10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2015
	or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ________________ to ________________

Commission File Number:  000-54785

INTEGRITY APPLICATIONS, INC.

(Exact name of registrant as specified in its charter)

Delaware	98-0668934
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
102 Ha’Avoda Street P.O. Box 432 Ashkelon, Israel	L3 7810301
(Address of principal executive offices)	(Zip Code)

972 (8) 675-7878

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 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 xNo o

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.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o (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 of the Exchange Act).

Yes oNo x

As of August 14, 2015, 5,512,867 shares of the Company’s common stock, par value $0.001 per share, were outstanding.

INTEGRITY APPLICATIONS, INC.

TABLE OF CONTENTS

Page

PART I - FINANCIAL INFORMATION		3
Item 1.	Financial Statements.	3
	CONDENSED CONSOLIDATED BALANCE SHEETS	3
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)	4
	CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT	5
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	6
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	24
Item 4.	Controls and Procedures.	24
PART II - OTHER INFORMATION		25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	25
Item 6.	Exhibits.	25
SIGNATURES		26
EXHIBIT INDEX		27

INTEGRITY APPLICATIONS, INC.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

CONDENSED CONSOLIDATED BALANCE SHEETS

	US dollars (except share data)
	June 30,			December 31,
	2015			2014
	(unaudited)			(audited)
A S S E T S
Current Assets
Cash and cash equivalents		3,516,073			5,827,560
Accounts receivable, net		26,591			23,250
Inventories		138,039			83,653
Other current assets		135,127			113,842
Total current assets		3,815,830			6,048,305
Property and Equipment, Net		127,040			122,491
Funds in Respect of Employee Rights Upon Retirement		207,827			177,470
Total assets		4,150,697			6,348,266
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable		255,182			104,711
Other current liabilities		538,210			440,764
Long-term loans from Stockholders, current portion		-			454,532
Total current liabilities		793,392			1,000,007
Long-Term Liabilities
Long-term loans from Stockholders		166,640			163,459
Liability for employee rights upon retirement		217,409			210,700
Warrants with down-round protection		392,874			2,057,618
Total long-term liabilities		776,923			2,431,777
Total liabilities		1,570,315			3,431,784
Commitments and Contingent Liabilities
Temporary Equity
Convertible Preferred Stock of $ 0.001 par value ("Preferred Stock"):
10,000,000 shares of Preferred Stock authorized as of June 30, 2015 and December 31, 2014;
441 and 7,407 shares of Series A Preferred Stock issued and outstanding as of June 30, 2015 and December 31, 2014, respectively		259,383			4,356,657
15,366 and 8,500 shares of Series B Preferred Stock issued and outstanding as of June 30, 2015 and December 31, 2014, respectively		6,861,717			3,392,028
Total temporary equity		7,121,100			7,748,685
Stockholders' Deficit
Common Stock of $ 0.001 par value ("Common Stock"):
40,000,000 shares authorized as of June 30, 2015 and December 31, 2014; 5,512,867and 5,323,058 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively		5,513			5,324
Additional paid in capital		21,852,610			18,182,866
Accumulated other comprehensive income		122,390			66,670
Accumulated deficit		(26,521,231	)		(23,087,063	)
Total stockholders' deficit		(4,540,718	)		(4,832,203	)
Total liabilities, temporary equity and stockholders’ deficit		4,150,697			6,348,266

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

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INTEGRITY APPLICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

	US dollars (except share data)
	Six month period ended June 30,						Three month period ended June 30,
	2015			2014			2015			2014
	(unaudited)						(unaudited)
Revenues		143,167			-			67,342			-
Research and development expenses		1,036,305			905,873			557,980			454,789
Selling, marketing and general and administrative expenses		1,083,762			863,639			605,565			427,537
Total operating expenses		2,120,067			1,769,512			1,163,545			882,326
Operating loss		1,976,900			1,769,512			1,096,203			882,326
Financing (income) expenses, net		1,224,437			(6,294,521	)		570,603			(6,144,254	)
Income (loss) for the period		(3,201,337	)		4,525,009			(1,666,806	)		5,261,928
Other comprehensive income (loss):
Foreign currency translation adjustment		55,720			(16,033	)		97,383			(16,905	)
Comprehensive income (loss) for the period		(3,145,617	)		4,508,976			(1,569,423	)		5,245,023
Income (loss) per share (Basic)		(0.64	)		0.66			(0.33	)		0.79
Income (loss) per share (Diluted)		(0.64	)		0.65			(0.33	)		0.78
Common shares used in computing Basic income (loss) per share		5,382,682			5,303,529			5,441,253			5,304,072
Common shares used in computing Diluted income (loss) per share		5,382,682			5,361,570			5,441,253			5,336,019

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

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INTEGRITY APPLICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

	US dollars (except share data)
	Common Stock							Accumulated
	Number of shares		Amount		Additional paid in capital			other comprehensive income		Accumulated deficit			Total stockholders’ deficit
Balance as of January 1, 2015		5,323,058		5,324		18,182,866			66,670		(23,087,063	)		(4,832,203	)
Loss for the period of six months		-		-		-			-		(3,201,337	)		(3,201,337	)
Other comprehensive income		-		-		-			55,720		-			55,720
Issuance of Series B-1 and Series B-2 Warrants		-				3,413,174			-		-			3,413,174
Conversion of Series A Preferred Stock into Common Stock		17,242		17		58,800			-		-			58,817
Stock dividend to certain Common Stock holders		92,136		92		(92	)		-		-			-
Stock dividend on Series B Preferred Stock		80,431		80		185,715			-		(185,795	)		-
Cash dividend on Series A Preferred Stock		-		-		-			-		(47,036	)		(47,036	)
Stock-based compensation		-		-		12,147			-		-			12,147
Balance as of June 30, 2015		5,512,867		5,513		21,852,610			122,390		(26,521,231	)		(4,540,718	)

