific products through a game-like experience based on mobile applications (“apps”).

Our first app, GlassesOff™, aims to eliminate, through exercise, the dependency on reading glasses of 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 Apple iOS platform (iPhone, iPod, iPad) and the Android platform and is available on the main app markets, such as the Apple App Store and The Google Play store.

Our new app, Game Vision, is based on sports themes, with a go-to-market strategy of partnering with known athletes as “brand partners”. We launched the first Game Vision app, featuring 9-time All-Star Chris Paul, on March 3, 2016. While this app is designed as a casual, fun-to-play game, it is based on extensive neuroscience research and patent pending technology that aim to enhance, through exercise, a user’s vision performance and brain processing speed. We expect that our new app, when available, will draw interest from athletes and sports enthusiasts of all ages.

Industry Background and Target Markets

As we age, we normally experience changes in reading abilities. These changes are influenced, among other factors, by our brain’s visual processing capabilities. The effect of these changes on most people results in slower, more difficult and less effective reading. According to a scientific review (Holden, B. A. et al., 2008), more than one billion people worldwide suffer from such age-related changes and this number is expected to rise significantly through 2050. At some point, natural age-related changes in reading abilities affect most people, who typically attempt to improve their reading abilities through the aid of magnifying devices, typically reading glasses. Such devices increase the size of words in reading material, making it easier for a person who uses them, whether that person is in his or her twenties or fifties, to read easily and quickly.

The GlassesOff™ product is designed to enhance the image processing capabilities of the brain and thus improve a person’s reading abilities. The use of the GlassesOff™ product results in faster, more efficient and more comfortable reading, thereby improving reading vision without use of reading glasses.

The Game Vision line of products targets both professional athletes and recreational athletes who want to improve their sports performance. As vision is the inception of every move made in most sports, superior vision speed is expected to have a critical impact on sports performance in any sport requiring swift response to a visual event. Our new Game Vision app platform, together with its newly-developed technology, is intended to serve as a new tool in players' training routines.

While there are many technologies and methods that aim to improve reaction speed in sports performance, we believe that Game Vision technology is innovative because of its focus on reducing the time that the vision system requires to process a visual event. Currently, most technologies and methods focus on minimizing the time it takes to respond to such visual event (once identified by the visual system) or improve the decision-making process to such visual event

GlassesOff™ Technology

Human vision is limited by two main factors: (a) the quality of an image captured by the eyes; and (b) the image processing capabilities of the brain as it interprets an image captured by the eyes.

Our proprietary technology enables us to develop software product solutions intended to enhance the image processing abilities of the brain and therefore improve a person’s vision sharpness and vision performance. GlassesOff’s™ unique software approach provides an alternative to existing solutions, which generally rely on magnifying devices, typically reading glasses. Game Vision’s unique software approach provides athletes and recreational players a method designed to improve vision parameters critical for sports performance. Our technology platform is based on advanced scientific research of image processing functionality, and our solution utilizes the remarkable ability of the brain’s plasticity (the brain’s ability to change), which constitutes the neuronal basis for “perceptual learning”, that is, repeated practice on a demanding visual task. Our founder’s academic research into the area of image processing functions during the last 20 years has yielded a breakthrough in perceptual learning methodologies, which enhance visual skills by improving image processing speed and efficiency in the visual cortex of the brain without altering optical functions. The use of perceptual learning methodologies improves both the processing speed and the sensitivity through repetitive exercise of the brain’s image processing function, resulting in improved vision sharpness and processing speed.

InnoVision’s technology and methods are based on scientific research and achievements that have been published in leading scientific publications, such as Nature, PNAS, Vision Research, Scientific Reports and others. Our first product application, GlassesOff™, which is designed to improve near vision sharpness and reading capabilities, has been tested in several studies, including a study conducted at the University of California, Berkeley, whose results have been published in Nature’s Scientific Reports in February 2012.

The GlassesOff™ Application

For those persons who experience the natural age-related changes in reading abilities, GlassesOff™ is designed to exercise the visual cortex of the brain to achieve comfortable reading without the use of magnifying devices such as reading glasses. According to a scientific review (Holden, B. A. et al., 2008), the target market for natural age-related changes in reading abilities is estimated to include more than one billion people worldwide, which is the market targeted by GlassesOff™. GlassesOff™ is a software visual cortex exercise solution to improve users’ reading abilities and maintain the ability to read comfortably, through enhancement of their image processing capabilities aiming to achieve near vision sharpness. The GlassesOff™ application is delivered through cloud-based client server architecture to mobile devices and is currently implemented Apple iOS platform (iPhone, iPod, iPad) and Android platform. Users initially download the application via Apple’s App Store or Google Play Market, but their reading improvement program is delivered through the our servers.

GlassesOff™ is a personalized application that monitors user performance and progress. The application automatically adjusts improved reading sessions based on each user’s ongoing progress.

The GlassesOff™ application is composed of two components:

(1)

Basic Program – a period of approximately three months during which users are encouraged to complete at least three, 12-minute training sessions per week. At the beginning of the program, users commence with an evaluation of their near vision processing capabilities. Those who come within the range of persons expected to benefit from GlassesOff, based on such evaluation, are expected by the end of the program to achieve image processing capabilities that would help them eliminate their dependency on magnifying devices, such as reading glasses.

(2)

Ongoing Care – following the Basic Program, users are encouraged to complete between two to six (as needed), 12-minute training sessions per month, intended to maintain the improvement they achieved in their reading performance.

The Game Vision™ Application

For those persons who want to improve their sports performance, Game Vision™ is designed to exercise the visual cortex of the brain and achieve improvement in vision parameters correlated with faster vision processing speed. According to a survey conducted by SFIA/Physical Activity Council (2012), over 20 million young people aged 6 through 18 in the United States alone participated in organized sports, hence we estimate the target market for Game Vision™ comprises one hundred million of sports enthusiasts worldwide. Game Vision™ is a personalized software visual cortex exercise solution to train users’ vision parameters critical for sports performance, through enhancement of their image processing capabilities. The Game Vision™ application is delivered through cloud-based client server architecture to mobile devices and launched March 3, 2016 on both Apple iOS platform (iPhone, iPod, iPad) and Android platform. Users initially download the application via Apple’s App Store or Google Play Market, but their training programs are delivered through our servers.

Game Vision™ is personalized because it monitors an individual user’s performance and progress. The application automatically adjusts improved training sessions based on each user’s ongoing progress.

GlassesOff™ and Game Vision™ Main Features

Simplicity. To facilitate its easy adoption, our apps do not require any third-party intervention, such as an optometrist or ophthalmologist examination.

Ease of Use. The apps offer a user-friendly self-explanatory user interface that allows users with no special technological or scientific background to complete the training program and follow their personal progress.

Platform Compatibility. The apps can be used on practically any device with a high quality display, including smart phones, tablets and personal computers. Our apps are currently available on Apple’s iOS platform (iPhone, iPad and iPod), and on the Android operating system.

Compliance. Working under a client-server architecture, each session a user completes is logged and stored in our system, allowing us to closely monitor the progress of the user and include automatic protocols that assist him or her throughout the reading improvement program, including such protocols as session reminders and personal improvement tips.

Product Architecture

The client-server cloud-based architecture provides several key advantages for the security, scalability and redundancy of the infrastructure.

Client Security. GlassesOff™ is a “thin client”, meaning all algorithm and reading improvement logics reside on the server side. At the end of each session, the customer receives his or her personalized reading improvement session data from the server for the next session. All communications between the GlassesOff™ and Game Vision™ servers and the customer are through an encrypted channel.

Server Scalability and Redundancy. All of our web services are hosted on the Amazon Web Services (“AWS”) cloud, which is a web service that provides resizable compute capacity in the cloud. Our current architecture allows us to further scale out (add more servers) and/or scale up (add more capacity to an existing server) within minutes, and our current architecture has been tested successfully under load and stress storms, which allows us to support more than two million users. Additionally, our load balancer layers enable updates and maintenance without any downtime and all of its data is backed up and mirrored between two SQL servers.

Server Security. Our web services on AWS have gone through a hardening process to enhance their security according to known practices, and all algorithm and data servers are isolated from the internet. For example, only “sanitized” requests (those that comply with our predefined request methodology) received by our internet-facing servers are delivered to our algorithm and data servers, with all other connections logged and ignored.

Application Pipeline

We plan to expand our product offerings to include additional suites of applications that would cater to other market segments related to enhancement of visual processing. Specifically, we intend to develop additional applications for:

diagnostic solutions for children and adults with attention deficit disorder;

diagnostic solutions for dyslexic children and adults;

improvement of reading abilities for dyslexic children and adults; and

improvement of reading speed for children and adults.

Revenue Model

We estimate that lifetime revenue per paying user of the GlassesOff™ application will gradually increase to approximately $100, and we offer various pricing plans. Moreover, to determine different pricing plans, we apply optimization techniques, which generally analyze pricing, acquisition costs and the number of conversions from free to pay-users in order to determine a pricing model that provides the greatest return on marketing and user-acquisition expenses. The Game Vision app is using common monetization methods in casual games, and we initially expect that lifetime revenue per paying user of the Game Vision™ application will equal approximately $50.

Because we offer a mobile software application, our primary variable costs are customer acquisition, app store platform commissions and revenue share paid to Game Vision™ partners.

Customer Acquisition. We analyze our customer acquisition process on an ongoing basis and apply an optimization mechanism that helps us identify effective marketing channels and marketing messages. Once a significant number of customers successfully use the applications, we anticipate that our customer acquisition costs will decline as more people learn about our products through word-of-mouth advertising by existing users.

Platform Commissions. Under the current policy of Apple’s App Store and Google Play market, which compose our current sales channel, a commission of 30% is charged per transaction.

Sales, Marketing & Customer Support

Sales & Marketing

We currently offer GlassesOff™ and Chris Paul’s Game Vision apps directly to end users via Apple’s App Store and the Google Play market.

We believe that our primary target market for GlassesOff™ consists of people between the ages of 40 and 60; therefore, we attempt to focus our marketing efforts on what we believe are the most efficient marketing channels to reach this population, and we constantly monitor the efficacy of each marketing channel, to the best of our ability, to constantly optimize our marketing efforts and resources.

We believe that our primary target market for Game Vision™ consists of young people between the ages of 13 and 25; therefore, we attempt to focus our marketing efforts on what we believe are the most efficient marketing channels to reach this population, and we constantly monitor the efficacy of each marketing channel, to the best of our ability, to constantly optimize our marketing efforts and resources

Currently, we focus our marketing efforts on the following:

Public Relations: We generate both international and local media coverage for the GlassesOff™ application, including through media articles and interviews. Our proactive efforts, supported by local public relations agencies, have been focused primarily on the U.S. and France markets, and we expect to extend our focus into additional markets during 2016. Game Vision™’s first product is in partnership with Chris Paul, and we also seek to generate media coverage through interviews with Chris Paul.

Online Marketing: We utilize online campaigns that are designed to direct potential customers to our application. We are investing in app store optimization (ASO), aiming to achieve top ranks in search results.

Social marketing: We believe that both our GlassesOff™ and Game Vision™ applications can generate strong viral distribution, or word-of–mouth, among their respective users. We have integrated, or are developing, several social functions in our applications to leverage the viral marketing potential, including:

Post/Share Tool – An easy-to-use tool that allows users to share their experiences with their friends via their Facebook and/or Twitter accounts.

We intend to develop friend invitation tools within the applications that will encourage users to share the apps with their friends.

Partnerships and Affiliate Marketing – Once we obtain a significant user base that allows us to provide statistically significant user acquisition and usage data, we plan to seek partnerships that may allow us to quickly grow our customer base.

As part of our partnership with Chris Paul, he has agreed to promote the Game Vision™ app through his social media channels, which have millions of followers.

We have launched the GlassesOff™ application in English and French to target users in the United States, Canada, the United Kingdom and France. We expect to launch additional localized versions for other markets during 2016. The Game Vision™ was initially be launched only in English.

Customer Support

To ensure customer satisfaction, our customer support efforts include both proactive and responsive models.

Proactive Model: We have developed an event-driven automatic communication plan that includes email messages, personal in-app notification screens and push notifications that are presented to each user according to that user’s particular training stages and personal progress.

Responsive Model: We offer online support via email.

Intellectual Property

We have filed several patent applications to protect our core technology platform and products. We have issued patents protecting our core technology platform and products in the United States (US 7,866,817), Australia (AU 2005278771), Korea (KO 10-1016429), Japan (JP 5222556), Canada (CA 2578932), China (CN ZL200580038206.2) and Israel (IL 181660). Our pending patent applications are still in different evaluation phases in Europe and India.

We have also filed a patent application for our vision evaluation method, which was issued by the United States Patent and Trademark Office (US 8,403,485).

We also recently submitted two PCT patent applications to protect our current and future Game Vision sport products and the future diagnostic products in our pipeline.

In addition to our patent portfolio, we have an intellectual property license agreement with Talshir Medical Technologies, Ltd (“Tashir”, which purchased this IP from RevitalVision LLC), which is the owner of several patents in the area of perceptual learning systems and methods. Under this agreement, referred to as the License Agreement, we have a non-exclusive license to certain patents for the field of near-vision solutions. The License Agreement does not assign any technology to us, and, unless earlier terminated, the License Agreement terminates upon the expiration of the last of the patents included in this License Agreement, which is expected to be in 2024. Under the License Agreement, we paid an initial fee of $75,000 in installments over a period of 24 months following the effective date of the License Agreement, and we are required to pay quarterly royalty payments of 5.5% of net sales up to aggregate net sales of $3 million and of 4.5% of net sales over $3 million (calculated annually).

Competition

Our GlassesOff™ application competes in the market of solutions for better, faster and more effective reading. The natural changes in reading capabilities with age have typically been addressed by traditional products for improvement of reading capabilities, mainly magnification devices, such as reading glasses or contact lenses, which support reading. Manufactures of such magnifier devices could therefore be considered as competition. We believe that our product, which is designed to eliminate the constant dependency on magnifiers, is therefore highly competitive with such devices.

In addition, there are several methods and products that claim to improve reading vision through various means, usually related to muscle exercises (e.g. the Bates method, the See Clearly Method and the Power Vision Program), whereas the GlassesOff™ application does not involve any such corrective methods.

Finally, there are several competitors offering vision improvement solutions based on neuroscience methods, such as PositScience and Talshir (which obtained FDA clearance for a product that treats amblyopia, a condition typically referred to as “Lazy Eye”). We believe that there is no other software solution for the improvement of reading capabilities to the extent that magnifying devices, such as reading glasses, are not required that has also demonstrated efficacy in controlled studies.

Our Game Vision™ application competes in the market of solutions for better and faster vision for sport. There are many solutions and training methods in the market aiming to improve sports performance and specifically improve reaction time. Still, most existing solution focus on optimizing the reaction to a visual event once it has been identified by the vision system or help identify visual events through improved attention.

In addition, we are aware of one competitor, Carrot Neurotechnology, Inc., which uses brain plasticity to train vision performance in sports. According to public available data, we don’t believe that this company has a significant market presence that can significantly impact our business plans.

We believe that our technology platform and unique intellectual property assets present a high barrier to entry for others who would try to develop and sell software products for improvement of vision sharpness and vision performance using mobile devices.

Employees

We currently have one part-time employee in the United States and 24 employees in Israel, of whom 14 are full-time employees, and 10 are part-time employees (including two part-time employees with Ph.D. degrees, one part-time employee with an MSc degree in neuroscience and two part-time employees who are certified optometrists). All of our neuroscientists focus on research and development. None of our employees is represented by a labor union, and we consider our employee relations to be good. We also utilize a number of consultants to assist with research and development and commercialization activities, generally on a monthly retainer.

We intend to hire additional personnel to focus on marketing, customer support and technological support.

Research and Development

We focus significant time and resources on research and development in connection with our efforts to improve our existing GlassesOff™ application, produce versions of GlassesOff™ application for new device platforms and operating systems, as well as in connection with our development of new product applications. For the years ended December 31, 2015 and 2014, we incurred research and development expenses in the aggregate of $2,209,000 and $1,818,000, respectively. During 2015, a significant portion of our research and development budget was allocated to the Game Vision™ application.

Available Information

A copy of this Annual Report on Form 10-K, as well as our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on the internet at our website, www.glassesoff.com, as soon as reasonably practicable after we electronically file these reports with, or furnish these reports to, the SEC. The reference to our website address does not constitute incorporation by reference of the information contained on, or available through, the website and such information is not part of this Annual Report on Form 10-K. Our reports filed with the SEC may be read or copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the SEC’s Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Alternatively, you may access these reports at the SEC’s website at www.sec.gov.

Item 1A.

Risk Factors

Risks Related to Our Company and Our Business

We have a limited operating history, and we do not expect to become profitable in the near future.

We are a development stage vision exercise improvement software solutions company with a limited operating history. We are not profitable and have incurred losses since our inception. We have not generated significant operating revenue since our inception, and we continue to incur research and development and general and administrative expenses related to our operations. We expect to incur losses for the foreseeable future. If our products do not achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Accordingly, it is difficult to evaluate our business prospects. Moreover, our prospects must be considered in light of the risks and uncertainties encountered by an early-stage company operating in a market with regulatory issues and where the need for market acceptance of our products is uncertain. There can be no assurance that our efforts will ultimately be successful or result in revenues or profits.

We began commercializing our first product only two years ago, and we have not generated significant revenues thus far and we may never become profitable.

We have only recently commercialized our first product. We will not be successful unless GlassesOff™ and any other products we develop, if any, gain market acceptance. The degree of market acceptance of our products will depend on a number of factors, including:

the competitive environment; and

the adequacy and success of distribution, sales and marketing efforts.

Physicians, users, third-party payors or the medical community in general may be unwilling to accept, utilize or recommend any of our products or products incorporating our technologies. As a result, we are unable to predict the extent of future losses or the time required to achieve profitability, if at all.

Our future potential products in our application pipeline are in the early development stages and may never be commercially successful.

Our future potential products in our application pipeline are either at very early stages of product development or pre-definition and may never be developed or commercialized. The progress and results of any future products are uncertain, and may result in a failure to develop additional effective products. Even if we successfully complete one or more of our future potential products’ development, they may not be commercially successful due to, among other things, low users’ acceptance or criticism by clinicians and other third-party opinion leaders. Third parties may develop superior products or have proprietary rights that preclude us from marketing our products.

Currently, our only distribution channels for our applications are Apple’s App Store and the Google Play Market, and we expect that future distribution channels will comprise other similar popular application stores, such as Amazon’s store. We do not control these application stores, and the owners of such stores can change various parameters, such as increasing fees or requiring additional product safeguards, any of which could have an adverse impact on our financial performance and our ability to distribute our products.

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.

Our independent registered public accounting firm noted in its report accompanying our financial statements for the fiscal year ended December 31, 2015 that we have incurred operating losses and our ability to continue to operate as a going concern is dependent upon additional financial support, which raises substantial doubt about our ability to continue as a going concern. We have not yet generated significant revenues from our operations to fund our activities, and are therefore dependent upon external sources for financing our operations. There can be no assurance that we will succeed in obtaining the necessary financing to continue our operations. As a result, our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern. Management’s plans concerning these matters are described in Note 1b to our financial statements; however, management cannot assure you that its plans will be successful in addressing these issues. Our 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 we be unable to continue as a going concern. If we cannot successfully continue as a going concern, our stockholders may lose their entire investment in our common stock.

We may not require or receive the full amount of proceeds available under the Standby Equity Distribution Agreement, referred to as the SEDA.

On July 1, 2014, we entered into a standby equity distribution agreement, which we refer to as the SEDA, with YA Global Master SPV Ltd., which we refer to as YA Global, pursuant to which we may, at our election and in our sole discretion, issue and sell to YA Global, which we refer to as an Advance, from time to time as provided in the SEDA, and YA Global has agreed to purchase up to $15,000,000 of common stock. In accordance with the terms, and subject to the conditions, of the SEDA, we may elect from time to time, in our sole discretion, to sell to YA Global shares of Common Stock at a per share price equal to 98.5% of the lowest daily volume weighted average price of the common stock as quoted by Bloomberg, L.P., which we refer to as the Market Price, during the five consecutive trading days commencing immediately subsequent to the date on which we deliver to YA Global a notice of our election to effect an Advance, which we refer to as an Advance Notice. In no event will the Market Price be less than 85% of the daily volume weighted average price of the common stock on the trading day immediately preceding the date of the Advance Notice. The amount of each Advance may not exceed the lesser of (x) $500,000 or (y) the Daily Value Traded (as defined in the SEDA) for the five consecutive trading days immediately prior to the date of the applicable Advance Notice. Pursuant to the SEDA, YA Global is obligated to purchase the common stock under the SEDA subject to certain conditions, including, among others, our filing of a registration statement with the SEC to register the resale by YA Global of the shares of common stock acquired pursuant to the SEDA and the SEC declaring such registration statement effective.

