Entity information:
NOTE 15 –    INCOME TAX
 
A.
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.

B.
Changes in the Israeli corporate tax rates

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,

Furthermore, on December 22, 2016 the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. The first step would be to reduce the corporate tax rate to 24% as of January 2017 and the second step would be to reduce the corporate tax rate to 23% as of January 2018.This change has no impact on the financial statements.

C.
Tax assessments
 
For federal, state and local income tax purposes the Company remains open for examination by the tax authorities for the tax years from 2014 through 2016 under the general statute of limitations.

Notwithstanding, pursuant and subject to the provisions of article 145 of the Income Tax Ordinance, Integrity Israel’s tax returns that were filled with the tax authority up to and including 2012 are considered final.

D.
Carryforward tax losses
 
As of December 31, 2017, the Company had cumulative net operating losses (NOL) for US federal purposes of approximately $7.0 million that will expire between the years 2032-2036. Integrity Israel has losses carry forward balances for Israeli income tax purposes of approximately $33 million to offset against future taxable income for an indefinite period of time.

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
  
   
Year ended December 31,
  
   
2017
    
2016
    
2015
  
                   
Pretax income (loss)
    
(10,328,806
)
    
(5,409,737
)
    
(5,842,172
)
Federal tax rate
    
34
%
    
34
%
    
34
%
Income tax expenses (benefit) computed at the ordinary tax rate
    
(3,511,794
)
    
(1,839,311
)
    
(1,986, 338
)
Non-deductible expenses
    
41,829
      
34,500
      
31,050
  
Stock-based compensation
    
908,041
      
17,562
      
4,503
  
Warrants with down round protection
    
(102,110
)
    
(98,473
)
    
(50,691
)
Loss on partial extinguishment of Series A Preferred Stock and Series A Warrants
    
-
      
-
      
436,680
  
Tax in respect of differences in corporate tax rates
    
524,134
      
396,956
      
340,263
  
Losses and timing differences in respect of which no deferred taxes assets were recognized
    
2,139,900
      
1,488,766
      
1,224,533
  
     
-
      
-
      
-
  

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
  
   
December 31,
  
   
2017
    
2016
    
2015
  
                   
Composition of deferred tax assets:
                  
Provision for employee-related obligation
    
21,086
      
28,526
      
23,494
  
Non-capital loss carry forwards
    
10,354,385
      
7,823,828
      
6,233,314
  
Valuation allowance
    
(10,375,471
)
    
(7,852,354
)
    
(6,256,808
)
     
-
      
-
      
-