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INCOME TAX | 6 Months Ended
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Jun. 30, 2012
INCOME TAX [Abstract] |
INCOME TAX |
NOTE 14 | - | INCOME TAX
| A. | Measurement of results for tax purposes under the Israeli Income Tax (Inflationary Adjustments) Law, 1985 (the "Inflationary Adjustment Law")
Until December 31, 2007, Integrity Israel reported for tax purposes in accordance with the provisions of the Inflationary Adjustments Law, whereby taxable income was measured in NIS, adjusted for changes in the Israeli Consumer Price Index. Results of operations for tax purposes were measured in terms of earnings in NIS after adjustments for changes in the Israeli Consumer Price Index ("CPI"). Commencing January 1, 2008, the Inflationary Adjustment Law became void and in its place there are transition provisions, whereby the results of operations for tax purposes are to be measured on a nominal basis.
| B. | Reduction in Israeli corporate tax rates
On July 25, 2005, the Israeli Parliament passed an amendment to the Income Tax Ordinance (No. 147) - 2005, gradually reducing the tax rate applicable to the Company to the following rates for the years indicated in 2006 - 31%, in 2007 - 29%, in 2008 - 27%, in 2009 - 26% and in 2010 and thereafter - 25%. On July 23, 2009, as part of the Economic Efficiency Law (Legislative Amendments for the Implementation of the Economic Plan for the years 2009 and 2010) - 2009 (the "Arrangements Law"), article 126 of the Income Tax Ordinance (New Version) - 1961 was amended, whereby the Israeli corporate tax rate would be gradually reduced commencing in the 2011 tax year and thereafter, to the following rates for the years indicated: 2011 - 24%, 2012 - 23%, 2013 - 22%, 2014 - 21%, 2015 - 20% and 2016 and thereafter - 18%. In accordance with the Law for the Change in the Tax Burden (Legislative Amendments) - 2011, commencing from December 5, 2011, the blueprint for the reduction in corporate tax set out in the Arrangements Law was cancelled so that following the amendment, the Israeli corporate tax rate was changed to the following rates for the years indicated: 2011 - 24%, commencing in 2012 and thereafter - 25%.
| C. | Tax assessments
The Company and Integrity Israel have not received final tax assessments since their inception.
| D. | Carryforward tax losses
As of December 31, 2011, the Company and Integrity Israel had loss carry forward balances for income tax purposes of nearly US$ 0.5 million and US$ 9.7 million, respectively, that may be available to offset future taxable income, if any.
| E. | The following is a reconciliation between the theoretical tax on pre-tax income, at the tax rate applicable to the Company (federal tax rate) and the tax expense reported in the financial statements:
|  | US dollars |
|  | Six month period ended June 30, |  |  | Three month period ended June 30, |  |  | Year ended December 31, |
|  | 2012 |  |  | 2011 |  |  | 2012 |  |  | 2011 |  |  | 2011 |  |  | 2010 |  |  | 2009 |
|  | (unaudited) |  |  | (unaudited) |  |  |  |
Pretax loss |  |  | (1,372,411 | ) |  |  | (1,056,921 | ) |  |  | (737,458 | ) |  |  | (516,657 | ) |  |  | (2,364,339 | ) |  |  | (2,788,446 | ) |  |  | (1,202,296 | )
Federal tax rate |  |  | 35 | % |  |  | 35 | % |  |  | 35 | % |  |  | 35 | % |  |  | 35 | % |  |  | 35 | % |  |  | 35 | %
Income tax benefit computed at the ordinary tax rate |  |  | (480,344 | ) |  |  | (369,922 | ) |  |  | (258,110 | ) |  |  | (180,830 | ) |  |  | (827,519 | ) |  |  | (975,956 | ) |  |  | (420,804 | )
Non-deductible expenses |  |  | 2,306 |  |  |  | 2,483 |  |  |  | 1,153 |  |  |  | 1,241 |  |  |  | 4,885 |  |  |  | 4,688 |  |  |  | 4,463 |
Stock-based compensation |  |  | 69,033 |  |  |  | 66,274 |  |  |  | 35,952 |  |  |  | 33,081 |  |  |  | 132,325 |  |  |  | 5,101 |  |  |  | 4,260 |
Stock-based interest compensation to holders of convertible notes |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 425,229 |  |  |  | - |
Tax in respect of differences in corporate tax rates |  |  | 137,241 |  |  |  | 105,692 |  |  |  | 73,746 |  |  |  | 51,666 |  |  |  | 236,434 |  |  |  | 278,844 |  |  |  | 252,483 |
Losses and timing differences in respect of which no deferred taxes were generated |  |  | 271,764 |  |  |  | 195,473 |  |  |  | 147,259 |  |  |  | 94,842 |  |  |  | 453,875 |  |  |  | 262,094 |  |  |  | 159,598 |
|  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
| F. | Deferred taxes result principally from temporary differences in the recognition of certain revenue and expense items for financial and income tax reporting purposes. Significant components of the Group's future tax assets are as follows:
|  | US dollars |
|  | June 30, |  |  | December 31, |
|  | 2012 |  |  | 2011 |  |  | 2011 |  |  | 2010 |  |  | 2009 |
|  | (unaudited) |  |  |  |
Composition of deferred tax assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Provision for employee-related obligation |  |  | 44,862 |  |  |  | 39,183 |  |  |  | 42,137 |  |  |  | 36,568 |  |  |  | 37,561 |
Non-capital loss carry forwards |  |  | 3,184,220 |  |  |  | 2,551,746 |  |  |  | 2,890,426 |  |  |  | 2,393,919 |  |  |  | 1,768,416 |
Valuation allowance |  |  | (3,229,082 | ) |  |  | (2,590,929 | ) |  |  | (2,932,563 | ) |  |  | (2,430,487 | ) |  |  | (1,805,977 | )
|  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 + Details
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