Unless earlier terminated in accordance with its terms, the SEDA will terminate automatically on the earliest of (i) the first day of the month next following the 36-month anniversary of the date of the SEDA and (ii) the date on which YA Global shall have purchased common stock issued pursuant to the SEDA in the aggregate amount of $15,000,000.

Pursuant to the terms of the SEDA, we agreed to pay to YA Global or its designee a structuring and due diligence fee in an amount equal to $3,000 and a commitment fee in an aggregate amount of up to $450,000, which is payable either in cash or shares of Common Stock. The first $150,000 of the commitment fee became payable upon execution of the SEDA, and we issued to YA Global II an aggregate of 103,301 shares of common stock in satisfaction thereof.

Our future capital requirements will depend on many factors, including requirements for investment in developing new product versions for new territories (localization), new devices and new platforms, and potentially development of new products. Furthermore, our expected ramp-up in sales and marketing activities will require significantly greater resources. Given the foregoing, management negotiated with YA Global a three-year term for the SEDA together with $15,000,000 potentially available thereunder, $40,000 of which has already been received pursuant to issuances under the SEDA as of the date of this Annual Report on Form 10-K, which is intended to provide us capital on an as-needed basis. We are not required to draw funds under the SEDA, and we may not require or receive the full amount of proceeds available under the SEDA. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

Our future capital requirements will depend on many factors, including the progress and results of our product testing, the timing and outcome of regulatory review of our products (should some of our products require regulatory approval), the number and development requirements of other products that we pursue, and the costs of commercialization activities, including product marketing, sales, and distribution. Because of the numerous risks and uncertainties associated with the development and commercialization of our products, we are unable to reasonably estimate the amounts of additional capital outlays and operating expenditures that our business will require. It is likely that we will need to raise additional funds through public or private debt or equity financings to meet various objectives including, but not limited to:

testing our products;

researching and developing new products;

pursuing growth opportunities, including more rapid expansion;

acquiring complementary businesses or technologies;

making capital improvements to improve our infrastructure;

hiring qualified management and key employees;

responding to competitive pressures;

complying with regulatory requirements; and

maintaining compliance with applicable laws.

Any additional capital raised through the sale of equity or equity-linked securities may dilute our current stockholders’ ownership in us and could also result in a decrease in the market price of our common stock. The terms of those securities issued by us in future capital transactions may be more favorable to new investors and may include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect.

Furthermore, any debt or equity financing that we may need may not be available on terms favorable to us, or at all. If we are unable to obtain required additional capital, we may have to curtail our growth plans or cut back on existing business, and we may not be able to continue operating if we do not generate sufficient revenues from operations needed to stay in business.

We may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial condition.

If we fail to obtain necessary funds for our operations, we will be unable to maintain and improve our technology, and we will be unable to develop and commercialize our products and technologies.

Our present and future capital requirements depend on many factors, including:

future revenues and profits generated from the launch of our first product;

the level of research and development investment required to develop our products, and maintain and improve our patented technology position;

the costs of product development for research and at commercial scale;

the results of testing, which can be unpredictable;

changes in product development plans needed to address any difficulties that may arise in development or commercialization;

our ability and willingness to enter into new agreements with strategic partners and the terms of these agreements;

the costs of investigating patents that might block us from developing potential products;

the costs of recruiting and retaining qualified personnel;

the time and costs involved in obtaining regulatory approvals should such be required;

the costs of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights; and

our need or decision to acquire or license complementary technologies.

If we are unable to obtain the funds necessary for our operations, we will be unable to maintain and improve our patented technology, and we will be unable to develop and commercialize our products and technologies, which would materially adversely affect our business, liquidity and results of operations.

We depend on key members of our management and advisory team and will need to add and retain additional leading experts.

We are highly dependent on our board members, executive officers and other key management and technical personnel. Our failure to retain our Chief Scientific Officer, Prof. Uri Polat, our Chairman, Mr. Shai Novik and our CEO, Mr. Nimrod Madar, or any other key board members or management and technical personnel could have a material adverse effect on our future operations. Our success is also dependent on our ability to attract, retain and motivate highly trained technical, marketing, sales and management personnel, among others, to market our products and to continue to develop enhanced releases of our products. We presently do not maintain “key person” life insurance policies on any of our personnel.

Our success also depends on our ability to attract, retain and motivate personnel required for the development, maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employees. The loss of key personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on our business, financial condition and results of operation.

We have entered into non-competition agreements with our key employees. These agreements prohibit our key employees, if they cease working for us, from competing directly with us or working for our competitors for a limited period. Under applicable U.S. and Israeli law, we may be unable to enforce these agreements. If we cannot enforce our non-competition agreements with our employees, then we may be unable to prevent our competitors from benefiting from the expertise of our former employees, which could materially adversely affect our business, results of operations and ability to capitalize on our proprietary information.

We only recently established limited sales and marketing capabilities. If we are unable to develop an effective sales, marketing, customer relationship management and distribution capabilities or enter into agreements with third parties to perform these functions, we will not be able to successfully commercialize any of our products. We currently have only limited internal sales and marketing capabilities, and we are entirely dependent on third parties for distribution of our products. In order to successfully commercialize any of our products, we must either further internally develop sales, marketing, customer relationship management and distribution capabilities or make arrangements with third parties to perform these services.

If we do not develop a skilled marketing and sales force and supporting customer relationship management, we will be unable to market any of our products directly. To promote any of our potential products through third parties, we will have to locate acceptable third parties for these functions and enter into agreements with them on acceptable terms, and we may not be able to do so. In addition, any third-party arrangements we are able to enter into, such as our agreement with Apple’s App Store, may result in lower revenues than we could achieve by directly marketing and selling our potential products.

We may suffer losses from product liability claims if our products cause harm to customers.

Any of our products could potentially cause adverse events. These reactions may not be observed during testing, but may nonetheless occur after commercialization. If any of these reactions occur, they may render our products ineffective or harmful in some customers, and our sales would suffer, materially adversely affecting our business, financial condition and results of operations.

In addition, potential adverse events caused by our products could lead to product liability lawsuits. If professional liability and/or product liability lawsuits are successfully brought against us, we may incur substantial losses and may be required to limit commercialization of our products. Our business exposes us to potential product liability risks, which are inherent in the testing, marketing and selling of brain training software products. We may not be able to avoid product liability claims. Product liability insurance for our products and products in development is generally expensive, if available at all. We do not currently have product liability insurance. If we are unable to obtain insurance coverage on reasonable terms or to otherwise protect against potential product liability claims, we may be unable to commercialize our products. A successful product liability claim brought against us in excess of our insurance coverage, if any, may cause us to incur substantial liabilities, and, as a result, our business, liquidity and results of operations would be materially adversely affected.

Failure by our customers to use our product correctly could lead to less than optimal results and customer dissatisfaction, which could have a material adverse effect on our business and results of operations.

Improper use of our product or failure by users to comply with the requirements for the correct use of our product could result in less than optimal results and customer dissatisfaction. The following, among other things, may result in poor results:

failure to comply with the required vision improvement protocol, such as session frequency and minimal number of sessions;

use of the product not in accordance with instructions;

use of the product by several users using the same user account on the same device;

use of the product by several users using the same user account on different devices;

use of the product by a single users on different devices;

use of the product under environmental conditions with extreme variation between training sessions; and

use of the product while using medication, alcohol or any other chemical substance that affects, among other things, vision, the ability to concentrate, attention or motor functions.

Poor results from our product could result in customer dissatisfaction and reduced product sales, which could have a material adverse effect on our business and results of operations.

Regulatory requirements may have an adverse effect on our business and results of operations.

Healthcare is heavily regulated by the federal government and by state and local governments. The federal laws and regulations affecting healthcare change constantly thereby increasing the uncertainty and risk associated with any healthcare-related venture, including our business.

The federal government regulates healthcare through various agencies, including but not limited to the following: (i) the Food and Drug Administration, which we refer to as the FDA, which administers the Food, Drug, and Cosmetic Act, which we refer to as the FD&C Act, and (ii) the Office of Civil Rights, which administers the privacy aspects of the Health Insurance Portability and Accountability Act of 1996, which we refer to as HIPAA. We do not envision seeking third-party coverage from any government healthcare program in the foreseeable future (e.g., Medicare, Medicaid, TriCare) or any private healthcare program, and therefore we believe that we will not be subject to regulation by certain other federal healthcare agencies such as the Centers for Medicare & Medicaid Services, Health and Human Services Office of Inspector General or the Department of Defense.

FDA

The FDA regulates medical devices. A “medical device” is as an article, including software associated with another medical device, which, among other things, is intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals. See FD&C Act § 201(h). We do not believe that our product is subject to FDA regulation as a medical device as its mode of operation is through exercise However, there is a real risk, especially in light of the recent FDA Guidance entitled Mobile Medical Applications (Sept. 25, 2013), that the FDA may disagree with our assessment and conclude that it is in fact a medical device subject to FDA regulation. If such were to occur, the FDA may, among other things, order us to cease marketing the product until the product satisfies FDA’s regulatory regime and controls. This risk can be affected by the manner in which the product is marketed. Medical claims increase the risk that it would be viewed by the FDA as a medical device; while pure exercise claims may lead the FDA to use its discretion not to regulate the product.

The regulatory requirements that would apply if our product were deemed to be a medical device would depend on the level of risk to the patient or user of the device. There are three categories of medical devices based on risk: Class I, which is the lowest risk, Class II, and Class III, which is the highest risk.

Generally speaking, companies that manufacture Class I medical devices must register with the FDA and list their product. They must also comply with quality system regulations. These regulations require companies manufacturing Class I medical devices to manufacture products and maintain documents in a prescribed manner with respect to design, manufacturing, testing and control activities. Further, such companies are required to comply with various FDA and other agency requirements for labeling and promotion and managing product complaints, which, in certain instances, requires notifying the FDA. Most Class I devices can be marketed without having submitted a premarket notification or “510(k)” to the FDA and then receiving a “clearance” from the FDA to market the device.

In addition to the Class I requirements, manufacturers of Class II products, generally, need to receive an FDA “510(k) clearance” which permits commercial distribution of that device for its intended use. The FDA will “clear” a product if it finds that such product is substantially equivalent in terms of safety and effectiveness to a similar legally marketed device. If clinical trial data are required to support the 510(k) submission, then these data must be gathered in compliance with investigational device exemption (IDE) regulations. The FDA review process for 510(k) submissions should take on average about 90 days, but it can and usually takes substantially longer, and there is no guarantee that the agency will “clear” the device for marketing, in which case the device cannot be distributed in the United States. The agency could condition clearance on our narrowing the intended uses of the device so that it may no longer be commercially feasible to market. Additionally, there may be special controls what apply to the development of a Class II product, including FDA guidance documents and recognized standards relevant to the product, which we refer to as Special Controls.

Class III manufacturers must comply with the Class I requirements and, in some instances, Special Controls. In addition, manufacturers of Class III medical devices need to get approval from the FDA before marketing their device, which we refer to as Pre-Market Approval or PMA. The PMA process is a more comprehensive approval process and requires the sponsor of the application to submit adequate data permitting the FDA to find that there is reasonable assurance that the device is safe and effective for its intended use. The manufacturer must submit a PMA application, which contains, among other things, clinical trial data, which were obtained in compliance with IDE regulations. Clinical trials associated with a Class III device are typically more complex than those of a Class II product. The PMA process also takes substantially longer than the 510(k) process.

The FDA may inspect the manufacturer’s facilities and, upon the occurrence of certain events, have the power to withdraw the clearance or require changes to a device, its manufacturing process, or its labeling or additional proof that regulatory requirements have been met. The FDA can also seize the device, ban its importation into the United States, or restrict is distribution, issue warning letters, untitled letters, impose civil or criminal penalties, fines, and injunctions, criminally prosecute a company for violations of the FD&C Act, decline to clear or approve modifications to the device, or take other regulatory action against such company.

Privacy Provisions of HIPAA

HIPAA, among other things, protects the privacy and security of individually identifiable health information by limiting its use and disclosure. HIPAA directly regulates “covered entities” (healthcare providers, insurers and clearinghouses) and indirectly regulates “business associates” with respect to the privacy of patients’ medical information. All entities that receive and process protected health information are required to adopt certain procedures to safeguard the security of that information. It is uncertain whether we would be deemed to be a covered entity under HIPAA, and it is unlikely that we, based on our current business model, would be a business associate. Nevertheless, we may be contractually required to physically safeguard the integrity and security of any patient information that we receive, store, create or transmit. If we fail to adhere to our contractual commitments, then our physician customers may be subject to civil monetary penalties and this could adversely affect our ability to market our product. If we are deemed to be a vendor, under the Health Information Technology for Economic and Clinical Health Act, enacted as part of the American Recovery and Reinvestment Act of 2009, then we will be obligated to adopt various security measures. We may also be subject to state and foreign privacy laws under which breaches could lead to substantial fines and liability.

We may acquire or license additional products and technologies. Any product or technology we license or acquire will likely require additional development efforts prior to commercial sale, including extensive testing and, potentially, approval by the FDA and applicable foreign regulatory authorities, if any. All products are prone to risks of failure, including the possibility that the product or product developed based on licensed technology will not be shown to be sufficiently safe and effective for approval by applicable regulatory authorities. In addition, we cannot assure you that any product that we develop based on acquired or licensed technology that is granted regulatory approval will be produced economically, successfully commercialized or widely accepted in the marketplace. Moreover, integrating any newly acquired products could be expensive and time-consuming. If we cannot effectively manage these aspects of our business strategy, our business may not succeed.

Furthermore, proposing, negotiating and implementing an economically viable acquisition or license can be a lengthy, costly and complex process. Other companies, including those with substantially greater financial, marketing and sales resources, may compete with us for the acquisition or license of products and/or technologies. We may not be able to acquire the rights to alternative products and/or technologies on terms that we find acceptable, or at all. Our failure to acquire or license alternative products and/or technologies could have a material adverse effect on our business, prospects and financial condition.

We may not be able to successfully grow and expand our business.

We may not be able to successfully expand. Successful implementation of our business plan will require management of growth, which will result in an increase in the level of responsibility for management personnel. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls to expand, train and manage our employee base. The management, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps taken to hire personnel and to improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on our business, results of operations and financial condition.

We may encounter difficulties in managing our growth, which could increase our losses.

We may experience rapid and substantial growth in order to achieve our operating plans, which will place a strain on our human and capital resources. If we are unable to manage this growth effectively, our losses could materially increase. Our ability to manage our operations and growth effectively requires us to continue to expend funds to enhance our operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient numbers of talented employees. If we are unable to scale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, then we will not be able to make available the products required to successfully commercialize our technology. Failure to attract and retain sufficient numbers of talented employees will further strain our human resources and could impede our growth or result in ineffective growth.

We may not be able to obtain insurance policies on terms affordable to us that would adequately insure our business and property against damage, loss or claims by third parties. To the extent our business or property suffers any damages, losses or claims by third parties, which are not covered or adequately covered by insurance, our financial condition may be materially adversely affected. Additionally, we may be unable to maintain sufficient insurance as a public company to cover liability claims made against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers and directors.

We are a holding company that depends, in addition to our capital raising activities, on cash flows from our wholly owned subsidiaries to meet our obligations.

We are a holding company with no material assets other than the stock of our wholly owned subsidiaries, and all of our operations are conducted by EYEKON E.R.D. LTD, our indirect wholly owned subsidiary. We currently expect that the earnings and cash flow of EYEKON E.R.D. LTD will primarily be retained and used by it in its operations, including servicing any debt obligations it may have now or in the future. We have no current plans to pay any dividends, and our subsidiary may not be able to generate sufficient cash flow to distribute funds to us in order to allow us to pay any dividends in the future or otherwise make any distributions in respect of our common stock.

We must maintain effective internal controls to provide reliable financial reports and detect fraud. Our failure to properly maintain an effective system of internal controls could harm our operating results and cause investors to lose confidence in our reported financial information. In addition, such failure may cause us to suffer violations of the U.S. federal securities laws to the extent we are unable to maintain effective internal controls. Any such loss of confidence or violations would have a negative effect on the trading price of our common stock.

We maintain offices and research and development facilities in the State of Israel. Political, economic and military conditions in Israel may directly affect our ability to conduct business. Since the State of Israel was established in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners, or a significant downturn in the economic or financial condition of Israel, could affect adversely our operations. We believe that if conditions would require relocation of our offices and key persons out of Israel, we could do so within few weeks, ongoing and revived hostilities or other Israeli political or economic factors could potentially have a short-term negative effect on our operations and product development and may have a short-term negative effect to our revenues.

Disruptions in the financial markets and economic conditions could affect our ability to raise capital and could disrupt or delay the performance of our third-party contractors and suppliers.

The U.S. and global economies have historically suffered dramatic economic downturns, including, among other things, as the result of deterioration in the credit markets. Similarly, recent years have seen extreme volatility in security prices, severely diminished liquidity and credit availability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have recently taken unprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financial markets. If the actions taken by these governments are not successful, a continued economic decline may cause a significant impact on our ability to raise capital, if needed, on a timely basis and on acceptable terms or at all. As a result of the current volatile and unpredictable global economic situation, our business could be severely adversely affected.

Risks Related to Our Intellectual Property

We license certain technology from Talshir Medical Technologies Ltd. (“Tashir”), and we could lose our rights to this license if a dispute with Talshir arises or if we fail to comply with the financial and other terms of the license.

In July 2011, we entered into a license agreement with RevitalVision LLC, which we refer to as the License Agreement, pursuant to which we licensed intellectual property from RevitalVision LLC. Pursuant to the License Agreement, we have obtained a worldwide, nonexclusive, irrevocable, transferable, sub licensable through multiple tiers, license to the field of vision improvement software applications limited to near-vision deficiencies and reading improvement. Our GlassesOff™ application is, and our future products may be, partly based on the intellectual property licensed under the License Agreement. Recently, RevitalVision sold its intellectual property to Talshir, which may terminate the License Agreement if we are in material breach of its terms and cannot cure such breach, which termination would have a material adverse effect on our business, prospects and results of operations.

The failure to obtain or maintain patents, licensing agreements and other intellectual property could impact our ability to compete effectively.

To compete effectively, we need to develop and maintain a proprietary position with regard to our own technologies, intellectual property, licensing agreements, products and business. Legal standards relating to the validity and scope of claims in the field of brain training based vision improvement technologies may still evolve. Therefore, the degree of future protection for our proprietary rights in our core technologies and any products that might be made using these technologies is also uncertain. The risks and uncertainties that we face with respect to our existing and future patents and other proprietary rights include the following:

while the patents we license have been issued, some are pending and may not result in issued patents or may take longer than we expect to result in issued patents;

we may be subject to interference proceedings;

we may be subject to opposition proceedings in foreign countries;

any patents that are issued may not provide meaningful protection;

we may not be able to develop additional proprietary technologies that are patentable;

other companies may challenge patents licensed or issued to us or our customers;

other companies may independently develop similar or alternative technologies, or duplicate our technologies;

other companies may design around technologies we have licensed or developed; and

enforcement of patents is complex, uncertain and expensive.

We cannot be certain that patents will be issued as a result of any of our pending applications, and we cannot be certain that any of our issued patents, whether issued pursuant to our pending applications or licensed from a third party, will give us adequate protection from competing products. For example, issued patents, including the patents licensed from Talshir, may be circumvented or challenged, declared invalid or unenforceable, or narrowed in scope. In addition, since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain that we were the first to make our inventions or to file patent applications covering those inventions.

It is also possible that others may obtain issued patents that could prevent us from commercializing our products or require us to obtain licenses requiring the payment of significant fees or royalties in order to enable us to conduct our business. As to those patents that we have licensed, our rights depend on maintaining our obligations to the licensor under the applicable license agreement, and we may be unable to do so.

In addition to patents and patent applications, we depend upon trade secrets and proprietary know-how to protect our proprietary technology. We require our employees, consultants, advisors and collaborators to enter into confidentiality agreements that prohibit the disclosure of confidential information to any other parties. We require our employees and consultants to disclose and assign to us their ideas, developments, discoveries and inventions. These agreements may not, however, provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure.