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

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INTEGRITY APPLICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	US dollars
	Six month period ended June 30,
	2015			2014
	(unaudited)
Cash flows from operating activities:
Income (loss) for the period		(3,201,337	)		4,525,009
Adjustments to reconcile income (loss) for the period to net cash used in operating activities:
Depreciation		18,359			16,610
Stock-based compensation		12,147			19,854
Change in the fair value of Warrants with down-round protection		(91,309	)		(6,293,705	)
Linkage difference on principal of loans from stockholders		(1,872	)		(1,315	)
Loss on partial extinguishment of Series A Preferred Stock and Series A Warrants		1,270,971			-
Changes in assets and liabilities:
Increase in accounts receivable		(3,149	)		-
Increase in inventory		(51,036	)		-
Increase in other current assets		(17,474	)		(24,756	)
Increase in accounts payable		145,388			118,346
Increase in other current liabilities		83,030			83,862
Net cash used in operating activities		(1,836,282	)		(1,556,095	)
Cash flows from investing activities:
Increase in funds in respect of employee rights upon retirement		(24,279	)		-
Purchase of property and equipment		(18,892	)		(47,919	)
Net cash used in investing activities		(43,171	)		(47,919	)
Cash flows from financing activities
Cash dividend on Series A Preferred Stock		(47,036	)		(185,263	)
Repayment of loan from stockholders		(439,939	)		-
Net cash used in financing activities		(486,975	)		(185,263	)
Effect of exchange rate changes on cash and cash equivalents		54,941			(6,898	)
Decrease in cash and cash equivalents		(2,311,487	)		(1,796,175	)
Cash and cash equivalents at beginning of the period		5,827,560			2,385,911
Cash and cash equivalents at end of the period		3,516,073			589,736

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

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INTEGRITY APPLICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (cont.)

Supplementary information on financing activities not involving cash flows:

During the six months period ended June 30, 2015, 100 shares of Series A Preferred Stock were converted into 17,242 shares of Common Stock. Accordingly, $58,817, representing the carrying value of such shares of Series A Preferred Stock, was reclassified from temporary equity to stockholders’ deficit.

During the six months period ended June 30, 2015, 6,866 shares of the Company’s Series A Preferred Stock were exchanged into 6,866 share of Series B Preferred Stock. In addition, 1,427,432 Warrants with down-round protection were exchanged into 1,189,503 Series B-1 Warrants and 1,189,503 Series B-2 Warrants. As a result of the exchange, the balances of the Series A Preferred Stock and the Warrants with down-round protection decreased by $4,038,457 and $1,573,435, respectively and the balances of the Series B Preferred Stock, Series B-1 Warrants and Series B-2 Warrants increased by $3,469,689, $1,816,759 and $1,596,415, respectively. In addition, the Company recorded a non-cash charge in the amount of $1,270,971 included in finance expenses within the Company’s statement of operations (See Note 3B).

$185,795, representing the fair value of the shares of Common Stock issued to owners of Series B Preferred Stock, was accounted for as a stock dividend in the statement of changes in stockholders’ deficit and was charged to accumulated deficit against additional paid in capital and Common Stock therein.

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INTEGRITY APPLICATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 –   GENERAL

A. Integrity Applications, Inc. (the "Company") was incorporated on May 18, 2010 under the laws of the State of Delaware.  On July 15, 2010, Integrity Acquisition Corp. Ltd. (hereinafter: "Integrity Acquisition"), a wholly owned Israeli subsidiary of the Company, which was established on May 23, 2010, completed a merger with A.D. Integrity Applications Ltd. (hereinafter: "Integrity Israel"), an Israeli corporation that was previously held by the stockholders of the Company.  Pursuant to the merger, all equity holders of Integrity Israel received the same proportional ownership in the Company as they had in Integrity Israel prior to the merger. Following the merger, Integrity Israel remained a wholly-owned subsidiary of the Company.  As the merger transaction constituted a structural reorganization, the merger has been accounted for at historical cost in a manner similar to a pooling of interests.  Integrity Israel was incorporated in 2001 and commenced its operations in 2002.  Integrity Israel, a medical device company, focuses on the design, development and commercialization of non-invasive glucose monitoring devices for home use by persons suffering from diabetes.

