INCOME TAX

12 Months Ended

Dec. 31, 2015

NOTE 14

–

INCOME TAX

Measurement of results for tax purposes under the Israeli Income Tax (Inflationary Adjustments) Law, 1985 (the “Inflationary Adjustment Law”)

Commencing January 1, 2008, the results of operations of Integrity Israel for tax purposes are measured on a nominal basis.

Changes in the Israeli corporate tax rates

On December 6, 2011, the Law for the Change in the Tax Burden (Legislative Amendments) – 2011 was published. As part of this law, among other things, commencing from 2012 the corporate tax rate was increased to 25%. In addition, commencing in 2012, the tax rate on capital gains in real terms and the tax rate applicable to betterment in real terms were increased to 25%.

On July 30, 2013, the Israeli parliament approved the Law for the Change in National Priorities (Legislative Amendments to Achieve Budgetary Goals for 2013 and 2014) – 2013, which, among other things increased the standard Israeli corporate income tax rate from 25% to 26.5% effective as of January 1, 2014.

On January 4, 2016, the Israeli parliament passed the Law for Amendment of the Income Tax Ordinance No. 216, which, among other things reduced the standard Israeli corporate income tax rate from 26.5% to 25% effective as of January 2016.

Tax assessments

The Company and Integrity Israel have not received final tax assessments since their inception.

Carryforward tax losses

As of December 31, 2015, the Company had cumulative net operating losses (NOL) for US federal purposes of approximately $3.1 million that will expire between the years 2031-2035. Integrity Israel has losses carry forward balances for Israeli income tax purposes of nearly $20.7 million to offset against future taxable income for an indefinite period of time.

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
	Year ended December 31,
	2015			2014			2013

Pretax income (loss)		(5,842,172	)		2,980,426			(9,796,853	)
Federal tax rate		34	%		35	%		35	%
Income tax expenses (benefit) computed at the ordinary tax rate		(1,986, 338	)		1,043,149			(3,428,899	)
Non-deductible expenses		31,050			27,250			21,250
Stock-based compensation		4,503			14,415			10,570
Amortization of warrants with down round protection		(50,691	)		(2,295,915	)		2,324,760
Loss on partial extinguishment of Series A Preferred Stock and Series A Warrants		436,680			-			-
Tax in respect of differences in corporate tax rates		340,263			278,466			253,942
Losses and timing differences in respect of which no deferred taxes assets were recognized		1,224,533			932,635			818,377
		-			-			-

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
	December 31,
	2015			2014			2013

Composition of deferred tax assets:
Provision for employee-related obligation		23,494			20,220			33,629
Non-capital loss carry forwards		6,233,314			4,810,780			4,364,466
Valuation allowance		(6,256,808	)		(4,831,000	)		(4,398,095	)
		-			-			-