Costly litigation may be necessary to protect our intellectual property rights, and we may be subject to claims alleging the violation of the intellectual property rights of others.

We may face significant expense and liability as a result of litigation or other proceedings relating to patents and other intellectual property rights of others. In the event that another party has also filed a patent application or been issued a patent relating to an invention or technology claimed by us in pending applications, we may be required to participate in an interference proceeding declared by the U.S. Patent and Trademark Office to determine priority of invention, which could result in substantial uncertainties and costs for us, even if the eventual outcome were favorable to us. We, or our licensors, also could be required to participate in interference proceedings involving issued patents and pending applications of another entity. An adverse outcome in an interference proceeding could require us to cease using the technology or to license rights from prevailing third parties.

The cost to us of any patent litigation or other proceeding relating to our licensed patents or patent applications, even if resolved in our favor, could be substantial. Our ability to enforce our patent protection could be limited by our financial resources, and may be subject to lengthy delays. If we are unable to effectively enforce our proprietary rights, or if we are found to infringe the rights of others, we may be in breach of our License Agreement.

A third party may claim that we are using inventions claimed by their patents and may go to court to stop us from engaging in our normal operations and activities, such as research, development and the sale of any future products. Such lawsuits are expensive and would consume time and other resources. There is a risk that the court will decide that we are infringing the third party’s patents and will order us to stop the activities claimed by the patents. In addition, there is a risk that a court will order us to pay the other party damages for having infringed their patents.

Moreover, there is no guarantee that any prevailing patent owner would offer us a license so that we could continue to engage in activities claimed by the patent, or that such a license, if made available to us, could be acquired on commercially acceptable terms. In addition, third parties may, in the future, assert other intellectual property infringement claims against us with respect to our products, technologies or other matters.

We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual property to compete against us.

Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the non-disclosure of confidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments, discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek to obtain these types of agreements from our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize or independently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with our products. If a dispute arises, a court may determine that the right belongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary know-how that we seek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ, we still face the risk that:

these agreements may be breached;

these agreements may not provide adequate remedies for the applicable type of breach;

our trade secrets or proprietary know-how will otherwise become known; or

our competitors will independently develop similar technology or proprietary information.

International patent protection is particularly uncertain, and if we are involved in opposition proceedings in foreign countries, we may have to expend substantial sums and management resources.

Patent law outside the United States is in some cases different than in the United States and is currently undergoing review and revision in many countries. Further, the laws of some foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States. For example, certain countries do not grant patent claims that are directed to the treatment of humans. We may participate in opposition proceedings to determine the validity of our foreign patents or our competitors’ foreign patents, which could result in substantial costs and diversion of our efforts.

Certain of our intellectual property rights are currently licensed from a third party, and, in the future, we may license intellectual property from other key strategic third parties. We are, and will continue to be, reliant upon such third parties to protect their intellectual property rights to any licensed technology. Such third parties may determine not to protect the intellectual property rights that we license from them and we may be unable to defend such intellectual property rights on our own or we may have to undertake costly litigation to defend the intellectual property rights of such third parties. There can be no assurances that we will continue to have proprietary rights to any of the intellectual property that we license from such third parties or otherwise have the right to use through similar strategic relationships. Any loss or limitations on use with respect to our right to use such intellectual property licensed from third parties or otherwise obtained from third parties with whom we have entered into strategic relationships could have a material adverse effect on our business, operating results and financial condition.

Risks Related to Our Industry

We are potentially subject to government regulations, and we may experience delays in obtaining required regulatory approvals, if required, to market our proposed products.

Various aspects of our operations are or may become subject to federal, state or local laws, rules and regulations, any of which may change from time to time. Costs arising out of any regulatory developments could be time-consuming, expensive and could divert management resources and attention and, consequently, could adversely affect our business operations and financial performance.

Delays in regulatory clearance, approval, limitations in regulatory approval and withdrawals of regulatory approval, if any are required, may have a negative impact on our results. If we experience significant delays in testing or approvals, our product development costs will increase. If we are required or seek FDA regulatory clearance or approval for any of our products, then any such clearance or approval will be limited to those conditions for which the product has demonstrated, through testing, either substantially equivalent in terms of safety and effectiveness to another lawfully marketed and cleared device or to be safe and effective. Any product clearances or approvals that we receive in the future could also include significant restrictions on the use or marketing of our products. Product clearances, if issued, or approvals, if granted, can be withdrawn for failure to comply with regulatory requirements or upon the occurrence of adverse events following commercial introduction of the products. Failure to comply with applicable FDA or other applicable regulatory requirements may result in criminal prosecution, civil penalties, recall or seizure of products, total or partial suspension of production or injunction, as well as other regulatory action against our products or us. If clearance or approval is withdrawn for a product, we would be unable to sell or license that product and our revenues would suffer. In addition, outside the United States, our ability to market any of our potential products may be contingent upon receiving market application authorizations from the appropriate regulatory authorities and these foreign regulatory approval processes include all of the risks associated with the FDA clearance or approval process described above.

We face significant competition and continuous technological change.

If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our products, our commercial opportunities will be reduced or eliminated. The extent to which any of our products achieve market acceptance will depend on competitive factors, many of which are beyond our control. Competition in the vision care industry is intense. Our competitors include substitute products such as glasses manufactures, contact lens manufacturers, refractive surgery technology companies as well as developers of eye exercise methodologies and companies, universities, and public and private research institutions developing methods for vision improvement via brain training or alternative solutions for vision correction, including:

new training techniques;

improved non-invasive optical techniques, such as monovision contact lenses, multifocal lenses, bifocal lenses and extended depth of focus (EDOF) lenses;

new invasive or semi-invasive procedures, such as mono-vision refractive surgery, including LASIK and intraocular lens (IOL) replacement surgery; and

medications or any chemical substances that can restore accommodation by affecting the eye muscles or eye lens elasticity.

Many of these entities have substantially greater research and development capabilities and financial, scientific, manufacturing, marketing and sales resources than we do, as well as more experience in research and development, clinical trials, regulatory matters, marketing and sales.

Risks Relating to Our Common Stock

Our common stock has alimited trading history, and prospective investors may not be able to sell their shares at their purchase price, if at all.

There is currently an extremely limited public market for our common stock. Our common stock is listed for quotation on the OTCBB under the symbol “INVS”, but there is no assurance that a regular trading market will develop or, if developed, will be sustained. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations of the price of, our common stock.

We expect that the market price of our common stock will fluctuate significantly in response to factors, some of which are beyond our control, such as the announcement of new products or product enhancements by us or our competitors, developments concerning intellectual property rights and regulatory approvals, quarterly variations in our and our competitors’ results of operations, changes in earnings estimates or recommendations by securities analysts, developments in our industry, and general market conditions and other factors, including factors unrelated to our own operating performance or the condition or prospects of our industry.

Our issuance of shares of common stock under the SEDA could contribute to the decline of the price of the common stock, which may also lead to additional dilution of the ownership interests of our existing stockholders.

We believe YA Global intends to promptly resell the shares of common stock that we sell to it under the SEDA, and such resales could cause the market price of the common stock to decline significantly. If the market price of our common stock declines, then any subsequent sales by us to YA Global under the SEDA would require that we issue a greater number of shares of common stock to YA Global in exchange for each dollar paid to us by YA Global, which would further increase the number of shares of common stock outstanding.

Solely for purposes of illustration, if we were to draw $500,000 under the SEDA at a price per share to YA Global of $1.25, then we would be required to issue to YA Global an aggregate of 400,000 shares, which would increase the number of shares outstanding by approximately 7% as of March 16, 2016. If the price of our common stock to YA Global were to decline, and the price per share to YA Global under the SEDA was $0.85, whether such decline was due to market sales by YA Global or otherwise, and we were to draw $500,000 under the SEDA, then we would be required to issue to YA Global an aggregate of approximately 588,236 shares of Common Stock, which would increase the number of shares outstanding by approximately 10% as of March 16, 2016. Therefore, any decline in the market price of our common stock, followed by a draw by us under the SEDA, would cause relatively greater dilution to your interest as a stockholder than such a draw would have caused prior to such decline. Also, the sale of common stock under the SEDA could encourage short sales by third parties, which could contribute to the further decline of the price of the common stock.

Until our common stock is registered under the Exchange Act, we will be subject only to the reporting obligations imposed by Section 15(d) of the Exchange Act, which we refer to as Section 15(d). Section 15(d) requires that issuers file periodic and current reports with the SEC when they have issued any class of securities for which a registration statement was filed and became effective pursuant to the Securities Act of 1933, as amended, which we refer to as the Securities Act. The purpose of Section 15(d) is to ensure that investors who buy securities in registered offering are provided with the same information on an ongoing basis that they would receive if the securities they purchased were listed on a securities exchange or the issuer were otherwise subject to periodic reporting obligations. However, companies that are required to report only under Section 15(d) are not subject to some of the Exchange Act reporting requirements. For example, companies that are required to report only under Section 15(d) are not subject to the short-swing profit reporting requirements contained in Section 16 of the Exchange Act, the beneficial ownership reporting requirements contained in Section 13 of the Exchange Act, the institutional investor reporting rules or the third-party tender offer rules. Additionally, stockholders in a company that is required to report only under Section 15(d) are not entitled to the benefits of the Exchange Act’s proxy rules contained in Section 14 of the Exchange Act.

The reporting obligations under Section 15(d) are automatically suspended when: (i) any class of securities of the issuer reporting under Section 15(d) is registered under Section 12 of the Exchange Act; or (ii) at the beginning of the issuer’s fiscal year, other than the year in which the applicable registration statement became effective, if the class of securities covered by the registration statement is held of record by fewer than 300 persons. In the latter case, the Company would no longer be subject to periodic reporting obligations so long as the number of holders remained below 300 unless we filed a registration statement with the Securities and Exchange Commission under Section 12 of the Exchange Act. If our obligation to file reports under Section 15(d) is suspended (other than due to our having registered our Common Stock under Section 12 of the Exchange Act), then investors will have reduced visibility with respect to the Company, its financial condition and results of operations.

We cannot assure you that our common stock will become liquid or that it will be listed on a securities exchange.

We may seek listing of our common stock on a U.S. national securities exchange, such as the NYSE MKT or the Nasdaq Capital Market; however, we cannot assure you that we will be able to meet the initial listing standards of either of those or of any other stock exchange, or that we will be able to maintain any such listing. Until our common stock is listed on an exchange, we expect to remain eligible for quotation on the OTCBB, on another over-the-counter quotation system or in the “pink sheets.” In those venues, however, an investor may find it difficult to obtain accurate quotations for our common stock. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may further affect the liquidity of our common stock. This would also make it more difficult for us to raise additional capital or attract qualified employees or partners.

Additionally, the stock market in general, and securities of small-cap companies in particular, have historically experienced extreme price and volume fluctuations. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in the value of our common stock. Price volatility might be worse if the trading volume of our common stock is low.

Because our common stock may be a “penny stock,” it may be more difficult for investors to sell shares of our common stock, and the market price of our common stock may be adversely affected.

Our common stock may be a “penny stock” if, among other things, the stock price is below $5.00 per share, it is not listed on a national securities exchange or it has not met certain net tangible asset or average revenue requirements. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. This document provides information about penny stocks and the nature and level of risks involved in investing in the penny-stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser and obtain the purchaser’s written agreement to the purchase. Broker-dealers must also provide customers that hold penny stock in their accounts with such broker-dealer a monthly statement containing price and market information relating to the penny stock. If a penny stock is sold to an investor in violation of the penny stock rules, the investor may be able to cancel its purchase and get its money back.

If applicable, the penny stock rules may make it difficult for investors to sell their shares of our common stock. Because of the rules and restrictions applicable to a penny stock, there is less trading in penny stocks, and the market price of our common stock may be adversely affected. Also, many brokers choose not to participate in penny stock transactions. Accordingly, investors may not always be able to resell their shares of our common stock publicly at times and prices that they feel are appropriate.

We do not expect to pay dividends on our common stock, and investors will be able to receive cash in respect of their shares of our common stock only upon the sale of the shares.

Cash dividends have never been declared or paid on our common stock, and we do not anticipate such a declaration or payment in the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, an investor in our common stock will obtain an economic benefit from the common stock only after an increase in its trading price and only by selling the common stock. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure stockholders that they will not lose the entire amount of their investment in our common stock.

Securities analysts may not initiate coverage or continue to cover our common stock, and this may have a negative impact on its market price.

The trading market for our common stock will depend in part on the research and reports that securities analysts publish about our business and us. We do not have any control over these analysts. There is no guarantee that securities analysts will cover our common stock. If securities analysts do not cover our common stock, the lack of research coverage may adversely affect its market price. If we are covered by securities analysts, and our stock is the subject of an unfavorable report, our stock price would likely decline. If one or more of these analysts ceases to cover us or fails to publish regular reports on us, we could lose visibility in the financial markets, which could cause our stock price and/or trading volume to decline. In addition, because we became public through a “reverse merger,” we may have additional difficulty attracting the coverage of securities analysts.

In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders. We are authorized to issue an aggregate of 60,000,000 shares of capital stock, consisting of 40,000,000 shares of common stock and 20,000,000 shares of preferred stock with preferences and rights to be determined by our Board of Directors. Additionally, as of March 16, 2016, we had 6,102,449 shares of our common stock outstanding and a total of 5,251,154 shares of our common stock subject to outstanding options, warrants and our $1.8 million aggregate principal amount of our 8.0% Senior Convertible Notes due 2018. We may also issue additional shares of our common stock or other securities that are convertible into or exercisable for common stock in connection with hiring or retaining employees, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes. Additionally, we may issue up to $15,000,000 of our common stock pursuant to the SEDA, $40,000 of which has already been issued as of the date of this Annual Report on Form 10-K. The future issuance of any such additional shares of our common stock may create downward pressure on the trading price of the common stock. There can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with any capital raising efforts, including at a price (or exercise prices) below the price at which shares of our common stock are then traded on the OTCBB or otherwise.

A significant number of shares of our common stock are eligible for sale, which could depress the market price of our stock.

Sales of a significant number of shares of our common stock in the public market could harm the market price of our stock. As additional shares of our common stock become available for resale in the public market, the supply of the common stock will increase, which could decrease its price. Further, shares may be offered by selling stockholders from time to time in the open market pursuant to Rule 144 promulgated under the Securities Act, and these sales may have a depressive effect on the market for the shares of our common stock.

Item 1B.

Unresolved Staff Comments

None.

Item 2.

Properties

Our principal corporate office is located at 5 Jabotinski St., POB 12, Ramat Gan 5252006, Israel.

InnoVision’s subsidiary, Eyekon, leases approximately 3,950 square feet of office space in Ramat Gan, Israel. Eyekon pays quarterly rental and management fees of approximately $22,000 plus approximately $9,600 per quarter for taxes and utilities. Eyekon’s facility lease will expire in August 2016.

Item 3.

Legal Proceedings

From time to time we may be named in claims arising in the ordinary course of business. Currently, we are not a party to any legal proceedings nor is any of our property subject to any legal proceedings.

Item 4.

Mine Safety Disclosures

Not applicable.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock is quoted on the OTCBB under the symbol “INVS.” All OTCBB quotations reproduced herein reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

The following table sets forth, for each quarter during the period commencing January 1, 2014 through December 31, 2015, the reported high and low bid prices of our common stock on the OTCBB.

Quarter Ended	High		Low

December 31, 2015	$	2.55	$	1.51
September 30, 2015	$	3.07	$	1.55
June 30, 2015	$	12.00	$	1.29
March 31, 2015	$	0.99	$	0.38

December 31, 2014	$	1.19	$	0.42
September 30, 2014	$	1.62	$	0.65
June 30, 2014	$	2.14	$	1.15
March 31, 2014	$	2.20	$	1.30

Number of Holders

As of March 16, 2016, our common stock was held by 109 stockholders of record.

Dividends

We have never declared or paid dividends on our common stock. We do not intend to pay cash dividends on our common stock for the foreseeable future, and we intend to retain any future earnings to fund the development and growth of our business. The payment of dividends if any, on the common stock will rest solely within the discretion of our board of directors and will depend, among other things, upon our earnings, capital requirements, financial condition, and other relevant factors.

Item 6.

Selected Financial Data

As a smaller reporting company as defined in Rule 12b-2 of the Exchange Act, we are not required to include information otherwise required by this item.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operation

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our historical consolidated financial statements and related notes thereto in “Item 8. Financial Statements and Supplementary Data.” The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified in “Cautionary Statement Regarding Forward-Looking Statements” and “Item 1A. Risk Factors.”

The discussion and analysis of the Company’s financial condition and results of operations are based on the Company’s financial statements, which the Company has prepared in accordance with U.S. generally accepted accounting principles, which we refer to as GAAP. The preparation of these financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, the Company evaluates such estimates and judgments, including those described in greater detail below. The Company bases its estimates on historical experience and on various other factors that the Company believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Overview

Our first app, GlassesOff™, aims to eliminate, through exercise, the dependency on reading glasses of 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.

Plan of Operation

During December 2013, we completed the development of the first commercial version of our consumer-oriented software application for improving, through exercise, near vision sharpness by improving the brain’s image processing function, for the iOS platform and began marketing the product to end consumers via Apple’s App Store. On June 30, 2014, we launched the first version of our software application for the Android platform as a beta version and subsequently in final form.

In the third quarter of 2015, we signed an agreement with 9-time All-Star Chris Paul as a brand partner for our first sports app. We launched Chris Paul’s Game Vision in early March 2016. We expect to advertise and market our app based on the popularity and reputation of this athlete, as a brand partner. Additionally, we plan to participate in various conferences and conventions internationally to further expose our products and technology to professionals, such as ophthalmologists, sports coaches and associations, and potentially form business partnerships.

During 2016, we plan to sign additional partnerships in additional sports, as well as re-launch the GlassesOff™ app under a new dynamic game-like technology.

We are not currently planning any major purchase or sale of equipment in 2016.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”), which require us to make judgments, estimates and assumptions that affect: (i) the reported amounts of assets and liabilities, (ii) disclosure of contingent assets and liabilities at the end of each reporting period and (iii) the reported amounts of revenues and expenses during each reporting period. We evaluate these estimates and assumptions based on historical experience, knowledge and assessment of current business and other conditions, and expectations regarding the future based on available information and reasonable assumptions, which together form a basis for making judgments about matters not readily apparent from other sources. Because the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. When reviewing our audited consolidated financial statements, you should consider (i) our selection of critical accounting policies, (ii) the judgment and other uncertainties affecting the application of such policies and (iii) the sensitivity of reported results to changes in conditions and assumptions. We consider the policies discussed below to be critical to an understanding of our consolidated financial statements as their application places significant demands on the judgment of our management.

Financial statements in U.S. dollars: The functional currency of InnoVision is the U.S. dollar, as the U.S. dollar is the primary currency of the economic environment in which InnoVision has operated and expects to continue to operate in the foreseeable future. The majority of Eyekon E.R.D. Ltd.’s operations are currently conducted in Israel, and most of the Israeli expenses are currently paid in new Israeli shekels, which we refer to as NIS; however, the subsidiary’s operations do not generate any positive cash flow to cover its expenses and is not able to exist without the parent company’s funding. Therefore the currency which is used in operating, financing and investing activities, including loans and equity transactions, is the U.S. dollar.

Accordingly, the functional and reporting currency of InnoVision is the U.S. dollar. Monetary accounts maintained in currencies other than the U.S. dollar are re-measured into U.S. dollars. All transaction gains and losses from the re-measurement of monetary balance sheet items are reflected in the statements of operations as financial income or expenses, as appropriate.

Stock-based compensation: Stock-based compensation expense is estimated at the grant date based on the fair value of the particular award and is recognized as an expense ratably over the requisite service period of the award. Determining the appropriate fair-value model and calculating the fair value of stock-based awards at the grant date requires considerable judgment, including estimating stock price volatility, expected option life and forfeiture rates. We develop our estimates based on historical data and market information that can change significantly over time. A small change in estimates used can have a relatively large impact on the estimated valuation.

We use the Black-Scholes option valuation model to value stock awards. We estimate stock price volatility based upon our historical volatility. For options with an expected term longer than the period for which we have quoted stock prices, we use a combination of comparable companies and our historical share prices. Estimated option life and forfeiture rate assumptions are derived from historical data and management's estimations.