B. Going concern uncertainty   Since its incorporation, the Company did not conduct any material operations other than those carried out by Integrity Israel.  The development and commercialization of Integrity Israel's product is expected to require substantial expenditures.  Integrity Israel and the Company (collectively, the "Group") have not yet generated material revenues from operations, and therefore they are dependent upon external sources for financing their operations. As of June 30, 2015, the Group has incurred accumulated deficit of $26,521,231, stockholder's deficit of $4,540,718 and negative operating cash flows.  These factors raise substantial doubt about the Group’s ability to continue as a going concern.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.  During 2012, the Company raised a total amount of approximately $1.0 million (net of related expenses) from the issuance of Common Stock. During 2013, the Company raised funds in an approximate amount of $5.3 million (net of related cash expenses) from the issuance of units (the “Series A Units”) consisting of shares of the Company’s Series A Convertible Preferred Stock (the “Series A Preferred Stock”) and detachable warrants to purchase shares of the Company’s Common Stock (the “Series A Warrants” or “Warrants with down-round protection”).  During the period between August and December of 2014, the Company raised funds in an aggregate amount of approximately $7.3 million (net of related cash expenses) from the issuance of units (the “Series B Units”), each consisting of (a) one share of the Company’s newly designated Series B 5.5% Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), convertible into Common Stock at an initial conversion price of $5.80 per share, (b) a five year warrant to purchase, at an exercise price of $5.80 per share, up to such number of shares of Common Stock issuable upon conversion of such share of Series B Preferred Stock (each a “Series B-1 Warrant”) and (c) a five year warrant to purchase, at an exercise price of $10.00 per share, up to such number of shares of Common Stock issuable upon conversion of such share of Series B Preferred Stock (each a “Series B-2 Warrant” and, together with the Series B-1 Warrants, collectively, the “Series B Warrants”). See Note 3B regarding the exchange of certain Series A Units into Series B Units.   Until such time as the Group generates sufficient revenue to fund its operations (if ever), the Group plans to finance its operations through the sale of equity or equity-linked securities and/or debt securities and, to the extent available, short term and long term loans. There can be no assurance that the Group will succeed in obtaining the necessary financing to continue its operations.

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INTEGRITY APPLICATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 1 –   GENERAL (cont.)

C. Risk factors The Group has a limited operating history and faces a number of risks, including uncertainties regarding continuation of the development process, demand and market acceptance of the Group's products, the effects of technological changes, competition and the development of products by competitors.  Additionally, other risk factors also exist, such as the ability to manage growth and the effect of planned expansion of operations on the Group's future results. In addition, the Group expects to continue incurring significant operating costs and losses in connection with the development of its products and marketing efforts. The Group has not yet generated material revenues from its operations to fund its activities and therefore the Group is dependent on the receipt of additional funding from its stockholders and investors in order to continue as a going concern (See Note 1B).

D. Use of estimates in the preparation of financial statements The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. As applicable to these condensed consolidated interim financial statements, the most significant estimates and assumptions relate to (i) the fair value estimate of the Warrants with down-round protection, (ii) the fair value measurement of the Series B Units and the estimate of the loss arising from the partial extinguishment of the Series A Units with Series B Units, and (iii) the going concern assumptions.

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INTEGRITY APPLICATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 2 –   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Basis of presentation   The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with our consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (“fiscal 2014”). The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) related to interim financial statements. As permitted under those rules, certain information and footnote disclosures normally required or included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted. The financial information contained herein is unaudited; however, management believes all adjustments have been made that are considered necessary to present fairly the results of the Company’s financial position and operating results for the interim periods. All such adjustments are of a normal recurring nature.   The results for the six and three month periods ended June 30, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015 or for any other interim period or for any future period.   Principles of Consolidation The consolidated financial statements include the accounts of the Company and the wholly- owned subsidiary. All significant intercompany balances have been eliminated in consolidation.

B. Warrants with down-round protection The Company has determined its derivative warrant liability with respect to the Series A Warrants to be a Level 3 fair value measurement and has used the Binomial pricing model to calculate its fair value. Because the warrants contain a price protection feature, the probability that the exercise price of the warrants would decrease as the stock price decreased was incorporated into the valuation calculations.  The key inputs used in the fair value calculations were as follows:

	June 30, 2015
Dividend yield (%)		-
Expected volatility (%) (*)		105.14
Risk free interest rate (%)		1.01
Expected term of options (years) (**)		2.70
Exercise price (US dollars)		5.80
Share price (US dollars) (***)		2.31
Fair value (US dollars)		1.00

  (*) Due to the low trading volume of the Company’s Common Stock, the expected volatility was based on the historical volatility of the share price of other public companies that operate in the same industry sector as the Company.

  (**) Due to the fact that the Company does not have sufficient historical exercise data, the expected term was determined based on the "simplified method" in accordance with Staff Accounting Bulletin No. 110.

  (***) The Common Stock price, per share, reflects the Company’s management’s estimation of the fair value per share of Common Stock as of June 30, 2015. In reaching its estimation, management considered, among other things, a valuation prepared by a third-party valuation firm following the issuance of the Series B Units.

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INTEGRITY APPLICATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 2 –   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

C. Recently issued accounting pronouncements

  1. Accounting Standard Update 2014-09, “Revenue from Contracts with Customers”

In May 2014, the FASB issued Accounting Standard Update 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09").

ASU 2014-09 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 also requires entities to disclose sufficient information, both quantitative and qualitative, to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

An entity should apply the amendments in this ASU using one of the following two methods: 1. Retrospectively to each prior reporting period presented with a possibility to elect certain practical expedients, or, 2. Retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. If an entity elects the latter transition method, it also should provide certain additional disclosures.

For a public entity, the amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period (the first quarter of fiscal year 2017 for the Company). However, during July 2015, the FASB decided to delay the effective date of ASU 2014-09 by one year and to permit limited early adoption. A final accounting standard that will reflect the revised date was not finalized as of the date of issuance of these interim financial statements.

The Company is in the process of assessing the impact, if any, of ASU 2014-09 on its consolidated financial statements.

  2. Accounting Standards Update 2014-15, “Presentation of Financial Statements—Going Concern”   In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern ("ASU 2014-15").   ASU 2014-15 provides guidance on management’s responsibility in evaluating whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable).   ASU 2014-15 also provides guidance related to the required disclosures as a result of management’s evaluation.    The amendments in ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.   The Company is in the process of assessing the impact, if any, of ASU 2014-15 on its consolidated financial statements or related disclosures.