Revenue Recognition: We recognize revenue when realized or realizable and earned, which is when the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the sales price is fixed or determinable; and collectability is reasonably assured. Determining whether and when some of these criteria have been satisfied often involves assumptions and judgments that can have an impact on the timing and amount of revenue we report. We defer amounts billed to our clients for revenues not yet earned. Such amounts are anticipated to be recorded as revenues as services are performed in subsequent periods.

We derive our revenues from subscription fees for access to and use of our on-demand application services. We deliver our products through cloud-based client-server architecture to mobile devices, currently implemented on the Apple iOS platform (iPhone, iPod, iPad) and Android platform. In a case of a lifetime subscription, the revenue from that subscription is recognized on a straight-line basis over the estimated expected period of use.

Other Assets: Research and development 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. When facts and circumstances indicate potential impairment of an amortizable intangible asset, we evaluate the recoverability of the asset’s carrying value, using estimates of future undiscounted cash flows over the remaining asset life. The estimates of future cash flows attributable to intangible assets require significant judgment based on our historical and anticipated results. Any impairment loss is measured by the excess of carrying value over fair value. All of our intangible assets have finite lives.

Convertible notes: For the outstanding $1.8 million aggregate principal amount of our 8.0% Senior Convertible Notes (the “8.0% Senior Convertible Notes”), the company applies ASC Topic 470-20, "Debt - Debt with Conversion and Other Options" which clarifies the accounting for instruments with beneficial conversion features or contingency adjustable conversion ratios. The beneficial conversion feature has been calculated by allocating the proceeds received in financing transactions to the convertible instrument and to any detachable warrants included in the transaction, and by measuring the intrinsic value of the convertible instrument based on the effective conversion price as a result of the allocated proceeds.

The fair value of the warrants issued together with the 8.0% Senior Convertible Notes was determined using the Black-Scholes option-pricing model. The amount of the beneficial conversion feature with respect to convertible notes was recorded as a discount on the convertible notes with a corresponding amount credited directly to equity as additional paid-in capital. After the initial recognition, the discount on the convertible notes is amortized as interest expenses over the term of the notes.

Recent Accounting Pronouncements

In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-17, Income Taxes: Balance Sheet Classification of Deferred Taxes (FASB ASU 2015-17). FASB ASU 2015-17 requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Earlier adoption is permitted and the standard may be applied either retrospectively or on a prospective basis to all deferred tax assets and liabilities. This ASU is not expected to have an impact on our financial statements or disclosures.

In August 2015, the FASB issued Update 2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”. The amendments in this Update defer the effective date of Update 2014-09 for all entities by one year. Public entities, certain not-for-profit entities and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the impact this Update will have on our consolidated financial statements and related disclosures.

In April 2015, the FASB issued ASU 2015-05 “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement”. The amendments in this ASU provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance will not change GAAP for a customer’s accounting for service contracts. All software licenses within the scope of this ASU will be accounted for consistent with other licenses of intangible assets. For public entities, the amendments will be effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted for all entities. This ASU is not expected to have an impact on our financial statements or disclosures.

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. This ASU is not expected to have an impact on our 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 Board 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 Company does not believe this pronouncement will have a material impact on its consolidated financial statements.

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 June 2014, the FASB issued ASU No. 2014-10, Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The amendments in this ASU remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, thereby improving financial reporting by eliminating the cost and complexity associated with providing that information. The amendments also clarify that the guidance in Topic 275, Risks and Uncertainties, is applicable to entities that have not commenced planned principal operations. For public business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. The Company adopted this standard prospectively as of January 1, 2015. The adoption of ASU No. 2014-10 did not have a material impact on its consolidated results of operation and financial condition.

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. This ASU is not expected to have a significant impact on the Company’s 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 does not believe this pronouncement will have a material impact on its consolidated financial statements.

There were various other updates recently issued. None of the updates are expected to a have a material impact on the Company’s financial position, results of operations or cash flows.

Results of Operations

Year Ended December 31, 2015 Compared to Year Ended December 31, 2014

Revenue

InnoVision generated revenues of $280,000for the year ended December 31, 2015, as compared to revenues of $110,000 for the year ended December 31, 2014. The increase in revenues was mostly due to the launch of a French version of the GlassesOff™ app and significant media coverage in France, which resulted in increased sales..

Cost of Sales

Cost of sales consists primary of commissions, royalties and amortization of intangible assets. For the year ended December 31, 2015, InnoVision incurred cost of sales aggregating $285,000, as compared to $111,000 in the 2014 period. The increase for the year ended December 31, 2015 as compared to the prior year resulted primarily from royalties and commissions of $97,000 in 2015 as compared to $38,000 in 2014 and amortization of intangible assets of $188,000 in 2015 as compared to $73,000 in 2014.The amortization of these intangible assets commenced in the third quarter of 2014. The increase in commissions and royalties resulted from the increase in revenues.

Research and Development Expenses

InnoVision expects its research and development, referred to as R&D, expenses to increase as it continues to develop its products. R&D expenses consist of:

internal costs associated with R&D activities;

personnel-related expenses, including salaries and stock-based compensation expenses, benefits, travel, and related costs for the personnel involved in R&D;

internal and external costs associated with scientific studies, including payment to investigators and labs participating in the studies, payments to purchase and/or use equipment required for such studies and payment to subjects for participating in the subject studies;

patents application fees;

outsource services associated with R&D activities; and

facilities and other expenses, which include expenses for rent and maintenance of facilities.

InnoVision expects its R&D expenses to increase in the near future in connection with the development efforts for new product applications and the planned redesign of GlassesOff™. InnoVision intends to expand the use of outsourced development services to expedite its development efforts. InnoVision believes that investment in product development is a competitive necessity and plans to continue these investments in an effort to realize the potential of its current and planned products. For the years ended December 31, 2015 and 2014, InnoVision incurred R&D expenses in the aggregate of $2,204,000 and $1,818,000, respectively. The increase in R&D expenses for 2015 as compared to 2014 was primarily due to $320,000 in outsource services due to engaging a third party provider for assistance with new product development and an increase of $53,000 in legal fees due to applications for new patents.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of salaries and other related costs for employees of InnoVision and external service providers for services, such as search engine optimization, public relations services, advertising costs and other expenses, which include expenses for rent and maintenance of facilities. During 2015, InnoVision continued to invest in building marketing infrastructure, which included, among other things, developing public relations networks to generate awareness of GlassesOff™, preparing marketing materials and building a network of eye care professionals to support and promote the GlassesOff™ technology and current and planned products.

For the years ended December 31, 2015 and 2014, InnoVision incurred sales and marketing expenses of $1,064,000 and $1,109,000, respectively. The decrease for the year ended December 31, 2015 as compared to the prior year resulted primarily from a decrease in consultants and advertising expenses of $165,000 resulting from reduced marketing expenses associated with the GlassesOff app pending its expected re-launch in 2016. This decrease was partially offset by an increase in payroll expenses of $111,000.

General and Administrative Expenses

General and administrative, referred to as G&A, expenses consist primarily of salaries and other related costs, including stock-based compensation expenses for persons serving in InnoVision’s executive and administration functions. Other G&A expenses include facility-related costs not otherwise included in R&D or sales and marketing expenses, and professional fees for legal and accounting services, including those associated with reporting obligations applicable to public companies in the United States. InnoVision expects that its G&A expenses will increase as it adds additional personnel in response to the increased responsibilities and reporting obligations imposed on InnoVision as a publicly-traded company and in connection with new product development. For the years ended December 31, 2015 and 2014, InnoVision incurred G&A expenses of $1,164,000 and $2,552,000, respectively. The decrease in 2015 as compared to 2014 resulted primarily from a decrease of $967,000 in stock-based compensation expenses from the award of options and restricted stock, a decrease of $156,000 in investor relations services, a decrease of $53,000 in professional fees for legal services and commitment fees paid in connection with the SEDA of $0 for 2015, as compared to $153,000 in 2014.

Financial Expenses and Income

Financial expenses and income consist of the following:

interest earned on InnoVision’s cash and cash equivalents;

bank fees and commissions;

expenses or income resulting from fluctuations of the NIS, in which a portion of InnoVision’s assets and liabilities is denominated, against the U.S. Dollar; and

interest expenses.

For the years ended December 31, 2015 and 2014, InnoVision incurred net financial (income) expenses of $231,000 and $(20,000), respectively. Financial expenses for 2015 increased as compared to 2014 primarily due to interest expenses of $237,000 in 2015 as compared to $0 in 2014. The interest expenses resulted primarily from the interest of $39,000 and amortization of the discount of $198,000 of the $1.80 million aggregate principal amount of our 8.0% Senior Convertible Notes that we issued to certain investors in 2015.

Stock-based Compensation

InnoVision’s stock-based compensation expenses with respect to employees are recorded according to ASC 718, which requires the measurement and recognition of compensation expense for all stock-based payment awards made to employees and directors, including employee stock options under InnoVision’s stock plans, based on estimated fair values.

ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in InnoVision’s consolidated statement of operations.

InnoVision applies ASC 505-50, “Equity Based Payments to Non Employees”, with respect to options issued to non-employees. InnoVision estimates the fair value of stock options granted using the Black-Scholes-Merton option pricing model.

For the years ended December 31, 2015 and 2014, our stock-based compensation costs comprise expenses and amounts capitalized as intangible assets, were $547,000 and $1,709,000, respectively. 98,000 stock options and 70,000 restricted shares were granted during 2015 as compared to 154,900 stock options and 52,869 restricted shares granted during the 2014 period. The decrease in stock-based compensation was due to a decrease in the value of options and restricted shares that were granted in 2015, due to completion of the vesting of part of the options that were granted in 2013 and 2014 and forfeiture of a portion of the unvested options during the 2015 period.

Cash Flows

For the years ended December 31, 2015 and 2014, net cash used in operations was $3,677,000 and $3,469,000, respectively. Cash was used primarily for salaries, subcontractors and software development expenses, facility-related costs and professional fees. The increase in cash used in operating activities for the year ended December 31, 2015 as compared to the 2014 period resulted primarily from hiring of new employees and an increase in subcontractor expenses. It is expected that cash used in operating activities will increase as we plan to continue to develop new product versions for new territories (localization), new devices and new platforms, and development of new products.

For the years ended December 31, 2015 and 2014, net cash used in investing activities was $51,000 and $488,000, respectively. The decrease in cash used in investing activities for 2015 compared to 2014 resulted from capitalization of intangible assets of $47,000 in 2015, as compared to $390,000 in 2014, and from the purchase of property and equipment of $4,000 in 2015 as compared to $98,000 in 2014.

For the years ended December 31, 2015 and 2014, net cash provided by financing activities was $1,788,000 and $5,001,000, respectively. The decrease in cash provided by financing activities for 2015 as compared to 2014 resulted primarily from InnoVision’s issuance and sale of $1,800,000 aggregate principal amount of the 8.0% Senior Convertible Notes in 2015, as compared to the issuance and sale of 400,000 shares of common stock in a private placement that provided net proceeds of $4,960,000 during the 2014 period.

Liquidity and Capital Resources

InnoVision expects to incur losses from operations for the foreseeable future and incur increasing R&D expenses, including expenses related to outsourcing of certain development projects. InnoVision expects that G&A expenses will also increase as it expands its finance and administrative infrastructure. InnoVision also expects that sales and marketing expenses will increase significantly in connection with the commercialization activities related to its new product. InnoVision’s future capital requirements will depend on a number of factors, including the continued progress of R&D of its products, cost of partnering with known athletes, and the total average cost of customer acquisition, comprising initial acquisition cost and customer retention cost.

Based on our 2015 average monthly cash expenses and our cash balance as of December 31, 2015, we expect that we will require additional financing of approximately $2,000,000 for the year ending December 31, 2016. InnoVision plans to continue to finance its operations with the issuance of equity or debt securities and, in the longer term, revenues from operations. There are no assurances, however, that InnoVision will be successful in obtaining the financing necessary for the long-term development of its current product or future products. InnoVision’s future capital requirements will depend on many factors, including requirements for investment in developing new product versions for new territories (localization), new devices and new platforms, and anticipated development of new products. Furthermore, the expected ramp-up in sales and marketing activities will require significantly higher resources. InnoVision generated only limited revenues for 2015. InnoVision expects continuing operating losses to result in increases in cash used in operations over the next 12 months. To the extent that InnoVision’s current capital resources are insufficient to meet its future capital requirements, InnoVision will need to finance its future cash needs through public or private equity offerings, debt financings, or corporate collaboration and licensing arrangements.

On July 1, 2014, InnoVision entered into the SEDA with YA Global, pursuant to which it may, at its election and in its sole discretion, issue and sell to YA Global, from time to time as provided in the SEDA, and YA Global has agreed to purchase up to $15,000,000 of common stock. In accordance with the terms, and subject to the conditions, of the SEDA, InnoVision may elect from time to time, in its sole discretion, to sell to YA Global shares of common stock at a per share price equal to the Market Price during the five consecutive trading days commencing immediately subsequent to the date on which InnoVision delivers to YA Global an Advance Notice. In no event will the Market Price be less than 85% of the daily volume weighted average price of the common stock on the trading day immediately preceding the date of the Advance Notice. The amount of each Advance may not exceed the lesser of (x) $500,000 or (y) the Daily Value Traded (as defined in the SEDA) for the five consecutive trading days immediately prior to the date of the applicable Advance Notice. Pursuant to the SEDA, YA Global is obligated to purchase the common stock under the SEDA subject to certain conditions, including, among others, InnoVision maintaining an effective registration statement with the SEC pursuant to which YA Global may resell of the shares of common stock acquired pursuant to the SEDA.

InnoVision currently does not have any commitments for future external funding other than the SEDA. InnoVision will need to raise additional funds, and it may decide to raise additional funds even before it needs such funds if the conditions for raising capital are favorable. InnoVision may seek to issue equity or debt securities or obtain a credit facility from one or more financial institutions or otherwise. The sale of equity or convertible debt securities may result in dilution to its existing stockholders, including issuances of equity under the SEDA. The incurrence of indebtedness would result in increased fixed obligations and could also subject InnoVision to covenants that restrict its operations. Additional equity or debt financing, or corporate collaboration and licensing arrangements may not be available on acceptable terms, or at all. If adequate funds are not available, InnoVision may be required to delay, reduce the scope of or eliminate its R&D programs, reduce its planned commercialization efforts or obtain funds through arrangements with collaborators or others that may require InnoVision to relinquish rights to certain potential products that it might otherwise seek to develop or commercialize independently. InnoVision’s ability to continue to operate as a going concern is dependent upon additional financial support.

Effects of Inflation and Currency Fluctuations

Inflation generally affects InnoVision by increasing its cost of labor and other development costs. InnoVision does not believe that inflation had a material effect on our results of operations for the years ended December 31, 2015 or 2014, nor do we expect that inflation will have a material impact on our results of operations for the year ending December 31, 2016.

Currency fluctuations may affect InnoVision by increasing or decreasing costs. Currency fluctuations had no material effect on InnoVision’s results of operations for the years ended December 31, 2015 or 2014. InnoVision does not purchase forward currency contracts or engage in other hedging arrangements for either hedging or speculative purposes.

Off-Balance Sheet Arrangements

InnoVision has no off-balance sheet arrangements that have had or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to include information otherwise required by this item.

Item 8.

Financial Statements and Supplementary Data

The financial statements required by this Item 8 are filed herewith commencing on page F-1 hereto and are incorporated herein by reference.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.

Controls and Procedures

Disclosure Controls and Procedures

The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) or 15d-15(e)) as of December 31, 2015. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this annual report.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed 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. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

For the year ended December 31, 2015, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, management (with the participation of our principal executive officer and principal financial officer) conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework established in Internal Control —Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management concluded that, as of December 31, 2015, our internal control over financial reporting was effective.

Changes in Internal Controls over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B.

Other Information.

None.

PART III

Item 10.

Directors, Executive Officers and Corporate Governance.

MANAGEMENT

Directors and Executive Officers

The following table sets forth information concerning our executive officers and directors, including their ages. The directors hold office for one year terms and until their respective successors are elected or appointed and qualified or until their earlier death, retirement, disqualification, resignation or removal. The executive officers hold office for one year terms or until their respective successors are elected or appointed and qualified or until their earlier resignation or removal.

Name	Age	Title
Shai Novik, M.B.A.	50	Chairman of the Board
Nimrod Madar, M.B.A.	42	President, Chief Executive Officer and Director
Uri Polat, Ph.D.	62	Chief Scientific Officer and Director
Ram Shaffir	45	Chief Technology Officer and Director
Steve Schaeffer, CPA	66	Chief Financial Officer
Yuval Bar-Gil	48	Director

Shai Novik, M.B.A, Chairman of the Board. Mr. Novik has served as our Chairman of the Board since July 2013. Mr. Novik founded PROLOR Biotech, Inc., a biopharmaceutical company developing long-acting therapeutic proteins, in 2005, and served as its President through its acquisition by OPKO Health (NYSE: OPK) in 2013. Mr. Novik is a co-founder of InnoVision, and previously served as Chief Operating Officer and Head of Strategic Planning of THCG, a technology and life sciences investment company. THCG was a portfolio company of Greenwich Street Partners, one of the largest U.S. private equity funds. THCG’s own portfolio included several life sciences and medical devices companies. Prior to his position at THCG, Mr. Novik served as Chief Operating Officer and Chairman of Strategy Committee of RogersCasey, an investment advisory company serving Fortune 500 companies such as DuPont, Kodak, General Electric and others.

Nimrod Madar, M.B.A, President, Chief Executive Officer and Director. Mr. Madar has served as our President and Chief Executive Officer and as a director of InnoVision since July 2013. Mr. Madar previously founded and served as Chairman at iMind Networks, a cognitive training venture specializing in assessing and training cognitive capabilities, such as working memory, attention, visual search, etc. Prior to his position at iMind Networks, Mr. Madar served as VP Strategic Alliances at 888 Holdings Public Limited Company traded on the London Stock Exchange, one of the world’s most popular online gaming entertainment companies with both PC and mobile offering for end users (B2C) as well as white label customers (B2B). Prior to his position at 888 Holdings, Mr. Madar served as a Managing Partner at POC Management Consulting, a management consulting firm consulting to leading corporations in the Israeli market, to include: financial institutes, communication companies, leading manufacturers and retailers.

Prof. Uri Polat Ph.D., Chief Scientific Officer and Director. Prof. Polat has served as our Chief Scientific Officer and as a director of InnoVision since July 2013. Prof. Polat is the director of the Visual and Clinical Neuroscience Laboratory at the Eye Research Institute at the Sheba Medical Center, Faculty of Medicine, Tel-Aviv University. He received a Ph.D. in Brain Research from the Weizmann Institute of Science, Rehovot, Israel. He was at the Smith-Kettlewell Eye Research Institute, San-Francisco, USA for several years as a Fellow and Associate Scientist. Prof. Polat was the Founder and Chief Scientific Officer of NeuroVision Inc. and developed the first FDA approved training for adult Amblyopia. Prof. Polat is a member of the Association for Research in Vision and Ophthalmology (ARVO), the Visual Sciences Society, The Israel Society for Neuroscience, and the International Brain Organization. His research and scientific publications received international recognition and are highly influential in the field of neuronal interaction, brain plasticity and perceptual learning in improving visual functions.

Ram Shaffir, Chief Technology Officer and Director. Mr. Shaffir has served as our Chief Technology Officer and as a director of InnoVision since July 2013. Mr. Shaffir previously served as Chief Executive Officer of Odysseus-Ventures, a private investment company specializing in early stage life science companies, and currently serves as a director at Stentomics, one of Odysseus Ventures’ portfolio companies. Prior to his position at Odysseus-Ventures, Mr. Shaffir founded and managed VbaTech, a specialized software house providing software architecture and development services to leading financial institutes in Israel. In additional to his extensive investment activities over the last 10 years, Mr. Shaffir consulted many of Israel’s leading insurance companies in IT issues.

Steve Schaeffer, CPA, Chief Financial Officer. Mr. Schaeffer has served as our Chief Financial Officer since July 2013. Mr. Schaeffer has more than 30 years of accounting and tax experience. His specialty is corporate tax including reorganizations, acquisitions and dispositions. In 1993, he co-founded Cohen & Schaeffer, P.C., a full service CPA firm. Prior to founding Cohen & Schaeffer, Mr. Schaeffer was a tax partner at BDO Seidman and a principal at Laventhol & Horwath heading up the mergers and acquisitions department. Before entering public accounting, he worked for ten years at the Internal Revenue Service. In addition, he taught graduate level tax courses and presented seminars in corporate tax.

Yuval Bar-Gil, Director. Mr. Bar-Gil has served as a director of InnoVision since December 2014. Mr. Bar-Gil was founder of AeroScout, a producer of real-time location systems for healthcare, manufacturing, mining and security, and served as its Chief Executive Officer until its acquisition by Stanley Black & Decker in 2012, following which, Mr. Bar-Gil served as an executive at Stanley Black & Decker until September 2014. Prior to founding AeroScout, Mr. Bar-Gil was a consultant at Bain & Company in London and San Francisco. At Bain & Company, he advised leveraged buyout funds on investments in a variety of industries and developed business strategies for market leaders in several high technology industries. Mr. Bar-Gil holds bachelor’s degrees with honors in Accounting and Law from Tel Aviv University in Tel Aviv, Israel and an M.B.A. from The Wharton School, University of Pennsylvania.

Code of Ethics

Our board of directors believes that it is important to encourage the highest level of corporate ethics and responsibility. Among other things, the board has adopted a written code of ethics, which applies to all of our directors, officers and employees, as well as a procedure by which employees can anonymously report any problems they may detect with respect to our financial reporting. We believe that our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in our public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. The code of ethics, as well as other information pertaining to our committees, corporate governance and reporting with the SEC, can be found on our website at http://www.innovision-labs.com.

Audit Committee

We have a standing Audit Committee composed of two members of the Board of Directors. We require that all Audit Committee members be able to read and understand financial statements, including the Company’s balance sheet, income statement and cash flow statements, and that at least one member, through appropriate education and/or experience, satisfies the definition of “audit committee financial expert” as defined by the rules and regulations of the SEC. Shai Novik and Yuval Bar-Gil compose our Audit Committee. Our board of directors has determined that both Mr. Novik and Mr. Bar-Gil qualify as “audit committee financial experts” under the applicable rules of the SEC. In making this determination, our board of directors determined that each of Mr. Novik and Yuval Bar-Gil has accounting and related financial management expertise within the meaning of the aforementioned rules. The Board of Directors has additionally determined that all members of the Audit Committee are independent for Audit Committee purposes under the more stringent independence standards required by NYSE MKT rules, which we have adopted notwithstanding that our common stock is not listed on the NYSE MKT, and the rules and regulations of the SEC.

Item 11.

Executive Compensation.

Executive Compensation

The following table sets forth the 2015 and 2014 compensation for Mr. Madar, our principal executive officer, and our two other most highly compensated executive officers, for the years ended December 31, 2015 and 2014.

Name and Principal Position	Year		Salary ($)		Stock Awards ($)		Option Awards ($)			All Other Compensation ($)			Total ($)

Nimrod Madar		2015	$	179,738	$	38,665	$	30,791	(1)	$	67,149	(2)		$	316,343
President and Chief Executive Officer		2014	$	176,469	$	87,789	$	77,204	(1)	$	60,618	(3)		$	402,080

Uri Polat		2015	$	101,668	$	-	$	149,996	(1)	$	-			$	251,664
Chief Scientific Officer		2014	$	106,664	$	-	$	268,760	(1)	$	19,183	(4)		$	394,607

Ram Shaffir		2015	$	101,731	$	57,995	$	21,428	(1)	$	-			$	181,154
Chief Technology Officer		2014	$	87,917	$	68,018	$	38,394	(1)	$	24,000	(5)		$	218,329

(1)

Represents the dollar amount recognized for financial statement reporting purposes with respect to the fiscal year in accordance with FASB ASC Topic 718 for stock options granted to the executive.

(2)

Includes $29,688 in automobile expenses paid by us, including leasing costs, insurance premiums gasoline and/or repairs incurred in connection with the executive’s automobile, $23,241 in pension costs related to the executive’s retirement plan and $14,220 in contributions to our severance pay fund as required by Israeli law.

(3)

Includes $20,128 in automobile expenses paid by us, including leasing costs, insurance premiums gasoline and/or repairs incurred in connection with the executive’s automobile, $25,277 in pension costs related to the executive’s retirement plan and $15,213 in contributions to our severance pay fund as required by Israeli law.

(4)

Includes $19,183 in automobile expenses paid by us, including leasing costs, insurance premiums, gasoline and/or repairs incurred in connection with the executive’s automobile.

(5)

Includes $24,000 in automobile expenses paid by us, including leasing costs, insurance premiums, gasoline and/or repairs incurred in connection with the executive’s automobile.

All officers, whether executive or non-executive, serve at the discretion of our board of directors.

We have entered into an Employment Agreement with Mr. Madar, which we refer to as the Madar Employment Agreement, a part-time Consulting Agreement with Prof. Polat, Ph.D., which we refer to as the Polat Consulting Agreement, and a Consulting Agreement with Mr. Shaffir, which we refer to as the Shaffir Consulting Agreement, and a part-time Consulting Agreement, with Cohen & Schaeffer LLP, which we refer to as the Schaeffer Consulting Agreement, pursuant to which Steve Schaeffer acts as our Chief Financial Officer. Collectively the foregoing employment and consulting agreements are referred to as the Officer Agreements. The Officer Agreements each have an initial one-year term, which term, except under the Schaeffer Consulting Agreement, shall be automatically extended for additional successive one-year terms on each one-year anniversary, unless either party gives the other party written notice, no less than 60 days prior to the end of the then-current term, of an election not to renew the Officer Agreement. Under the Schaeffer Consulting Agreement, the term may be extended for subsequent one-year terms upon mutual agreement of the parties. Pursuant to their Officer Agreements, Prof. Polat and Messrs. Madar, Shaffir and Schaeffer will receive annual base salaries or compensation, as the case may be, of $100,000, $180,000, $50,000 and $48,000, respectively, provided, that Mr. Shaffir’s base compensation will increase to $120,000 following our consummation of a financing round in excess of $6,000,000. In addition, each of Prof. Polat and Messrs. Madar and Shaffir are entitled to an annual cash bonus of up to 25% of his base salary or compensation, as the case may be, based on corporate and personal milestones together with equity performance awards, each as determined by the compensation committee of our board of directors, which we refer to as our Compensation Committee. Upon execution of the Officer Agreements on July 30, 2013, we agreed to grant Prof. Polat and Messrs. Madar and Shaffir options to purchase 350,000, 150,000 and 50,000 shares of common stock (in each case not giving effect to the 1-for-10 reverse split of our common stock effected in March 2015, which we refer to as the Reverse Split), respectively, which were granted on February 7, 2014, at an exercise price of $1.93 per share, which options will vest in substantially equal amounts on the first, second and third anniversaries of the date of grant. In addition we granted Messrs. Madar and Shaffir 200,000 and 300,000 shares (not giving effect to the Reverse Split), respectively, of restricted common stock, vesting in substantially equal amounts on the first, second and third anniversaries of the date of grant.

Prof. Polat’s and Messrs. Madar’s and Shaffir’s Officer Agreements provide that if such person voluntarily terminates his employment or consultancy, as the case may be (other than in connection with a change of control of InnoVision and certain other reasons), or we terminate his employment or consultancy, as the case may be, for “cause” (as defined in the agreement) then he will be entitled only to payment of his base salary or compensation, as the case may be, through the date of termination, and will not be entitled to any performance bonus for that year. However, if any such person terminates his Officer Agreement as the result of a material breach by us, he will be entitled to continued payment of his base salary for a period of six months following such termination, plus the value of any accrued benefits (if any), and all unvested options and shares of restricted common stock granted to him shall immediately vest and become exercisable. If we terminate any such person other than for cause or if the term expires and is not renewed by us, then, (i) in the case of Mr. Madar, he will be entitled to continued payment of his base salary or compensation, as the case may be, for a period of six months following such termination or non-renewal, and he would additionally receive the value of accrued benefits and a pro-rata portion of the current year’s performance bonus, and (ii) in the case of Prof. Polat and Mr. Shaffir, he will be entitled to receive an amount equal to his then-current base salary for a period of six months following such termination or non-renewal, and he would additionally receive the value of accrued benefits and a pro-rata portion of the current year’s performance bonus.

If either (a) Prof. Polat or Messrs. Madar or Shaffir terminates his employment or consultancy, as the case may be, for “good reason” (as defined in the agreement) or (b) we or our successor terminates his employment or consultancy, as the case may be, within 12 months following a change in control (as defined in the agreement), then he will be entitled to receive a lump-sum payment equal to the lesser of (i) his base salary or compensation, as the case may be, for six months and (ii) his base salary or compensation, as the case may be, for the remainder of the then unexpired term, and all unvested stock options and shares of Restricted common stock will immediately vest and become exercisable. This amount is subject to reduction so that the total amount of payments or benefits provided to him under his agreement or any benefit plans or agreements will not constitute an “excess parachute payment” under the Internal Revenue Code.

The Officer Agreements include covenants limiting the ability of each of Prof. Polat and Messrs. Madar and Shaffir to compete with us during the term of his employment or during the consulting period, as the case may be, and for a period of one year following his termination for cause by us, and includes a nonsolicitation provision that applies during the same period.

The Officer Agreements provide Mr. Madar and, to the extent not inconsistent with an independent contractor relationship, each of Prof. Polat and Mr. Shaffir, with such benefits as are provided generally to our executive officers, which includes the use of a company car for which he will be grossed-up for any tax liability incurred with respect to the car’s “value equivalent” (the value of the car usage) for tax purposes as updated from time to time, provided, that, the use of a company car for Prof. Polat and Mr. Shaffir is subject to approval of our board of directors.

Pursuant to their Officer Agreements, each of Prof. Polat and Mr. Shaffir, are entitled to assign all or a part of his rights and obligations thereunder to a controlled entity (a “Controlled Entity” is an entity wholly owned by such individual and/or members of such individual’s immediate family); provided, that (i) the Controlled Entity joins as a party to the Officer Agreement and agrees to be bound by the provisions thereof, (ii) the Controlled Entity shall at all times after such assignment employ or otherwise retain the services of such individual, (iii) such individual remains personally bound by and subject to the certain confidentiality and non-competition restrictions contained in the Officer Agreement, (iv) the management services and other duties required under the Officer Agreement shall be rendered by the Controlled Entity only through such individual and (v) we incur no additional cost due to such assignment.

The three primary components of compensation for our organization are salary, bonuses and equity incentives (stock options). Each is described in more detail below.

Salary

Salaries are initially negotiated and generally set forth in employment or consulting agreements between each of our executives and us. Thereafter, our Compensation Committee reviews the salaries of our executive management annually. Salaries are established by (a) reviewing the performance of the executive, (b) adjusting (upwards or downward) to reflect individual qualifications, job uniqueness and performance and (c) engaging in discussions between the CEO and the Compensation Committee in order to make revisions as needed.

Bonuses

We believe that bonuses based on both personal and corporate targets are important in order to incentivize employees and management to achieve our goals. We grant bonuses based on corporate and personal milestones, each as determined by our Compensation Committee.

Equity Compensation

We believe that equity ownership by executive management is important in order to align our long-term rewards program with the interests of our stockholders. Additionally, long-term awards are needed to attract and retain talented and success-driven employees.

Benefits and Perks

We do not currently have a written benefits and perks policy. We intend to provide our executive officers with benefits and perks that are customarily provided to executive officers of public companies of similar size, including, for example, the use of a company car for which we will gross-up the executive’s compensation for any tax liability incurred with respect to the car’s “value equivalent”.

Employment Agreements

We generally negotiate employment or consulting agreements with our named executive officers. The purpose of these arrangements is to secure qualified executives for leadership positions in our organization, as well as to protect our intellectual property by virtue of restrictive covenants contained in the agreements. As described above, we currently have an employment or consulting agreement with each of Prof. Polat, Mr. Madar and Mr. Shaffir.

Outstanding Equity Awards as of December 31, 2015

The following table summarizes the equity awards made to our named executive officers that were outstanding at December 31, 2015.

	Option Awards							Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Option Exercise Price ($)		Option Expiration Date	Number of shares of stock that have not yet vested (#)			Market Value of shares of stock that have not yet vested ($)(1)
Nimrod Madar		241,071		-		0.013	May 8, 2022		6,667	(2)		11,267
		76,812		-		0.013	November 20, 2022		-			-
		10,000		5,000		19.300	February 6, 2024		-			-

Uri Polat		23,450		11,550		19.300	February 6, 2024		-			-

Ram Shaffir		259,764		-		0.013	May 8, 2022		10,000	(2)		16,900
		3,350		1,650		19.300	February 6, 2024		-			-

⁽¹⁾

The market value of the shares was calculated based upon the closing price of our common stock of $1.69 per share, as reported on the OTCBB on December 31, 2015.

⁽²⁾

Restricted common stock vests in substantially equal amounts on July 29, 2016.

Director Compensation

Members of our board of directors who are also officers do not receive separate compensation for their respective service on our board of directors. Awards of restricted stock or options are determined in the discretion of the Compensation Committee. We reimburse each director for reasonable travel expenses related to such director’s attendance at board of directors and committee meetings. Mr. Novik is entitled to receive annual cash compensation of $75,000 for his service as Chairman of our board of directors. On December 15, 2014, we appointed Mr. Yuval Bar-Gil to serve as a director on our board of directors. On December 15, 2014, we granted Mr. Novik 75,000 shares of common stock and we granted Mr. Bar-Gil options to purchase up to 100,000 shares of common stock, at an exercise price equal to $0.46 per share, in each case not giving effect to the Reverse Split, vesting in substantially equal monthly installments over a period of 12 months from the date of grant. Mr. Bar-Gil did not receive any other compensation for his services as director for the year ended December 31, 2015.

Director	Fees Earned or Paid in Cash ($)		Stock and Options Awards ($)⁽¹⁾		Total ($)
Shai Novik	$	75,000	$	-	$	75,000
Yuval Bar-Gil		—	$	-	$	-

⁽¹⁾

Amount represents the aggregate grant date fair value of stock awards granted during the fiscal year ended December 31, 2015. For additional information regarding assumptions underlying the valuation of equity awards and the calculation method, please refer to Note 10 to our consolidated financial statements, which are contained in this Annual Report on Form 10-K for the year ended December 31, 2015. As of December 31, 2015, the aggregate number of outstanding stock awards and stock option awards (both exercisable and unexercisable) for the persons named in the table above (in each case giving effect to the Reverse Split) were as follows:

Name	Aggregate Number of Options Awards		Aggregate Number of Stock Awards
Shai Novik		15,000		37,500
Yuval Bar-Gil		10,000		-

Item 12.

Security Ownership of Certain Beneficial Owners and Management.

As of March 16, 2016, the following table sets forth information regarding the beneficial ownership of our common stock by:

each of our named executive officers;

each of our directors;

all of our directors and executive officers as a group; and

each person who is known by us to beneficially own more than 5% of our common stock.

Beneficial ownership is determined in accordance with the rules of the SEC. Except as indicated by footnote and subject to community property laws, where applicable, to our knowledge the persons named in the table below have sole voting and investment power with respect to all shares of our common stock that are shown as beneficially owned by them. In computing the number of shares of common stock owned by a person and the percentage ownership of that person, any such shares subject to options and warrants held by that person that are exercisable as of March 16, 2016 or that will become exercisable within 60 days thereafter are deemed outstanding for purposes of that person’s percentage ownership but not deemed outstanding for purposes of computing the percentage ownership of any other person. Unless otherwise indicated, the mailing address of each individual is c/o InnoVision Labs, Inc., 5 Jabotinski St., POB 12, Ramat Gan, Israel 5252006. The following information is based upon information provided to us or filed with the SEC by the persons named below.

Name and Address of	Number of Shares			Percentage of Outstanding Common Shares⁽¹⁾
Directors and Named Executive Officers:
Uri Polat, Chief Scientific Officer and Director		1,622,153	⁽²⁾		26.5	%
Shai Novik, Chairman of the Board		1,407,220	⁽³⁾		21.0	%
Ram Shaffir, Chief Technology Officer and Director		1,157,262	⁽⁴⁾		18.1	%
Nimrod Madar, President, Chief Executive Officer and Director		347,884	⁽⁵⁾		5.4	%
Steve Schaeffer, Chief Financial Officer		_			*
Yuval Bar-Gil, Director		20,000	⁽⁶⁾		0.3	%
All Executive Officers and Directors as a Group (6 Persons)		3,907,398			56.3	%
Certain Beneficial Owners:
Odysseus Ventures LLP ⁽⁵⁾		410,126			6.7	%
IGWT Global Services LTD.⁽⁶⁾		405,790			6.6	%

Less than 1%

(1)

6,102,449 shares issued and outstanding as of March 16, 2016.

(2)

Includes options to purchase 23,450 shares.

(3)

Includes warrants to purchase 342,466 shares, Notes to purchase 236,993 shares and options to purchase 15,000 shares. Also includes (i) 410,126 shares held by Odysseus-Ventures LLP, over which Shai Novik shares voting and investment control, and (ii) 5,625 shares owned by Mr. Novik’s spouse through her 401(k) plan. Mr. Novik disclaims beneficial ownership of all of the foregoing shares except to the extent of his pecuniary interest therein.

(4)

Includes warrants to purchase 40,000 shares and options to purchase 263,114 shares. This also includes 410,126 shares held by Odysseus-Ventures LLP, over which Ram Shaffir shares voting and investment control. Mr. Shaffir disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein.

(5)

Includes options to purchase 327,883 shares.

(6)

Includes options to purchase 10,000 shares.

(7)

The address of Odysseus Ventures LLP is 28 Harakevet Street, Tel Aviv, Israel 67770. Ram Shaffir and Shai Novik have shared voting and investment control over the shares held by Odysseus Ventures LLP.

(8)

The address of IGWT Global Services LTD. is Craigmuir Chambers, P.O. Box 71, Road Town, Tortola VG1110 BVI. Kretzmer & Associates PLLC has voting and investment control over the shares held by IGWT Global Services LTD.

Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth information as of December 31, 2015 about securities authorized for issuance under our 2013 Incentive Compensation Plan, which we refer to as the Plan, which was adopted by our board of directors on June 26, 2013.

	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders		—		—		—
Equity compensation plans not approved by security holders		951,131	$	3.07		110,283
Total		951,131	$	3.07		110,283

The purpose of the Plan is to assist us and our subsidiaries in attracting, motivating, retaining, and rewarding high-quality executives and other employees, officers, directors, and individual consultants, who provide services to us or our subsidiaries by enabling such persons to acquire or increase a proprietary interest in us, which we believe strengthens the mutuality of interests between such persons and our stockholders. We have reserved 1,400,000 shares of common stock for issuance under the plan, of which 165,516 options have been exercised and 110,283 remain available for issuance. To the extent of a forfeiture, expiration, termination, non-issuance or cash settlement of shares of common stock subject to an award or to any award, as applicable, such shares will again be available for delivery with respect to awards under the Plan.

The Plan is administered by our Compensation Committee or a subcommittee thereof. If our board of directors fails to designate a committee or if there are no longer any members on the committee so designated by our board of directors, or for any other reason determined by our board of directors, then our board of directors will serve as the committee. The committee may appoint agents to assist it in administering the Plan. Subject to the terms of the plan, the committee is authorized to: (a) designate participants; (b) grant awards; (c) determine the type, number and other terms and conditions of, and all other matters relating to, awards; (d) prescribe award agreements; (e) construe and interpret the Plan and award agreements; (f) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it will deem appropriate for the proper administration of the Plan; (g) make any other determination and take any other action that the committee deems necessary or advisable for the administration of the Plan; (h) determine whether, to what extent, and under what circumstances awards may be settled or exercised in cash, shares, other awards, other property, net settlement, or any combination thereof, or canceled, forfeited, or suspended, and the method or methods by which awards may be settled, exercised, canceled, forfeited, or suspended; and (i) determine whether, to what extent, and under what circumstances cash, shares, other awards, other property, and other amounts payable with respect to an award under the Plan will be deferred either automatically or at the election of the holder thereof or of the committee. The committee has the authority to adopt such modifications, procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which we or our subsidiaries may operate to assure the viability of the benefits from awards granted to participants performing services in such countries and to meet the objectives of the Plan.