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INTEGRITY APPLICATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 2 –   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

C. Recently issued accounting pronouncements (cont.)

  3. Accounting Standard Update 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity”   In November 2014, the FASB issued Accounting Standard Update 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity ("ASU 2014-16").   The amendments in ASU 2014-16 clarify how current U.S. GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument. The amendments also clarify that, in evaluating the nature of a host contract, an entity should assess the substance of the relevant terms and features (i.e., the relative strength of the debt-like or equity-like terms and features given the facts and circumstances) when considering how to weigh those terms and features. The assessment of the substance of the relevant terms and features should incorporate a consideration of the characteristics of the terms and features themselves; the circumstances under which the hybrid financial instrument was issued or acquired; and the potential outcomes of the hybrid financial instrument, as well as the likelihood of those potential outcomes.   The amendments in ASU 2014-16 apply to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share.   The amendments in ASU 2014-16 are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 (fiscal 2016 for the Company). Early adoption, including adoption in an interim period, is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.   The effects of initially adopting the amendments in ASU 2014-16 should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted to all relevant prior periods.   The Company is in the process of assessing the impact, if any, of ASU 2014-16 on its consolidated financial statements.

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INTEGRITY APPLICATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 3 –   EVENTS DURING THE REPORTED PERIOD

A. As more fully described in Note 10.D and Note 19 to the Company's annual report on Form 10-K for the year ended December 31, 2014, from June of 2011 Integrity Israel, Avner Gal, David Malka, Zvi Cohen, Ilana Freger and Alexander Reykhman, on the one hand, and Y.H. Dimri Holdings ("Dimri"), on the other hand, which was a shareholder of Integrity Israel prior to the reorganization and merger (described in Note 1 to the Company's annual report on Form 10-K for the year ended December 31, 2014), were involved in arbitration proceedings resulting from certain claims asserted by Dimri following such reorganization. On March 11, 2015, the arbitrator issued a binding arbitration decision (the “Arbitration Decision”) which documents the parties’ negotiated settlement of such arbitration proceedings.  Pursuant to the terms of the Arbitration Decision, (1) Avner Gal, David Malka, Zvi Cohen, Ilana Freger and Alexander Reykhman transferred to Dimri, on March 18, 2015, an aggregate of 440,652 shares of the Company’s outstanding Common Stock held collectively by such shareholders, (2) Integrity Israel (A) paid to Dimri on March 23, 2015, NIS 1,767,674 or $439,939 (based on the exchange rate of 4.018 NIS:$1 as of March 23, 2015), as repayment in full of the outstanding principal amount under Dimri’s investment agreement with Integrity Israel and the founders (the “Investment Agreement”), as adjusted for changes in the Israeli consumer price index since the date on which the loan was made, and (B) paid to Dimri on April 30, 2015, NIS 316,100 or $81,870 (based on the exchange rate of 3.861 NIS:$1 as of April 30, 2015), as partial reimbursement of Dimri’s attorney’s fees in the arbitration. The Company accrued for the fee reimbursement obligation as part of professional fees within selling, marketing and general and administrative expenses included in its Annual Report on Form 10-K for the fiscal year ended December 31. As of June 30, 2015 such amount was fully paid.   Following the completion of the abovementioned transfers and payments, the Arbitration Decision released Integrity Israel, the Company and the other defendants in the arbitration from any legal claim by Yigal Dimri, the principal shareholder of Dimri, and any other companies under his control in respect of the subject matter of the arbitration, including the shareholder loan granted under and any claim of anti-dilution rights under the Investment Agreement, and similarly released Mr. Dimri and all companies under his control from any legal claim by Integrity Israel, the Company and the other defendants in the arbitration in respect of the subject matter of the arbitration.

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INTEGRITY APPLICATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 3 –   EVENTS DURING THE REPORTED PERIOD (cont.)

B. As more fully described in Note 11 to the Company's annual report on Form 10-K for the year ended December 31, 2014, on March 13, 2013, the Company entered into a Securities Purchase Agreement (“Purchase Agreement”) with certain accredited investors (the “Series A Unit Purchasers”) pursuant to which the Company issued to the Series A Unit Purchasers an aggregate of 6,300 Series A Units.    Based on the terms the Purchase Agreement, so long as any initial Series A Unit Purchaser holds any shares of Series A Preferred Stock, if (1) the Company sells any shares of Common Stock or other securities convertible into, or rights to acquire, Common Stock and (2) a Purchaser then holding Series A Preferred Stock, Warrants, Conversion Shares or Warrant Shares reasonably believes that any of the terms and conditions appurtenant to such issuance or sale are more favorable to the purchaser in such subsequent sale of securities than are the terms and conditions granted to such Series A Unit Purchaser, then the Series A Unit Purchaser will be permitted to require the Company to amend the terms of the Series A Unit Sale transaction (only with respect to such Series A Unit Purchaser) so as to match the terms of the subsequent issuance (including, for the avoidance of doubt, any terms and provisions that are or may be less favorable to such Purchaser).
During August and December of 2014, the Company issued to certain accredited investors 8,500 Series B Units. Pursuant to the Purchase Agreement, the Company was required to and did notify the holders of the Series A Preferred Stock of the closing of the sale of the Series B Units, and following receipt thereof such holders of Series A Preferred Stock were entitled, pursuant to the “most favored nation” provisions contained in the Purchase Agreement (as described above), to elect to amend the terms of their purchase of Series A Units to match the terms of the Series B Units. The Company was obligated to amend the terms of any of Series A Units who timely made such election and tendered its Series A Units for exchange.
As of June 30, 2015, approximately 6,866 Unit A holders have elected pursuant to the “most favored nation” provision in the Purchase Agreement to amend the terms of their Series A Units to match the terms of the Series B Units. Accordingly, the Company has exchange 6,866 share of Series A Preferred Stock into 6,866 shares of Series B Stock and 1,427,432 Warrants with down-round protection into 1,189,503 Series B-1 Warrants and 1,189,503 Series B-2 Warrants. Due to the differences in the contractual terms of each of the financial instruments exchanged management determined that the exchange constitutes an extinguishment of the exiting instruments and an issuance of new financial instruments. As a result of the exchange elections, the Company recorded during the six months period ended June 30, 2015 a non-cash loss on extinguishment of Series A Preferred Stock and Series A Warrants in the amount of $1,270,971, resulting from the differences between the fair market value estimate of the new Series B Units less the net book value of the exchanged Series A Preferred Stock and less the fair value of the exchanged Warrants with down-round protection (See Note 2B above).