The persons eligible to receive awards under the Plan are our officers, directors, employees and individual consultants of us or any of our subsidiaries, or our prospective employees or any of our subsidiaries (conditioned upon, and effective not earlier than, such person becoming an employee of the Company or any of our subsidiaries). The Plan provides for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, stock granted as a bonus or in lieu of another award, other stock-based awards and performance awards. Stock options granted under the Plan will have an exercise price per share not less than 100% of the fair market value of our common stock on the grant date.

Item 13.

Certain Relationships and Related Transactions, and Director Independence

Transactions with Related Persons

On September 21, 2015, we issued and sold to investors in a private placement $1,750,000 aggregate principal amount of our 8.0% Senior Convertible Notes, which were issued together with warrants to acquire an aggregate of 1,198,631 shares of common stock at an exercise price of $2.19 per share. Our Chairman of the Board of Directors, Mr. Shai Novik, participated in the private placement on the same terms as all other investors, acquiring, for $500,000 a Note in an aggregate principal amount of $500,000 and Warrants to acquire an aggregate of 342,466 shares.

Review, Approval or Ratification of Transactions with Related Persons

Our board of directors conducts an appropriate review of and oversees all related-party transactions. We have not yet adopted formal standards in respect of the review and approval or ratification of related-party transactions; however, our board has conformed to the following standards: (i) all related-party transactions must be fair and reasonable to us and on terms comparable to those reasonably expected to be agreed to with independent third parties for the same goods and/or services at the time authorized by the board; and (ii) all related-party transactions must be authorized, approved or ratified by the affirmative vote of a majority of the directors who have no interest, either directly or indirectly, in any such related party transaction.

Director Independence

We evaluate the independence of directors and the composition of the committees of the board of directors in accordance with the rules of the NYSE MKT, notwithstanding that our common stock is not listed for trading on the NYSE MKT or any other national securities exchange. Our board utilizes the definition of “independence”, including for Audit Committee purposes, as that term is defined by the applicable NYSE MKT rules. Our board of directors analyzes whether a director is independent by evaluating, among other factors, the following:

whether the director has any material relationship that may impair his or her independent judgment;

whether the director is a current employee of InnoVision or our subsidiaries or was an employee of InnoVision or our subsidiaries within the three years preceding the determination date;

whether the director accepted or has an immediate family member who accepted any compensation from InnoVision or our subsidiaries within the three years preceding the determination of independence, other than (a) compensation for board or board committee service, (b) compensation paid to an immediate family member who is our employee (other than an executive officer), (c) compensation received for former service as an interim executive officer (provided the interim employment did not last longer than one year), or (d) benefits under a tax-qualified retirement plan, or non-discretionary compensation;

whether the director is, or has an immediate family member who is, a partner in, or a controlling stockholder or an executive officer of, any organization to which we made, or from which we received, payments exceeding certain amounts in any of our most recent three fiscal years;

whether the director is, or has an immediate family member who is, employed as an executive officer of another entity where at any time during the most recent three fiscal years any of our executive officers serve on the compensation committee of such other entity; and

whether the director is, or has an immediate family member who is, a current partner of our outside auditor, or was a partner or employee of our outside auditor who worked on our audit at any time during any of the past three years.

The above list is not exhaustive, and the board of directors considers other factors when determining whether a director is independent.

Our board is composed of Shai Novik, M.B.A., Nimrod Madar, M.B.A., Uri Polat, Ph.D., Ram Shaffir and Yuval Bar-Gil. Based on the independence standards discussed above, our board has affirmatively determined that each of Mr. Novik and Mr. Bar-Gil is independent. Mr. Madar, Prof. Polat and Mr. Shaffir are not independent because each serves as one of our executive officers.

Item 14.

Principal Accounting Fees and Services.

Our independent auditor for the year ended December 31, 2015 was the firm of Yarel + Partners CPA (ISR). The following table sets forth fees billed to us by Yarel + Partners CPA (ISR) for the fiscal years ended December 31, 2015 and 2014 for: (a) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements; (b) services that are reasonably related to the performance of the audit or review of our financial statements and that are not reported as “audit fees;” (c) services rendered in connection with tax compliance, tax advice and tax planning; and (d) all other fees for services rendered.

	Year Ended December 31,
	2015		2014
Audit Fees	$	50,000	$	50,000
Audit Related Fees		—		—
Tax Fees (1)	$	2,500	$	2,500
All Other Fees		—		—

(1)

Tax fees pre-approved by the Audit Committee relate to preparation of the Company’s Israeli subsidiary’s annual tax report.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

The Audit Committee is solely responsible for the pre-approval of all audit and non-audit services to be provided by the independent accountants. The Audit Committee approved all of the fees paid to Yarel + Partners CPA (ISR) for the years ended December 31, 2015 and 2014.

The Audit Committee, after consideration of the matter, does not believe that any of the services rendered to us by Yarel + Partners CPA (ISR) were incompatible with maintaining Yarel + Partners CPA (ISR)’s independence as our principal independent registered public accountant.

PART IV

Item 15.

Exhibits and Financial Statement Schedules

The following documents are filed as part of this Annual Report on Form 10-K:

1. Financial Statements. The following Consolidated Financial Statements of InnoVision Labs, Inc. are included in Item 8 of this Annual Report on Form 10-K:

		Page
Report of Independent Registered Public Accounting Firm		F-3
Consolidated Balance Sheets		F-4
Consolidated Statements of Operations		F-5
Consolidated Statements of Stockholders’ Equity		F-6
Consolidated Statements of Cash Flows		F-8
Notes to Consolidated Financial Statements		F-10

2. Financial Statement Schedule. The information required by this item is included in the consolidated financial statements contained in this Annual Report on Form 10-K.

3. Exhibits

Exhibit		Description


2.1		Agreement and Plan of Merger, dated as of June 26, 2013, by and among Autovative Products, Inc., Ucansi Acquisition Corp. and Ucansi Inc., filed as Exhibit 2.1 to our Current Report on Form 8-K, filed with the SEC on July 2, 2013 and incorporated herein by reference.

2.2		First Amendment to Agreement and Plan of Merger, dated as of July 2, 2013, by and among Autovative Products, Inc. and Ucansi Inc., filed as Exhibit 2.2 to our Current Report on Form 8-K, filed with the SEC on July 2, 2013 and incorporated herein by reference.

2.3		Spin-Off Agreement, dated as of May 23, 2013, by and between Autovative Products, Inc. and David Funderburk, filed as Exhibit 2.3 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

3.1		Amended and Restated Articles of Incorporation of GlassesOff Inc., filed as Exhibit 3.1 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

3.2		Amended and Restated Bylaws of GlassesOff Inc., filed as Exhibit 3.2 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

3.3		Certificate of Change of GlassesOff Inc., effective March 30, 2015, filed as Exhibit 3.3 to our Annual Report on Form 10-K, filed with the SEC on March 31, 2015 and incorporated herein by reference

3.4		Certificate of Amendment of GlassesOff Inc., effective December 29, 2015, filed as Exhibit 3.1 to our Current Report on Form 8-K, filed with the SEC on January 5, 2016 and incorporated herein by reference.

4.1		Form of Warrant, filed as Exhibit 4.1 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

4.2		Form of Subscription Agreement, filed as Exhibit 4.2 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

4.3		Form of 8.0% Senior Convertible Promissory Note, filed as Exhibit 4.1 to our Current Report on Form 8-K, filed with the SEC on September 23, 2015 and incorporated herein by reference.

4.4		Form of Warrant, filed as Exhibit 4.2 to our Current Report on Form 8-K, filed with the SEC on September 23, 2015 and incorporated herein by reference.

10.1		License Agreement, dated July 15, 2011, by and between RevitalVision LLC and Ucansi Inc., filed as Exhibit 10.2 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

10.2+		Employment Agreement, dated July 30, 2013, by and between Eyekon E.R.D Ltd. and Nimrod Madar., filed as Exhibit 10.3 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

10.3+		Consulting Agreement, dated July 30, 2013, by and between Eyekon E.R.D Ltd. and Uri Polat, Ph.D., filed as Exhibit 10.4 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

10.4+		Consulting Agreement, dated July 30, 2013, by and between Eyekon E.R.D Ltd. and Ram Shaffir., filed as Exhibit 10.5 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

Exhibit		Description

10.5+		Consulting Agreement, dated July 30, 2013, by and between GlassesOff Inc. and Cohen & Schaeffer P.C., filed as Exhibit 10.6 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

10.6+		GlassesOff Inc. 2013 Incentive Compensation Plan, filed as Exhibit 10.7 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

10.7+		Form of Option Award Agreement under the GlassesOff Inc. 2013 Incentive Compensation Plan, filed as Exhibit 10.8 to our Annual Report on Form 10-K, filed with the SEC on March 31, 2015 and incorporated herein by reference.

10.8+		Form of Restricted Stock Award Agreement under the GlassesOff Inc. 2013 Incentive Compensation Plan, filed as Exhibit 10.8 to our Annual Report on Form 10-K, filed with the SEC on March 31, 2015 and incorporated herein by reference.

10.9		Stock Purchase and Registration Rights Agreement, dated May 16, 2014, by and among GlassesOff Inc. and the Investors party thereto, filed as Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on March 19, 2014 and incorporated herein by reference.

10.10		Standby Equity Distribution Agreement, dated July 1, 2014, by and between GlassesOff Inc. and YA Global Master SPV Ltd., filed as Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on July 3, 2014 and incorporated herein by reference.

10.11		Securities Purchase and Registration Rights Agreement, dated September 17, 2015, by and among GlassesOff Inc. and the Investors party thereto, filed as Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on September 23, 2015 and incorporated herein by reference.

21*		Subsidiaries of InnoVision Labs, Inc.

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**		Certifications of Chief Executive Officer required by Section 906 of the Sarbanes-Oxley Act of 2002

32.2**		Certifications of Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*		XBRL Instance Document

101.SCH*		XBRL Schema Document

101.CAL*		XBRL Calculation Linkbase Document

101.LAB*		XBRL Label Linkbase Document

101.PRE*		XBRL Presentation Linkbase Document

Filed herewith.

Furnished herewith.

Compensation plan or arrangement or management contract.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on our behalf by the undersigned, thereunto duly authorized.

	InnoVision Labs, Inc.

	By:	/s/ Nimrod Madar
		Nimrod Madar
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: March 25, 2016

	By:	/s/ Steve Schaeffer
		Steve Schaeffer
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)
Date: March 25, 2016

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

Signature	Title	Date

/s/ Nimrod Madar	President, Chief Executive Officer and Director	March 25, 2016
Nimrod Madar	(Principal Executive Officer)

/s/ Steve Schaeffer	Chief Financial Officer	March 25, 2016
Steve Schaeffer	(Principal Financial Officer and Principal Accounting Officer)

/s/ Shai Novik	Chairman of the Board	March 25, 2016
Shai Novik

/s/ Uri Polat	Chief Scientific Officer and Director	March 25, 2016
Uri Polat

/s/ Ram Shaffir	Chief Technology Officer and Director	March 25, 2016
Ram Shaffir

/s/ Yuval Bar-Gil	Director	March 25, 2016
Yuval Bar-Gil

INNOVISION LABS, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014

AND THE TWO YEARS ENDED DECEMBER 31, 2015

INNOVISION LABS, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015 AND 2014

AND THE TWO YEARS ENDED DECEMBER 31, 2015 AND 2014

INDEX

	Page

Report of Independent Registered Public Accounting Firm	1

Consolidated Balance Sheets	2

Consolidated Statements of Operations	3

Statements of Stockholders’ Equity	4

Consolidated Statements of Cash Flows	6

Notes to Consolidated Financial Statements	8

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of InnoVision Labs, Inc.

We have audited the accompanying consolidated balance sheets of InnoVision Labs, Inc. and subsidiaries ("the Company") as of December 31, 2015 and 2014, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2015. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has incurred operating losses and its ability to continue to operate as a going concern is dependent upon additional financial support. These conditions and others raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

/s/ Yarel + Partners

Yarel + Partners

Tel-Aviv, Israel

March 23, 2016

INNOVISION LABS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

IN THOUSANDS (Except shares and par value amounts)

	December 31,
	2015			2014
ASSETS
Current Assets:
Cash and cash equivalents	$	630		$	2,570
Trade receivables and deferred income		43			18
Accounts receivable and prepaid expenses		347			120
Total Current Assets		1,020			2,708
Long Term Assets:
Property and equipment, net		110			142
Intangible assets, net		320			455
Long term prepaid expenses		14			16
Restricted cash		65			64
Total Long Term Assets		509			677
Total Assets	$	1,529		$	3,385

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Trade payables	$	219		$	105
Related parties payable		171			316
Accrued expenses and other liabilities		455			427
Total Current Liabilities		845			848
Long Term Liabilities:
Convertible notes payable, net of discount of $1,602		237			-
Related parties payable		243			-
Commitments and Contingent liabilities		-			-
Total Long Term Liabilities		480			-
Stockholders’ Equity:
Preferred Stock, $0.001 par value, 20,000,000 shares authorized at December 31, 2015 and 2014, respectively; no shares issued or outstanding.		-			-
Stock capital - Common shares of $0.001 par value per share 40,000,000 and 20,000,000 shares of common stock authorized at December 31, 2015 and 2014, respectively; 6,032,449 and 5,834,833 shares issued and outstanding at December 31, 2015 and 2014, respectively		6			6
Additional paid-in capital		21,773			19,438
Accumulated deficit		(21,575	)		(16,907	)
Total Stockholders’ Equity		204			2,537
Total Liabilities and Stockholders’ Equity	$	1,529		$	3,385

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

INNOVISION LABS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

IN THOUSANDS (Except shares and per share amounts)

	Year ended December 31,
	2015			2014

Revenues	$	280		$	110
Cost of sales		(285	)		(111	)

Gross loss		(5	)		(1	)

Operating expenses:
Research and development		(2,204	)		(1,818	)
Sales and marketing		(1,064	)		(1,109	)
General and administrative		(1,164	)		(2,552	)

Total operating expenses		(4,432	)		(5,479	)
Operating (loss)		(4,437	)		(5,480	)
Financial income (expenses), net		(231	)		20

Net (loss)	$	(4,668	)	$	(5,460	)

( Loss) per share (basic & diluted)	$	(0.79	)	$	(0.98	)

Weighted average number of shares outstanding		5,874,868			5,562,891

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

INNOVISION LABS, INC. AND SUBSIDIARIES

STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)

IN THOUSANDS (Except number of shares)

	Common Stock
	Shares		Amount		Additional paid-in capital		Accumulated Deficit			Total stockholders’ equity

Balance as of December 31, 2013		5,328,859	$	5	$	12,579	$	(11,447	)	$	1,137

Issuance of common stock and warrants, net of $40 issuance expenses		400,000		*		4,960		-			4,960

Vested portion of restricted shares granted in 2014		52,869		*		409		-			409

Vested portion of restricted shares granted in previous years		-		-		282		-			282

Stock-based compensation on options		-		-		1,018		-			1,018

Issuance of common stock-commitment fee		10,331		*		150		-			150

Exercise of options		37,901		*		-					*

Issuance of common stock to investor		4,873		*		40		-			40

Net (loss)		-		-		-		(5,460	)		(5,460	)

Balance as of December 31, 2014		5,834,833	$	6	$	19,438	$	(16,907	)	$	2,537

* - Less than $1

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

INNOVISION LABS, INC. AND SUBSIDIARIES

STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)

IN THOUSANDS (Except number of shares)

	Common Stock
	Shares		Amount		Additional paid-in capital		Accumulated Deficit			Total stockholders’ equity

Balance as of December 31, 2014		5,834,833	$	6	$	19,438	$	(16,907	)	$	2,537

Vested portion of restricted shares granted in 2015		70,000		*		96		-			96

Vested portion of restricted shares granted in previous years		-		-		124		-			124

Stock-based compensation on options		-		-		327		-			327

Exercise of options		127,616		*		1		-			1

Debt discount on convertible debt allocated to warrants, net of $8 issuance expenses		-		-		1,127		-			1,127

Debt discount on convertible debt allocated to beneficial conversion feature, net of $5 issuance expenses		-		-		660		-			660

Net (loss)		-		-		-		(4,668	)		(4,668	)

Balance as of December 31, 2015		6,032,449	$	6	$	21,773	$	(21,575	)	$	204

* - Less than $1

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

INNOVISION LABS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

IN THOUSANDS

	Year ended December 31,
	2015			2014
Cash flows from operating activities
Net (loss)	$	(4,668	)	$	(5,460	)
Adjustments to reconcile net (loss) to net cash (used in)
Operating activities:
Depreciation		36			26
Amortization of intangible assets		188			73
Amortization of debt discounts and debt issuance costs		198			-
Accrued interest on convertible notes payable		39			-
Stock based compensation related to employees and nonemployees		541			1,571
Issuance of common stock in satisfaction of SEDA commitments fees		-			150
Changes in assets and liabilities:
(Increase) in accounts receivables		(25	)		(18	)
Decrease (increase) in receivables and prepaid expenses		(225	)		37
Increase in trade payables		114			11
(Decrease) increase in related parties payable		98			(34	)
Long term deposit exchange rate differences		(1	)		3
Increase in accrued expenses and other liabilities		28			172
Net cash (used in) operating activities		(3,677	)		(3,469	)

Cash flows from investing activities
Purchase of property and equipment		(4	)		(98	)
Intangible asset		(47	)		(390	)
Net cash (used in) investing activities		(51	)		(488	)

Cash flows from financing activities
Proceeds from issuance of convertible notes and warrants, net of issuance costs		1,787			-
Proceeds from options exercise		1			-
Proceeds from issuance of common stock and warrants, net		-			5,001
Net cash provided by financing activities		1,788			5,001

Increase (decrease) in cash and cash equivalents		(1,940	)		1,044
Cash and cash equivalents at the beginning of the year		2,570			1,526
Cash and cash equivalents at the end of the year	$	630		$	2,570

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

INNOVISION LABS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

IN THOUSANDS (Except number of warrants and shares)

	Year ended December 31,
	2015		2014
Non cash transactions:
Capitalization of stock based compensation to intangible assets		6	$	138

Additional information:
Cash paid for income taxes	$	-	$	-
Cash paid for interest expense	$	-	$	-

The accompanying notes are an integral part of the consolidated financial statement

INNOVISION LABS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS

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 delivers its scientific products through a game-like experience based on mobile applications (“apps”). Currently, the Company focuses significant time and resources on development of its new app, which is based on sports themes, including basketball and baseball, with a go-to-market strategy of partnering with known athletes as “brand partners”. The Company also plans to re-launch its existing GlassesOff app under a new dynamic game-like technology. The Company conducts its development efforts through its wholly owned Israeli subsidiary, Eyekon E.R.D Ltd.

The Company devotes most of its efforts toward research and development activities. The Company commenced marketing activities in 2014. In the course of such activities, the Company has sustained operating losses and expects such losses to continue for the foreseeable future. The Company started generating revenues in 2014; however, the Company has not yet generated significant revenue from operations and is still devoting efforts to development activities, such as raising capital and recruiting and training personnel. The Company’s deficit accumulated during the development stage aggregated $21,575 through December 31, 2015. 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.

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The significant accounting policies followed in the preparation of the financial statements, on a consistent basis are:

Use of estimates:

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While management believes that such estimates are fair when considered in conjunction with the consolidated financial position and results of operations taken as a whole, actual results could differ from those estimates and such differences may be material to the financial statements.

Patents:

As a result of the Company’s research and development efforts, the Company has obtained, or is applying for, a number of patents to protect proprietary technology and inventions. Costs incurred in connection with patent applications where there is no uncertainty with respect to the future economic benefits of the asset or that an alternate future use is available to the Company, are capitalized and amortized over the expected life of the patent. All other costs associated with patents for product candidates under development are expensed as incurred. As of December 31, 2015, the Company had capitalized patent costs in the amount of $7.

INNOVISION LABS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial statements in U.S. dollars:

The functional currency of the Company is the U.S dollar, as the U.S. dollar is the primary currency of the economic environment in which the Company has operated and expects to continue to operate in the foreseeable future. The majority of Eyekon E.R.D. Ltd.’s operations are currently conducted in Israel and most of the Israeli expenses are currently paid in new Israeli shekels ("NIS"); however, the subsidiary's operations do not generate any positive cash flow to cover its expenses and is not able to exist without the parent company's funding. Therefore the currency used for operating activities, financing and investing activities, including loans and equity transactions, is the U.S. dollar. Accordingly, the functional and reporting currency of the Company is the U.S. dollar. Monetary accounts maintained in currencies other than the dollar are remeasured into U.S. dollars. All transaction gains and losses from the remeasurement of monetary balance sheet items are reflected in the statements of operations as financial income or expenses, as appropriate.