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INTEGRITY APPLICATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 4 – INVENTORIES

	US dollars
	June 30,		December 31,
	2015		2014
	(unaudited)		(audited)
Raw materials		81,984		55,557
Work in progress		45,596		16,459
Finished products		10,459		11,637
		138,039		83,653

NOTE 5 – FINANCING (INCOME) EXPENSES, NET

	US dollars						US dollars
	Six month period ended June 30,						Three month period ended June 30,
	2015			2014			2015			2014
	(unaudited)						(unaudited)
Israeli CPI linkage difference on principal of loans from stockholders		(1,872	)		(1,315	)		1,808			3,402
Exchange rate differences		38,269			(3,724	)		90,872			(1,757	)
Change in fair value of Warrants with down round protection		(91,309	)		(6,293,705	)		(25,539	)		(6,147,835	)
Interest expenses on credit from banks and other		8,378			4,223			5,788			1,936
Loss on partial extinguishment of Series A Preferred Stock and Series A Warrants		1,270,971			-			497,674			-
		1,224,437			(6,294,521	)		570,603			(6,144,254	)

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INTEGRITY APPLICATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 6 – INCOME (LOSS) PER SHARE   Basic income (loss) per share is computed by dividing net income (loss) for the period after consideration of the effect of dividend on preferred stock by the weighted average number of shares outstanding during the period.   The income (loss) and the weighted average number of shares used in computing basic and diluted income (loss) per share for the six and three month periods ended June 30, 2015 and 2014 are as follows:

	US dollars						US dollars
	Six month period ended June 30,						Three month period ended June 30,
	2015			2014			2015			2014
	(unaudited)						(unaudited)
Income (loss) for the period		(3,201,337	)		4,525,009			(1,666,806	)		5,261,928
Cash dividend on Series A Preferred Stock		(47,036	)		(185,263	)		(26,522	)		(92,589	)
Stock dividend on Series B Preferred Stock		(185,795	)		-			(102,558	)		-
Income attributable to participating securities (Preferred Stock)		-			(842,475	)		-			(1,003,097	)
Income (loss) for the period attributable to common stockholders		(3,434,168	)		3,497,271			(1,795,886	)		4,166,242

	Number of shares				Number of shares
	Six month period ended June 30,				Three month period ended June 30,
	2015		2014		2015		2014
Number of shares:
Common shares used in computing basic income (loss) per share		5,382,682		5,303,529		5,441,253		5,304,072
Common shares used in computing diluted income (loss) per share (*)		5,382,682		5,361,570		5,441,253		5,336,019
Total weighted average number of common shares related to outstanding convertible Preferred Stock, options and warrants excluded from the calculations of diluted income (loss) per share (**)		9,367,247		3,324,535		9,537,309		3,369,743

(*) In applying the treasury method, the average market price of Common Stock was based on management’s estimate (see Note 2D, above).

(**) The Company excludes from the calculation of diluted income (loss) per share, shares that will be issued upon the exercise of options and warrants with exercise prices, that are greater than the estimated average market value of the Company’s Common Stock and shares issuable upon conversion of Preferred Stock because their effect would be anti-dilutive.   Outstanding shares that will be issued upon conversion or exercise, as applicable, of all convertible Preferred Stock, stock options and warrants, have been excluded from the calculation of the diluted net loss per share for all the reported periods for which net loss was reported because the effect of the common shares issuable as a result of the exercise or conversion of these instruments was anti-dilutive.

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Item 2.                      Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. These forward looking statements include statements about our expectations, beliefs or intentions regarding our product development efforts, business, financial condition, results of operations, strategies or prospects. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q, including statements regarding our future activities, events or developments, including such things as future revenues, product development, market acceptance, responses from competitors, capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strengths, goals, expansion and growth of our business and operations, plans, references to future success, projected performance and trends, and other such matters, are forward-looking statements. The words “believe,” “expect,” “anticipate” “intend,” “estimate,” “plan,” “may,” “will,” “could,” “would,” “should” and other similar words and phrases, are intended to identify forward-looking statements. The forward-looking statements made in this Quarterly Report on Form 10-Q are based on certain historical trends, current conditions and expected future developments as well as other factors we believe are appropriate in the circumstances. These statements relate only to events as of the date on which the statements are made and we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. All of the forward-looking statements made in this Quarterly Report on Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us or our business or operations. Whether actual results will conform to our expectations and predictions is subject to a number of risks and uncertainties that may cause actual results to differ materially. Risks and uncertainties, the occurrence of which could adversely affect our business, include the risks identified under the caption “Risk Factors” included in our annual report on Form 10-K for the year ended December 31, 2014. The following discussion should be read in conjunction with the condensed consolidated financial statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q.