Revenue recognition:

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 mobile 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 is 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.

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 and contractors, clinical trials and related clinical manufacturing costs, license and milestone fees, and facilities and overhead costs.

Comprehensive Income (Loss):

Accounting guidance requires financial statements to include the reporting of comprehensive income (loss), which includes net income (loss) and certain transactions that have generally been reported in the statement of stockholders’ equity. The Company’s comprehensive loss consists of net loss.

Segment Reporting:

A business segment is a distinguishable component of an enterprise that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business segments. Management believes that the Company meets the criteria for aggregating its operating segments into a single reporting segment.

INNOVISION LABS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (continued)

Cash and cash equivalents:

For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.

Restricted cash:

Cash and cash items which are restricted as to withdrawal or usage. Restricted cash includes legally restricted deposits held as compensating balances against a line of credit on credit cards to assure future credit availability and for a bank guarantee to secure the Company's office lease agreement. Restricted cash is classified as either short or long term according to the restriction terms.

Accounts receivable:

Accounts receivable are recorded at net realizable value consisting of the carrying amount less the allowance for uncollectible accounts. As of December 31, 2015 and 2014, the Company has not accrued an allowance for uncollectible accounts.

Property and equipment:

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets.

The annual depreciation rates are as follows:	%
Office furniture and equipment		7 - 15
Laboratory equipment		15 - 31
Computers and electronic equipment		33
Leasehold improvements		10

Long lived assets:

The Company 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.

Intangible assets, net:

Software development costs incurred subsequent to establishing technological feasibility and up to the general release of the software products and significant enhancement in the products afterwards 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 at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company assesses recoverability by determining whether the carrying value of such assets will be recovered through the discounted expected future cash flows. If the future discounted cash flows are less than the carrying amount of these assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets.

INNOVISION LABS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounting for stock-based compensation:

ASC 718 - “Compensation-stock Compensation”- (“ASC 718”) requires companies to estimate the fair value of equity-based payment awards on the date of grant using an Option Pricing Model ("OPM"). 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 estimates the fair value of stock options granted using the Black-Scholes Merton OPM. The OPM requires a number of assumptions, of which the most significant are the expected stock price volatility and the expected option term. For options with an expected term longer than the period for which the Company has quoted stock prices, expected volatility is calculated on the basis of a combination of comparable companies and the Company's historical share price. For options with a short expected term, expected volatility is calculated on the basis of the Company's historical share price. The expected term represents management's estimation of the period of time such options are expected to be outstanding.

The Company applies ASC 505-50, “Equity Based Payments to Non Employees” (“ASC 505-50”), with respect to options issued to non-employees, which requires the fair value of the nonemployee award to be remeasured as the award vests. For employee stock-based awards with only service conditions, the Company recognize compensation on a straight line basis over the requisite service period, which is usually the vesting period of the award.

The fair value of options was estimated using the Black-Scholes Merton OPM with the following assumptions:

	Year ended December 31, 2015			Year ended December 31, 2014

Risk free interest rate		0.270% - 1.760	%		0.001% - 0.670	%
Dividend yield		0	%		0	%
Volatility factor		0.902 - 1.408			0.833 - 1.004
Expected life of the options		1 – 5 years			1 - 3 years

Severance pay:

All employees signed on employment agreements implementing Section 14 of the Israeli Severance Pay Law, mandating that upon termination of the employees’ employment, the Company shall release to them all the amounts accrued in their insurance policies. The severance pay liabilities and deposits covered by these plans are not reflected in the balance sheet as the severance pay risks have been irrevocably transferred to the severance funds.

Income taxes:

The Company accounts for income taxes in accordance with the provisions of ASC 740-10, Income Taxes. ASC 740-10 requires companies to recognize deferred tax assets and liabilities based on the differences between financial reporting and tax bases of assets and liabilities. These differences are measured using the enacted tax rates and laws that are expected to be in effect when the temporary differences are expected to reverse. A valuation allowance is established against net deferred tax assets, if based on the weighted available evidence, it is more likely than not that all or a portion of the deferred tax assets will not be realized.

Financial risk management:

The Company's activities potentially expose it to a variety of financial risks: market risk (including foreign exchange risk and cash flow) and liquidity risk. The Company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company's financial performance.

INNOVISION LABS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (continued)

The board of directors provides oversight of the overall risk management of the Company. The Company did not make use of derivative financial instruments during the current and preceding financial periods.

(a) Market risk

(i) Foreign exchange risk

The Company operates internationally and is exposed to foreign exchange risk arising from financial instruments that are denominated in a currency other than the functional currency of the Company. The table below shows the Company's sensitivity to foreign exchange rates on its NIS and euro (EUR) financial instruments. These two currencies are the significant non-functional currencies in which the Company’s financial instruments are denominated. The Company has considered movements in these currencies over the last two years and has concluded that a 5% movement in rates is a reasonable benchmark. Foreign exchange sensitivity for Company assets and liabilities other than financial instruments is not included and translation related risk is not taken into account.

At December 31, 2015, if the currencies had strengthened by 5% against the U.S. dollar with all other variables held constant, the impact on net loss for the year would have been as follows:

Currency	Increase/(Decrease) on Loss
5% appreciation of NIS	$	(5	)
5% appreciation of EUR	$	1

If the currencies depreciated by 5% against the U.S. dollar, the impact on loss for the year would result in an equal and opposite effect.

(ii) Cash flow and fair value interest rate risk

The Company’s interest-bearing financial instruments are primarily comprised of money market investments and bank deposits. Interest rates on money market investments and bank deposits are minimal. Consequently, management considers the potential impact on profit or loss of a defined interest rate shift that is reasonably possible at the end of the reporting period to be immaterial.

(b) Credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents.

Cash and cash equivalents are invested in major banks in Israel and in the U.S. Such deposits in Israel and the U.S. are not insured. Management believes that the financial institutions that hold the Company’s investments are financially sound and, accordingly, minimal credit risk exists with respect to these investments.

The Company has no off-balance-sheet concentration of credit risk, such as foreign exchange contracts or any other hedging arrangements.

The Company is exposed to liquidity risk in relation to meeting future obligations associated within its financial liabilities and commitments. Financial liabilities comprise amounts owed to holders of the Company’s outstanding 8.0% Senior Convertible Notes due 2018 (the “Notes”), trade and other payables. Liquidity risk is monitored at a Company level by ensuring that sufficient funds are available.

8.0% Senior Convertible Notes:

Beneficial conversion feature:

The Company applied ASC Topic 470-20, "Debt - Debt with Conversion and Other Options" which clarifies the accounting for instruments with beneficial conversion features or contingency adjustable conversion ratios.

INNOVISION LABS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (continued)

The beneficial conversion feature has been calculated by allocating the proceeds received in financing transactions to the convertible instrument and to any detachable warrants included in the transaction, and by measuring the intrinsic value of the convertible instrument based on the effective conversion price as a result of the allocated proceeds.

The fair value of the warrant was determined using the Black-Scholes option-pricing model under the assumptions that described in Note 6.

The amount of the beneficial conversion feature with respect to the Notes was recorded as a discount on the Notes with a corresponding amount credited directly to equity as additional paid-in capital. After the initial recognition, the discount on the Notes is amortized as interest expenses over the term of the Notes.

Issuance costs on the Notes:

Costs incurred in respect of obtaining financing through issuance of the Notes were reported as a direct deduction from the face amount of the note and that amortization of debt issue costs was reported as interest expense.

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 pay 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:

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.

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 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	$	-	$	-

	Fair Value Measurements at December 31, 2014
	Total		(Level 1)		(Level 2)		(Level 3)

Cash and cash equivalents	$	2,570	$	2,570	$	-	$	-
Restricted cash		64		64		-		-
Total assets at fair value, net	$	2,634	$	2,634	$	-	$	-

INNOVISION LABS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS (Except shares and per share amounts)

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (continued)

(Loss) per share:

Basic and Diluted losses per share are presented in accordance with ASC 260-10 “Earnings per share”. Outstanding convertible notes, restricted stock, options and warrants 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 the Company’s common stock, $0.001 par value per share (“Common Stock”), related to outstanding convertible notes, restricted stock, options and warrants excluded from the calculations of diluted loss per share were 2,089,696 and 2,053,128 for the years ended December 31, 2015 and 2014, respectively.

Impact of recently issued accounting standards:

INNOVISION LABS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS (Except shares and per share amounts)

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (continued)

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“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 this Update will have on our consolidated financial statements and related 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS (Except shares and per share amounts)

NOTE 3:-

ACCOUNTS RECEIVABLE AND PREPAID EXPENSES

	December 31,
	2015		2014

Israeli government authorities	$	50	$	60
Prepaid expenses and other		297		60
	$	347	$	120

NOTE 4:-

PROPERTY AND EQUIPMENT, NET

	December 31,
	2015		2014
Cost:
Office furniture and equipment	$	42	$	42
Computers and electronic equipment		122		118
Laboratory equipment		35		35
Leasehold improvements		67		67
		266		262
Accumulated depreciation:
Office furniture and equipment		16		11
Computers and electronic equipment		92		70
Laboratory equipment		30		27
Leasehold improvements		18		12
		156		120
Depreciated cost	$	110	$	142

Depreciation expenses for the years ended December 31, 2015 and 2014 were $36 and $26, respectively.

NOTE 5:-

INTANGIBLE 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. These costs include coding, testing and product design

The Company has included amortization expenses of the intangible assets directly attributable to revenue-generating activities in cost of revenues. Amortization expenses with respect to these intangible assets for the year ended December 31, 2015 and 2014 were $188 and $73, respectively.

Data with respect to Company’s intangible assets associated with its products are as follows:

	December 31,			December 31,
	2015			2014
Gross Carrying Value	$	581		$	528
Less: Accumulated Amortization		(261	)		(73	)
Net Carrying Value	$	320		$	455

INNOVISION LABS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS (Except shares and per share amounts)

NOTE 6 –

CONVERTIBLE NOTES PAYABLE

On September 21, 2015, the Company issued and sold to investors in a private placement (the “Private Placement”) $1,750 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 1,198,631 shares of Common Stock at an exercise price of $2.19 per share. The Company’s Chairman of the Board of Directors, Mr. Shai Novik, participated in the Private Placement on the same terms as all other investors, acquiring a Note in an aggregate principal amount of $500 and Warrants to acquire an aggregate of 342,466 shares of Common Stock. Refer to Note 9.

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 March 20, 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 U.S. Securities and Exchange Commission, 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 Notes were assigned between the warrants and convertible debt. Additionally, the instruments were evaluated for consideration of any beneficial conversion features. It was concluded that a beneficial conversion feature existed for the convertible debt since the effective conversion price is less than the fair value of the issuer’s capital stock. As a result, the gross proceeds of $1,750 including the transaction cost of $13, from the sale of the Note were recorded net of debt discount of $1,105 due to relative fair value of warrants and of $645 due to beneficial conversion feature. In addition the Company paid transaction costs of $13, of which $5 was allocated to the convertible debt and $8 to the Warrants. The warrant and beneficial conversion feature was recorded as additional paid in capital. The debt discount is being amortized to interest expenses over the life of the Notes using the straight line method.

INNOVISION LABS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS (Except shares and per share amounts)

NOTE 6 –

CONVERTIBLE NOTES PAYABLE (continued)

The fair value of the Warrants at issuance date was estimated using the Black-Scholes OPM using the following assumptions:

Weighted average risk-free interest rate	1.54	%
Weighted average expected life of grants in years	5.0
Weighted average expected volatility of underlying stock	1.12
Dividends	0.00

The fair value of the Notes at 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.

On October 19, 2015, the Company issued and sold an additional $50 aggregate principal amount of the Notes, which were issued together with Warrants to acquire an aggregate of 34,247 shares of Common Stock at an exercise price of $2.19 per share. These Note and Warrants were issued under the same terms and conditions as those issued on September 21, 2015. The Notes were recorded net of a debt discount of $30 due to relative fair value of warrants and net of $20 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 an interest expense over the life of the Notes using the straight line method.

The fair value of the Warrants at issuance date was estimated using the Black-Scholes OPM using the following assumptions:

Weighted average risk-free interest rate	1.35	%
Weighted average expected life of grants in years	4.9
Weighted average expected volatility of underlying stock	1.11
Dividends	0

The fair value of the Notes at 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 years ended December 31, 2015 and 2014, were $198 and $0, respectively. The unamortized debt discount balances at December 31, 2015 and 2014 were $1,602 and $0.

For the years ended December 31, 2015 and 2014 the Company recorded accrued interest at 8.00% per annum of $39 and $0, respectively.

	December 31,
	2015
Face amount of the Note	$	1,800
Issuance costs		(13	)
Discount of Warrants and BCF, net of issuance costs		(1,787	)
Amortization of debt discount and issuance costs		198
Interest accrued during the period		39
	$	237

INNOVISION LABS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS (Except shares and per share amounts)

NOTE 7:-

ACCRUED EXPENSES AND OTHER LIABILITIES

	December 31,
	2015		2014
Employees and payroll accruals	$	233	$	273
Accrued expenses and other		178		133
Deferred revenues		44		21
	$	455	$	427

NOTE 8:-

COMMITMENTS AND CONTINGENT LIABILITIES

In July 2011, the Company entered into a license agreement with RevitalVision LLC, a Kansas Limited Liability Company, which is the owner of several patents in the area of perceptual learning systems and methods. Pursuant to the license agreement, RevitalVision LLC granted the Company a non-exclusive license to certain patents. RevitalVision LLC recently sold its license to Talshir Medical Technologies Ltd. Under the license agreement, the Company has the right to sub-license the licensed patents. The license agreement terminates when the last of the patents licensed to the Company expires, unless terminated earlier.

Under the license agreement, the Company is required to pay quarterly royalty payments from net sales: (i) up to yearly net sales of $3,000, fees of 5.5% of net sales and (ii) for yearly net sales in excess of $3,000, fees of 4.5% from such net sales.

Royalty payments for the years ended December 31, 2015 and 2014 were $12 and $4, respectively.

Operating leases:

Eyekon E.R.D. Ltd. rents its offices under a lease with a term that commenced December 15, 2013 and expires August 31, 2016. Eyekon E.R.D. Ltd. additionally leases a vehicle under a lease that commenced August 2, 2014 and expires in July, 2017.

Aggregate minimum rental commitments, under non-cancelable leases, as of December 31, 2015, were as follows:

Year ended December 31,
2016	$	74
2017		11
Total	$	85

Rent expenses for the years ended December 31, 2015 and 2014 were $69 and $78, respectively.

Car lease expenses for the years ended December 31, 2015 and 2014 were $16 and $18, respectively.

NOTE 9:-

RELATED PARTIES

In 2013 the Company entered into: (i) an Employment Agreement with Mr. Madar, the Company's President, Chief Executive Officer and Director. (ii) a part-time Consulting Agreement with Prof. Polat, Ph.D. – the Company's Chief Scientific Officer and Director. (iii) a Consulting Agreement with Mr. Shaffir, - the Company's Chief Technology Officer and Director, and together the “Officer Agreements”. The Officer Agreements each have an initial one-year term, which term shall be automatically extended for additional successive one-year terms on each one-year anniversary, unless either party gives the other party written notice of an election not to renew the Officer Agreement. Pursuant to their Officer Agreements, Dr. Polat and Messrs. Madar and Shaffir will receive annual base salaries or compensation, as the case may be, of $100, $180 and $50, respectively, provided, that Mr. Shaffir’s base compensation will increase to $120 following the Company’s consummation of a financing round in excess of $6,000. In addition, each of the officers are entitled to an annual cash bonus of up to 25% of his base salary or compensation, as the case may be, based on corporate and personal milestones together with equity performance awards, each as determined by the compensation committee of the Board of Directors of the Company.

INNOVISION LABS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS (Except shares and per share amounts)

NOTE 9:-

RELATED PARTIES (continued)

Upon execution of the Officer Agreements, the Company agreed to grant Prof. Polat and Messrs. Madar and Shaffir options to purchase 35,000, 15,000 and 5,000 shares of Common Stock valued at $491, $141 and $70, respectively, which options would vest in substantially equal amounts on the first, second and third anniversaries of the date of grant. The options were granted on February 7, 2014.

In addition, the Company granted Messrs. Madar and Shaffir on July 30, 2013, 20,000 and 30,000 shares valued at $187 and $280, respectively, of restricted Common Stock, vesting in substantially equal amounts on the first, second and third anniversaries of the date of grant. The Officer Agreements provide that if any of the officers voluntarily terminates his employment or consultancy, as the case may be (other than in connection with a change of control of the Company and certain other reasons), or the Company terminates his employment or consultancy, as the case may be, for “cause” (as defined in the agreement) then he will be entitled only to payment of his base salary or compensation, as the case may be, through the date of termination, and will not be entitled to any performance bonus for that year.

However, if any of the officers terminates his Officer Agreement as the result of a material breach by the Company, he will be entitled to continued payment of his base salary for a period of six months following such termination, plus the value of any accrued benefits, and all unvested options and shares of restricted Common Stock granted to him shall immediately vest and become exercisable.

If the Company terminates any such officer other than for cause or if the term expires and is not renewed by the Company, then, the officer will be entitled to continued payment of his base salary or compensation, as the case may be, for a period of six months following such termination or non-renewal, and he would additionally receive the value of accrued benefits and a pro-rata portion of the current year’s performance bonus. If either of the officers terminates their employment or consultancy, as the case may be, for “good reason” (as defined in the agreement) or (b) the Company or its successor terminates their employment or consultancy, as the case may be, within 12 months following a change in control (as defined in the agreement), then they will be entitled to receive a lump-sum payment equal to the lesser of (i) their base salary or compensation, as the case may be, for six months and (ii) their base salary or compensation, as the case may be, for the remainder of the then unexpired term, and all unvested stock options and shares of restricted Common Stock will immediately vest and become exercisable.

On July 29, 2013 the Company granted Mr. Shai Novik, the Company’s Chairman of the Board, 30,000 shares of restricted Common Stock valued at $280, which vested in substantially equal monthly installments over a period of 12 months from the date of grant. On February 7, 2014 the Board granted Mr. Novik options to purchase up to 15,000 shares of Common Stock valued at $210 at an exercise price equal to $19.30 per share, vesting in substantially equal monthly installments over a period of 12 months from the date of grant.

On December 15, 2014, the Company appointed Mr. Yuval Bar-Gil to serve as a director. Upon his appointment, the Board granted Mr. Bar-Gil options to purchase up to 10,000 shares of Common Stock valued at $22, at an exercise price equal to $4.60 per share, vesting in substantially equal monthly installments over a period of 12 months from the date of grant.

On December 15, 2014, Mr. Sasson Darwish, Vice Chairman of the Board, resigned from the Board with immediate effect. In connection with Mr. Darwish’s departure, the Company agreed to accelerate the vesting of his outstanding options to purchase up to 35,000 shares of Common Stock valued at $329 at an exercise price of $19.30 so that all of such options became fully vested as of December 15, 2014. The Company did not record any additional value relating with the acceleration of the options. In addition, in consideration for Mr. Darwish’s service as the Vice Chairman of the Board, the Company granted Mr. Darwish 22,300 shares of Common Stock valued at $103.

INNOVISION LABS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS (Except shares and per share amounts)

NOTE 9:-

RELATED PARTIES (continued)

On December 15, 2014, 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, 7,500 shares of Common Stock valued each at $35.

On May 16, 2014, the Company consummated a private placement of 400,000 shares of Common Stock for a purchase price in cash of $12.5 per share. Mr. Shai Novik and Mr. Sasson Darwish, each participated in this private placement on the same terms as the other investors in the private placement, and purchased 33,500 shares of Common Stock for a total of $419 and 16,000 shares of Common Stock for a total of $200, respectively.

On September 21, 2015, the Company issued $1,750 aggregate principal amount of the Notes, together with the related Warrants, in the Private Placement. Refer to Note 6. Mr. Shai Novik, participated in the Private Placement on the same terms as all other investors, acquiring, for $500, a Note in an aggregate principal amount of $500 and Warrants to acquire an aggregate of 342,466 shares of Common Stock.