Overview

Integrity is a medical device company focused on the design, development and commercialization of non-invasive glucose monitoring devices for use by persons suffering from diabetes. Integrity Israel was founded in 2001 with a mission to develop, produce and market non-invasive glucose monitors for home use by diabetics. We have developed a non-invasive blood glucose monitor, the GlucoTrack® model DF-F glucose monitoring device, which is designed to help people with diabetes obtain blood glucose level readings without the pain, inconvenience, cost and difficulty of conventional (invasive) spot finger stick devices. The GlucoTrack® model DF-F utilizes a patented combination of ultrasound, electromagnetic and thermal technologies to obtain blood glucose measurements in less than one minute via a small sensor that is clipped onto one’s earlobe and connected to a small, handheld control and display unit, all without drawing blood.

On June 4, 2013, we received initial CE Mark approval for the GlucoTrack® model DF-F non-invasive glucose monitoring device from DEKRA Certification B.V., our European notified body (the “Notified Body”). In March 2014 we received CE Mark approval for 6 months calibration validity of the same device. Receipt of the CE Mark allows us to market and sell the GlucoTrack® model DF-F glucose monitoring device in European Union (“EU”) member countries that have adopted the European Medical Device Directive (the “MDD”) without being subject to additional national regulations with regard to demonstration of performance and safety. However, although the MDD is applicable throughout the EU, in practice it does not ensure uniform regulation throughout the EU.  Accordingly, member countries may apply and enforce the MDD’s terms differently, and certain EU member countries may request or require performance and/or safety data additional to the MDD’s requirements from time to time, on a case-by-case basis. The CE Mark also permits the sale in countries that have an MDD Mutual Recognition Agreement with the EU. The GlucoTrack® model DF-F has not yet been approved for commercial sale in the United States. We have submitted pre-submission documents to the U.S. Food and Drug Administration (the “FDA”) 0n August 10, 2015 in connection with our proposed future application for FDA approval of our U.S. clinical trial protocol.  The pre-submission documentation has been submitted to the FDA in order to obtain the FDA’s guidance regarding the U.S. regulatory pathway for the GlucoTrack® model DF-F, the proper approach to refining the trial protocol and endpoints, and preparing the pre-marketing application. If our clinical trial protocol is approved by FDA, we expect to begin clinical trials in the United States in early 2016.  Although a final agreement has not been reached, the Company is currently in advanced discussions with a well-known hospital and university to conduct such clinical trials. We are seeking approval the Notified Body for improvements to the GlucoTrack® model DF-F which simplify and shorten (from approximately 2.5 hours to less than one hour) the initial calibration process for the device. These improvements are intended to reduce the backlog created as purchasers of the device await calibration. We are also seeking approval from the Notified Body on the updated intended use for the device, which would expand the intended user population to include not only Type 2 diabetes, but persons suffering from pre-diabetes conditions as well.

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Since receiving CE Mark approval for our GlucoTrack® model DF-F glucose monitoring device, we have expanded our primary focus to include, in addition to research and development activities, preparation for anticipated future mass-production and distribution of the GlucoTrack® model DF-F in EU member countries and other countries that have an MDD Mutual Recognition Agreement with the EU.  We have entered into exclusive distribution agreements with distribution firms in more than 10 countries, the effectiveness of which in many cases is subject to the receipt of local regulatory approval or registration, if required, for the commencement of sales of the GlucoTrack® model DF-F in the subject territory.  We cannot provide any assurance that we will receive the required local regulatory approvals in any of the countries in which such approvals are required, and therefore we may never be permitted to commence commercial sales of our products in such territories. Further discussions with other potential distributors are in different stages. Among other jurisdictions, we are in the process of seeking regulatory approval for the GlucoTrack® model DF-F in China (where we have a distribution agreement in place), South Korea (where we have a distribution agreement in place) and Japan (where we do not yet have a distribution agreement in place), and are awaiting local regulatory approval in each of those countries.  Based on input from our local distributors and regulatory consultants, we currently estimate that we will complete the local regulatory approval review process in China (CFDA), South Korea (KFDA) and Japan (PMDA) in approximately 9 to 12, 3 to 6 and 15 to 18 months, respectively.

We do not have commercial manufacturing facilities and do not intend to build commercial manufacturing facilities of our own in the foreseeable future. We currently utilize a third party manufacturer in Israel to manufacture the GlucoTrack model DF-F.  In July 2014, we entered into a manufacturing agreement with Wistron Corp. (“Wistron”), a Taiwanese entity and the manufacturing arm of Acer Inc.  Pursuant to such agreement, Wistron has agreed to mass produce and service, on a non-exclusive basis, the GlucoTrack® model DF-F and any future products, if any, introduced by us. Pursuant to such agreement, Wistron has also agreed to provide full turn-key manufacturing services for the GlucoTrack® model DF-F, including components procurement, unit assembly, device integration, testing and packaging.  Wistron is in the process of preparing a production line for the GlucoTrack model DF-F, and we expect such production line to be operational between the end of 2015 and early 2016.  Subject to the completion of Wistron’s production line, we intend to utilize the services of both Wistron and the Israeli third-party manufacturer to produce the GlucoTrack model DF-F.