The following transactions were carried out with related parties:

	2015		2014
Income statements:
Officers remuneration for employment and consulting	$	450	$	475
Stock based compensation to officers	$	299	$	540

Directors’ who are not officers compensation	$	75	$	61
Stock based compensation to directors’ who are not officers	$	39	$	817

Balances with related parties:
Related party payables to officers for employment and consulting	$	305	$	285
Related party payables to directors		109		31
	$	414	$	316

NOTE 10:-

STOCKHOLDERS’ EQUITY

Common Stock confers upon its holders the right to participate and vote in general stockholders’ meetings, to share in the distribution of dividends if declared by the Company and the right to receive assets of the Company upon its liquidation.

As of December 31, 2014 and 2015, all outstanding share capital consisted of Common Stock.

On May 16, 2014, the Company entered into a stock purchase and registration rights agreement, pursuant to which the Company issued and sold in a private placement an aggregate of 400,000 shares of Common Stock at a purchase price of $12.5 per share. The private placement provided $5,000 of gross proceeds, and issuance expenses amounted to $40.

During the year ended December 31, 2014 the Company issued 37,901 shares of Common Stock in connection with exercise of 37,901 stock options at an exercise price of $0.013 per share.

INNOVISION LABS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS (Except shares and per share amounts)

NOTE 10:-

STOCKHOLDERS’ EQUITY (continued)

On July 1, 2014, the Company entered into a Standby Equity Distribution Agreement, which is referred to as the SEDA, with YA Global Master SPV Ltd., a Cayman Islands exempt limited partnership (the “Investor”), pursuant to which the Company may issue and sell to the Investor from time to time as provided in the SEDA, and the Investor has agreed to purchase, up to $15,000 of Common Stock.

The Company is not obligated to sell any Common Stock to YA but may, over the term of the SEDA and in its sole discretion, sell shares of Common Stock at a purchase price specified in the SEDA for aggregate proceeds to the Company of up to $15,000. YA is obligated to purchase such shares from the Company subject to certain conditions as defined in the SEDA.

The amount of each Advance may not exceed the lesser of (i) $500 or (ii) the Daily Value Traded (as defined in the SEDA) for the five consecutive trading days immediately prior to the date of the applicable Advance Notice.

As a part of a commitment fee payable to the Investor, in July 2014, the Company issued to the Investor’s designee an aggregate of 10,331 shares of Common Stock valued at $150.

On August 1, 2014, in connection with the SEDA, the Company registered for resale an aggregate of 500,000 shares of Common Stock.

On October 30, 2014 the Company issued and sold 4,873 shares of Common Stock to the Investor pursuant to the SEDA for proceeds of $40.

On March 30, 2015, the Company effected a 1-for-10 reverse split of its authorized and issued and outstanding shares of Common Stock (the “Reverse Split”). Following the Reverse Split, the number of shares of the Company’s issued and outstanding Common Stock was reduced from approximately 58.4 million shares to approximately 5.8 million shares. Additionally, proportional adjustments were made to its authorized shares of Common Stock and its outstanding options and warrants. Any fractional shares resulting from the Reverse Split were rounded up to the next whole share.

During the year ended December 31, 2015 the Company issued 127,616 shares of Common Stock in connection with exercise of 127,616 stock options at an exercise price of $0.013 per share.

On December 29, 2015, the Company increased the number of its authorized shares of Common Stock from 20,000,000 to 40,000,000.

Restricted Shares

In 2013 the Company adopted the GlassesOff Inc. 2013 Incentive Compensation Plan (the “Equity Incentive Plan”). An aggregate of 1,400,000 shares of Common Stock were authorized for issuance under the Equity Incentive Plan as of December 31, 2015.

During the year ended December 31, 2014, the Company granted 10,569 shares of restricted Common Stock to consultants, valued at $180, which vested immediately. In addition, the Company granted an aggregate of 5,000 shares of restricted Common Stock to two employees, valued at $57, of which 500 vested immediately and 4,500 are vesting in substantially equal amounts on the first, second and third anniversaries of the date of grant and 37,300 shares of restricted Common Stock to directors, see note 8.

During the year ended December 31, 2015 the Company granted 30,000 shares of restricted Common Stock to a consultant, valued at $75, which vested immediately, and 40,000 shares of restricted Common Stock to two employees, valued at $66, of which 30,000 are vesting in substantially equal amounts on the first, second and third anniversaries from the date of grant and 10,000 are vesting in substantially equal amounts on the first, second and third anniversaries from the date of beginning of an employee employment, which represents a weighted average period of 1.56 years from the date of grant.

The Company accounts for employees’ and directors’ restricted stock compensation in accordance with ASC 718, "Share-Based Payment" and for nonemployees' restricted stock compensation in accordance with ASC 505-50, “Equity Based Payments to Non Employees”.

INNOVISION LABS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS (Except shares and per share amounts)

NOTE 10:-

STOCKHOLDERS’ EQUITY (continued)

The total restricted stock compensation expenses in 2015 and 2014 were $220 and $631, respectively. Total unrecognized estimated compensation cost related to non-vested restricted stock granted through 2015 was $87, which is expected to be recognized over a weighted average period of 1.18 year.

Total restricted shares compensation costs recognized in 2015 and 2014 were as follows:

	Year ended December 31,
	2015		2014
Research and development	$	76	$	48
General and administrative		89		531
Sales and marketing		55		52
	$	220	$	631

Stock options

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.

Employees stock options:

Following is a summary of the changes of the stock options granted to employees during 2015 and 2014:

	December 31, 2015
	Number of Options			Weighted Average Exercise Price
Outstanding at the beginning of the year		639,688		$	4.32
Granted		82,400		$	2.59
Exercised		(127,616	)	$	0.01
Forfeited		(19,286	)	$	14.43
Outstanding at the end of the year		575,186		$	4.69

Options exercisable		449,836		$	3.42

	December 31, 2014
	Number of Options			Weighted Average Exercise Price
Outstanding at the beginning of the year		510,173		$	0.01
Granted		154,300		$	18.30
Exercised		(6,022	)	$	0.01
Forfeited		(18,763	)	$	3.47
Outstanding at the end of the year		639,688		$	4.32

Options exercisable		522,199		$	1.77

INNOVISION LABS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS (Except shares and per share amounts)

NOTE 10:-

STOCKHOLDERS’ EQUITY (continued)

Weighted average fair value of options granted during 2015 was $1.61.

Following is a summary of changes in nonvested shares granted to employees during 2015 and 2014:

	December 31, 2015
	Number of Options			Weighted Average Fair Value
Balance at the beginning of the year		117,487		$	9.68
Granted		82,400		$	1.61
Vested		(58,651	)	$	7.66
Forfeited		(15,886	)	$	6.98
Balance at the end of the year		125,350		$	5.66

	December 31, 2014
	Number of Options			Weighted Average Fair Value
Balance at the beginning of the year		26,246		$	2.90
Granted		154,300		$	10.37
Vested		(44,296	)	$	11.44
Forfeited		(18,763	)	$	1.71
Balance at the end of the year		117,487		$	9.68

The total unrecognized estimated compensation cost related to non-vested employees' stock options granted until December 31, 2015 was $155 which is expected to be recognized over a weighted average period of 1.1 years.

Compensation costs charged to operations for 2015 and 2014 amounted to $313 and $1,015, respectively.

Cash received upon exercise under the Equity Incentive Plans during 2015 and 2014 was $2 and $0.

The options outstanding as of December 31, 2015 have been separated by exercise prices, as follows:

Exercise Price		# of Options Outstanding		Average Remaining Contractual Life (years)
$	0.01		360,386		6.41
$	19.30		126,500		8.11
$	18.60		1,000		8.44
$	4.60		10,000		8.96
$	5.10		17,300		9.07
$	1.66		60,000		9.59
			575,186

The total aggregate intrinsic value of options to employees outstanding at December 31, 2015 was $ 606.

The options exercisable as of December 31, 2015 have been separated by exercise prices, as follows:

Exercise Price		# of Options Exercisable		Average Remaining Contractual Life (years)
$	0.01		360,386		6.41
$	19.30		76,140		8.11
$	18.60		340		8.44
$	4.60		10,000		8.96
$	5.10		2,970		9.07
			449,836

INNOVISION LABS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS (Except shares and per share amounts)

NOTE 10:-

STOCKHOLDERS’ EQUITY (continued)

The total aggregate intrinsic value of options to employees exercisable at December 31, 2015 was $ 604.

Options to nonemployees:

Following is a summary of the changes of the stock options granted to nonemployees during 2015 and 2014:

	December 31, 2015
	Number of Options			Exercise Price
Outstanding at the beginning of the year		360,549		$	0.43
Granted		15,600		$	4.66
Forfeited		(200	)	$	18.60
Outstanding at the end of the year		375,949		$	0.60

Options exercisable		362,919		$	0.43


	December 31, 2014
	Number of Options			Exercise Price
Outstanding at the beginning of the year		391,828		$	0.37
Granted		600		$	18.60
Exercised		(31,879	)	$	0.01
Outstanding at the end of the year		360,549		$	0.43

Options exercisable		359,949		$	0.40

Weighted average fair value of options granted during 2015 was $0.79.

Following is a summary of changes in nonvested options to nonemployees during 2015 and 2014:

	December 31, 2015
	Number of Options			Weighted Average Fair Value
Balance at the beginning of the year		600		$	0.68
Granted		15,600		$	0.79
Vested		(3,038	)	$	0.36
Forfeited		(132	)	$	0.75
Balance at the end of the year		13,030		$	0.89

	December 31, 2014
	Number of Options			Weighted Average Fair Value
Balance at the beginning of the year		14,403		$	5.75
Granted		600		$	0.68
Vested		(14,403	)	$	5.75
Balance at the end of the year		600		$	0.68

INNOVISION LABS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS (Except shares and per share amounts)

NOTE 10:-

STOCKHOLDERS’ EQUITY (continued)

The options outstanding as of December 31, 2015 have been separated by exercise prices, as follows:

Exercise Price		# of Options Outstanding		Average Remaining Contractual Life (years)
$	0.01		302,339		6.12
$	2.44		57,610		4.48
$	18.60		400		8.44
$	5.10		13,600		9.07
$	1.66		2,000		9.59
			375,949

The total aggregate intrinsic value of options to non-employees outstanding at December 31, 2015 was $507.

The options exercisable as of December 31, 2015 have been separated by exercise prices, as follows:

Exercise Price		# of Options Exercisable		Average Remaining Contractual Life (years)
$	0.01		302,339		6.12
$	2.44		57,610		4.48
$	18.60		136		8.44
$	5.10		1,500		9.07
$	1.66		1,334		9.59
			362,919

The total aggregate intrinsic value of options to non-employees exercisable at December 31, 2015 was $507.

The Company accounted for these grants under the fair value method of ASC 505-50. Compensation (income) costs charged to operations for 2015 and 2014 amounted to $8 and $(75) respectively. Cash received upon exercise under the Equity Incentive Plans during 2015 and 2014 was $0 and $1. The total unrecognized estimated compensation cost related to nonvested stock options granted to nonemployees at December 31, 2015 was $5 which is expected to be recognized over a weighted average period of 0.95 years.

Total stock options compensation charged to operations in 2015 and 2014 was as follows:

	Year ended December 31,
	2015		2014
Research and development	$	219	$	305
General and administrative		75		611
Sales and marketing		27		24
	$	321	$	940

INNOVISION LABS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS (Except shares and per share amounts)

NOTE 10:-

STOCKHOLDERS’ EQUITY (continued)

Warrants

During the year ended December 31, 2015, the Company issued Warrants to acquire an aggregate of 1,232,878 shares of Common Stock in connection with the Private Placement on September 21, 2015 and October 19, 2015.

The following is a summary of the warrants issued:

	December 31, 2015
	Number of outstanding warrants		Weighted Average Exercise Price
Outstanding at the beginning of the year		1,001,369	$	9.96
Issued		1,232,878		2.19
Outstanding at the end of the year		2,234,247	$	5.67

	December 31, 2014
	Number of outstanding warrants		Weighted Average Exercise Price
Outstanding at the beginning of the year		1,001,369	$	9.96
Outstanding at the end of the year		1,001,369	$	9.96

The warrants outstanding as of December 31, 2015 have been separated by exercise prices, as follows:

exercise price		# of Warrants Outstanding		Average Remaining Contractual Life (years)
$	5.47		250,794		1.86
$	10.94		501,575		1.86
$	12.50		249,000		2.58
$	2.19		1,232,878		4.73
			2,234,247

INNOVISION LABS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS (Except shares and per share amounts)

NOTE 11:-

INCOME TAXES

Carryforward losses:

Carry-forward tax losses of the Company as of December 31, 2015 were $2,088. Carry-forward tax losses of Eyekon E.R.D. Ltd. as of December 31, 2015 were $ 12,015 which may be carried forward and offset against taxable income in the future for an indefinite period.

The components of the Company’s loss before provision for income taxes by jurisdiction are as follows:

	Year ended December 31,
	2015		2014
Domestic	$	811	$	827
Foreign		3,857		4,633
	$	4,668	$	5,460

The components of the provision for income taxes are as follows:

	Year ended December 31,
	2015		2014
Current tax:
United States—Federal	$	-	$	-
United States—State and local		-		-
Outside United States		-		-
Total current tax		-		-
Deferred tax:
United States—Federal		-		-
United States—State and local		-		-
Outside United States		-		-
Total deferred tax		-		-
Provision for income taxes, net	$	-	$	-

Reconciliation of the theoretical tax expenses:

	Year ended December 31,
	2015			2014
Loss before taxes	$	4,668		$	5,460
Statutory tax rate of InnoVision Labs, Inc.		35	%		35	%
Tax benefit		1,634			1,911

Permanent differences		(136	)		(65	)
Valuation allowance		(1,102	)		(1,473	)
Differences in tax rate		(396	)		(373	)
Tax expense	$	-		$	-

INNOVISION LABS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS (Except shares and per share amounts)

NOTE 11:-

INCOME TAXES (continued)

Deferred income taxes:

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax purposes.

As of December 31, 2015 and 2014 the Company has provided full valuation allowance in respect of deferred tax assets. Management currently believes that since the Company has a history of losses it is more likely than not that the deferred tax regarding the loss carry-forward and other temporary differences will not be realized in the foreseeable future. Components of the Company's deferred tax liabilities and assets are as follows:

	December 31,
	2015			2014

Tax assets in respect of:
Accrued vacation pay	$	25		$	26
Intangible asset		(67	)		(107	)
Employees stock based compensation		1,317			1,236
Related parties accrued expenses		61			70
Net loss carry forward		3,734			2,743
Total deferred tax assets		5,070			3,968
Less - valuation allowance		(5,070	)		(3,968	)
Deferred tax assets	$	-		$	-

NOTE 12:-

REVENUES

The following represents revenue based on geographic location of paying users:

	Year ended December 31,
	2015		2014
United States	$	73	$	65
France		125		1
Others (1)		82		44
Total revenue	$	280	$	110

(1)

No individual country exceeded 10% of our total revenue for any period presented.

NOTE 13:-

FINANCIAL (EXPENSES) INCOME, NET

	Year ended December 31,
	2015			2014
Financial income	$	-		$	-
Financial (expenses)		(244	)		(8	)
Exchange rate differences income (loss)		13			28
	$	(231	)	$	20

INNOVISION LABS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

IN THOUSANDS (Except shares and per share amounts)

NOTE 14:-

SUBSEQUENT EVENTS

In January 2016, the Company increased the number of shares under the Equity Incentive Plan from 1,400,000 to 2,000,000 shares.

In January 2016, the Company granted 16,000 stock options to consultants at an exercise price of $1.25 per share and 50,000 shares of restricted Common Stock to directors.

In March 2016, the Company granted 20,000 shares of restricted Common Stock to a consultant.

On February 4, 2016, the Company issued to investors Notes for an aggregate principal amount of $1,060, together with Warrants to acquire an aggregate of 726,031 shares of Common Stock. The Note and Warrant have the same terms as the Notes and Warrants issued in the Private Placement on September 21, 2015, other than the maturity date, which, for the Notes issued February 2016, is August 3, 2018.

EXHIBIT INDEX

Exhibit		Description

2.1		Agreement and Plan of Merger, dated as of June 26, 2013, by and among Autovative Products, Inc., Ucansi Acquisition Corp. and Ucansi Inc., filed as Exhibit 2.1 to our Current Report on Form 8-K, filed with the SEC on July 2, 2013 and incorporated herein by reference.

2.2		First Amendment to Agreement and Plan of Merger, dated as of July 2, 2013, by and among Autovative Products, Inc. and Ucansi Inc., filed as Exhibit 2.2 to our Current Report on Form 8-K, filed with the SEC on July 2, 2013 and incorporated herein by reference.

2.3		Spin-Off Agreement, dated as of May 23, 2013, by and between Autovative Products, Inc. and David Funderburk, filed as Exhibit 2.3 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

3.1		Amended and Restated Articles of Incorporation of GlassesOff Inc., filed as Exhibit 3.1 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

3.2		Amended and Restated Bylaws of GlassesOff Inc., filed as Exhibit 3.2 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

3.3		Certificate of Change of GlassesOff Inc., effective March 30, 2015, filed as Exhibit 3.3 to our Annual Report on Form 10-K, filed with the SEC on March 31, 2015 and incorporated herein by reference

3.4		Certificate of Amendment of GlassesOff Inc., effective December 29, 2015, filed as Exhibit 3.1 to our Current Report on Form 8-K, filed with the SEC on January 5, 2016 and incorporated herein by reference.

4.1		Form of Warrant, filed as Exhibit 4.1 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

4.2		Form of Subscription Agreement, filed as Exhibit 4.2 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

4.3		Form of 8.0% Senior Convertible Promissory Note, filed as Exhibit 4.1 to our Current Report on Form 8-K, filed with the SEC on September 23, 2015 and incorporated herein by reference.

4.4		Form of Warrant, filed as Exhibit 4.2 to our Current Report on Form 8-K, filed with the SEC on September 23, 2015 and incorporated herein by reference.

10.1		License Agreement, dated July 15, 2011, by and between RevitalVision LLC and Ucansi Inc., filed as Exhibit 10.2 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

10.2+		Employment Agreement, dated July 30, 2013, by and between Eyekon E.R.D Ltd. and Nimrod Madar., filed as Exhibit 10.3 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

10.3+		Consulting Agreement, dated July 30, 2013, by and between Eyekon E.R.D Ltd. and Uri Polat, Ph.D., filed as Exhibit 10.4 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

10.4+		Consulting Agreement, dated July 30, 2013, by and between Eyekon E.R.D Ltd. and Ram Shaffir., filed as Exhibit 10.5 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

Exhibit		Description

10.5+		Consulting Agreement, dated July 30, 2013, by and between GlassesOff Inc. and Cohen & Schaeffer P.C., filed as Exhibit 10.6 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

10.6+		GlassesOff Inc. 2013 Incentive Compensation Plan, filed as Exhibit 10.7 to our Current Report on Form 8-K, filed with the SEC on August 5, 2013 and incorporated herein by reference.

10.7+		Form of Option Award Agreement under the GlassesOff Inc. 2013 Incentive Compensation Plan, filed as Exhibit 10.8 to our Annual Report on Form 10-K, filed with the SEC on March 31, 2015 and incorporated herein by reference.

10.8+		Form of Restricted Stock Award Agreement under the GlassesOff Inc. 2013 Incentive Compensation Plan, filed as Exhibit 10.8 to our Annual Report on Form 10-K, filed with the SEC on March 31, 2015 and incorporated herein by reference.

10.9		Stock Purchase and Registration Rights Agreement, dated May 16, 2014, by and among GlassesOff Inc. and the Investors party thereto, filed as Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on March 19, 2014 and incorporated herein by reference.

10.10		Standby Equity Distribution Agreement, dated July 1, 2014, by and between GlassesOff Inc. and YA Global Master SPV Ltd., filed as Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on July 3, 2014 and incorporated herein by reference.

10.11		Securities Purchase and Registration Rights Agreement, dated September 17, 2015, by and among GlassesOff Inc. and the Investors party thereto, filed as Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on September 23, 2015 and incorporated herein by reference.

21*		Subsidiaries of InnoVision Labs, Inc.

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**		Certifications of Chief Executive Officer required by Section 906 of the Sarbanes-Oxley Act of 2002

32.2**		Certifications of Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*		XBRL Instance Document

101.SCH*		XBRL Schema Document

101.CAL*		XBRL Calculation Linkbase Document

101.LAB*		XBRL Label Linkbase Document

101.PRE*		XBRL Presentation Linkbase Document

Filed herewith.

Furnished herewith.

Compensation plan or arrangement or management contract.

Attached files

InnoVision Labs, Inc Reports

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