In support of our sales and distribution efforts, we are continuing to seek to expand our sales and customer support capabilities by increasing our sales and customer support teams, by adding new members to our advisory board, as well as by raising market awareness of our GlucoTrack® model DF-F device and its benefits.  In February 2015, we held the first meeting of our new Scientific Advisory Board, comprised of the following well-known leaders in the fields of Diabetes research, monitoring and treatment: Professor Lutz Heinemann, CEO and Head, Business Development of Profil Institute for Metabolic Research, Ltd. in Neuss, Germany; Prof. Michael Heise, University of Applied Science of South-Westphalia, Iserlohn, Germany; Prof. Mark A. Arnold, Professor and Edwin B. Green Chair Professor in Laser Chemistry at the University of Iowa; Prof. Jens Sandahl Christiansen, clinical professor at the Department of Endocrinology and Diabetes  of Aarhus University Hospital in Denmark; and Prof. Jan Bolinder, Professor of Clinical Diabetes Research at the department of Medicine, Huddinge,  Sweden.  Members of the Scientific Advisory Board will receive a per meeting fee of 2,000 Euros each, plus reimbursement of expenses.  On July 1, 2014, we hired an experienced director in the medical devices field, Ron Roobroeck, to serve as our Director of International Marketing and Sales. We have also hired and continue in the recruiting process to hire additional field engineers, who work out of our headquarters in Israel, to educate our distributors and their sales and customer support personnel on the proper use and calibration of the GlucoTrack® model DF-F and provide customer support to our distributors.  To further support the efforts of our distributors, we have also hired and continue seeking to hire business development managers to serve as local liaisons to, and manage our relationships with, our distributors.  We have engaged Ogilvy CommonHealth (Paris), a well-known marketing firm in Europe to assist us in creating a marketing program intended to increase awareness of our product, and have hired a social media director to both monitor social network activity with respect to diabetes and blood sugar measurement devices, and to assist in publicizing our device through social networking activity.

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We have not yet generated any material revenues from our operations and, as of June 30, 2015, have incurred accumulated deficit of $26,521,231, stockholders’ deficit of $4,540,718 and negative operating cash flows. We currently have no material sources of recurring revenue and therefore are 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.

Significant Accounting Policies

Our consolidated financial statements are prepared in accordance with US. GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Our significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements appearing in our annual report on Form 10-K for the year ended December 31, 2014. Our management believes that, as for the financial statements for the periods included in this report, the going concern assessment is a critical accounting policy. However, due to the early stage of operations of the Company, there are no other accounting policies that are considered to be critical accounting policies by management.

Going Concern Uncertainty

The development and commercialization of our product will require substantial expenditures. We have not yet generated material revenues and have incurred substantial accumulated losses and cumulative negative operating cash flows since inception. We currently have no sources of recurring revenue and are therefore dependent upon external sources for financing our operations. There canbe 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 annual report on Form 10-K for the year ended December 31, 2014; however management cannot assure that its plans will be successful in addressing these issues. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Recently Issued Accounting Pronouncements

1. Accounting Standard Update 2014-09, “Revenue from Contracts with Customers”

In May 2014, the FASB issued Accounting Standard Update 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09").

ASU 2014-09 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 also requires entities to disclose sufficient information, both quantitative and qualitative, to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

An entity should apply the amendments in this ASU using one of the following two methods: 1. Retrospectively to each prior reporting period presented with a possibility to elect certain practical expedients, or, 2. Retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. If an entity elects the latter transition method, it also should provide certain additional disclosures.

For a public entity, the amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period (the first quarter of fiscal year 2017 for the Company). However, during July 2015, the FASB decided to delay the effective date of ASU 2014-09 by one year and to permit limited early adoption. A final accounting standard that will reflect the revised date was not finalized as of the date of issuance of these interim financial statements.

The Company is in the process of assessing the impact, if any, of ASU 2014-09 on its consolidated financial statements.

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2. Accounting Standards Update 2014-15, “Presentation of Financial Statements—Going Concern”

In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern ("ASU 2014-15").

ASU 2014-15 provides guidance on management’s responsibility in evaluating whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable).

ASU 2014-15 also provides guidance related to the required disclosures as a result of management’s evaluation. 

The amendments in ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.

The Company is in the process of assessing the impact, if any, of ASU 2014-15 on its consolidated financial statements or related disclosures.

3. Accounting Standard Update 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity”

In November 2014, the FASB issued Accounting Standard Update 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity ("ASU 2014-16").

The amendments in ASU 2014-16 clarify how current U.S. GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument. The amendments also clarify that, in evaluating the nature of a host contract, an entity should assess the substance of the relevant terms and features (i.e., the relative strength of the debt-like or equity-like terms and features given the facts and circumstances) when considering how to weigh those terms and features. The assessment of the substance of the relevant terms and features should incorporate a consideration of the characteristics of the terms and features themselves; the circumstances under which the hybrid financial instrument was issued or acquired; and the potential outcomes of the hybrid financial instrument, as well as the likelihood of those potential outcomes.

The amendments in ASU 2014-16 apply to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share.

The amendments in ASU 2014-16 are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 (fiscal 2016 for the Company). Early adoption, including adoption in an interim period, is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

The effects of initially adopting the amendments in ASU 2014-16 should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted to all relevant prior periods.

The Company is in the process of assessing the impact, if any, of ASU 2014-16 on its consolidated financial statements.

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Results of Operations

The following discussion explains material changes in our results of operations for the three and six month periods ended June 30, 2015, compared with the same periods ended June 30, 2014. This discussion should be read in conjunction with the financial statements and related notes included elsewhere in this report.

Six Months Ended June 30, 2015 Compared to Six Months Ended June 30, 2014

Revenues

During the six month period ended June 30, 2015, we had revenues of $143,167 from orders for our GlucoTrack® model DF-F glucose monitoring device and personal ear-clip (“PEC”) that are replaced every six months.  We did not have any revenue in the prior-year period, as we had not yet commenced sales of the GlucoTrack® model DF-F.  We recognize revenues from GlucoTrack® model DF-F and PEC when delivery has occurred, persuasive evidence of an agreement exists, the fee is fixed and determinable, collectability is reasonably assured and no further obligations exist.

Research and Development Expenses

Research and development expenses were $1,036,305 for the six month period ended June 30, 2015, as compared to $905,873 for the prior-year period. The increase is attributable primarily to higher salaries and related expenses resulting from research and development engagement in the initial manufacturing of the GlucoTrack DF-F. Research and development expenses consist primarily of salaries and other personnel-related expenses, including stock-based compensation expenses, materials, travel expenses, clinical trials and other expenses. We expect to maintain similar levels of research and development expenses through the remainder of 2015; however, we may adjust or allocate the level of our research and development expenses based on available financial resources and based on our commercial needs including the FDA registration process, specific requirements from customers, development of new GlucoTrack models and others.

Selling, Marketing and General and Administrative Expenses

Selling, marketing and general and administrative expenses were $1,083,762 for the six month period ended June 30, 2015, as compared to $863,639 for the prior-year period. The increase is attributable primarily to higher salaries and related expenses relating to our new sales and marketing director hired in July 2014 and our new social media director hired in April 2015. In addition, the increase is also attributable in part to higher professional fees primarily due to the engagement during the second quarter of 2015 of Ogilvy CommonHealth (Paris), a well-known marketing firm in Europe, offset partially by lower investor relations and public relations expenses. Selling, marketing and general and administrative expenses consist primarily of professional services, salaries, travel expenses and other related expenses for executive, finance and administrative personnel, including stock-based compensation expense. Other general and administrative costs and expenses include facility-related costs not otherwise included in research and development costs and expenses, and professional fees for legal and accounting services. We expect selling, marketing and general and administrative expenses to increase in 2015 and beyond as we continue our focus on marketing and sales of the GlucoTrack® model DF-F and incur increased costs to comply with the reporting and other obligations applicable to public reporting companies.

Financing (income) expenses, net

Financing expenses, net was $1,224,437 for the six month period ended June 30, 2015, as compared to financing income of $(6,294,521) for the prior-year period. The change is primarily attributable to the non-cash loss on partial extinguishment of Series A Preferred Stock and Series A Warrants (see Note 3B of Item I – Financial Statement, above) during the six months period ended June 30, 2015 and the decrease in the fair value estimate during the six months period ended June 30, 2014 relating to our Warrants with down-round protection that were issued to investors. In accordance with U.S. GAAP, we mark the warrants to market on a quarterly basis based on the fair value estimate derived by using a binomial pricing model, with the changes in fair value recognized as finance expense or income, as applicable, in our consolidated statement of operations.

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Net income (loss)

Net loss was $(3,201,337) for the six month period ended June 30, 2015, as compared to a net income of $4,525,009 for the prior-year period. The increase in net loss is due primarily to the change in financing (income) expenses, net and increase in our operating expenses, as described above.

Three Months Ended June 30, 2015 Compared to three Months Ended June 30, 2014

Revenues

During the three month period ended June 30, 2015, we had revenues of $67,342 from orders for our GlucoTrack® model DF-F glucose monitoring device and personal ear-clip (“PEC”) that are replaced every six months.  We did not have any revenue in the prior-year period, as we had not yet commenced sales of the GlucoTrack® model DF-F.  We recognize revenues from GlucoTrack® model DF-F and PEC when delivery has occurred, persuasive evidence of an agreement exists, the fee is fixed and determinable, collectability is reasonably assured and no further obligations exist.

Research and Development Expenses

Research and development expenses were $557,980 for the three month period ended June 30, 2015, as compared to $454,789 for the prior-year period. The increase is attributable primarily to higher salaries and related expenses resulting from research and development engagement in the initial manufacturing of the GlucoTrack DF-F. Research and development expenses consist primarily of salaries and other personnel-related expenses, including stock-based compensation expenses, materials, travel expenses, clinical trials and other expenses. We expect to maintain similar levels of research and development expenses through the remainder of 2015; however, we may adjust or allocate the level of our research and development expenses based on available financial resources and based on our commercial needs including the FDA registration process, specific requirements from customers, development of new GlucoTrack models and others.

Selling, Marketing and General and Administrative Expenses

Selling, marketing and general and administrative expenses were $605,565 for the three month period ended June 30, 2015, as compared to $427,537 for the prior-year period. The increase is attributable primarily to higher salaries and related expenses relating to our new sales and marketing director hired in July 2014 and our new social media director hired in April 2015. In addition, the increase is also attributable in part to higher professional fees primarily due to the engagement during the second quarter of 2015 of Ogilvy CommonHealth (Paris), a well-known marketing firm in Europe, offset partially by lower investor relations and public relations expenses. Selling, marketing and general and administrative expenses consist primarily of professional services, salaries, travel expenses and other related expenses for executive, finance and administrative personnel, including stock-based compensation expense. Other general and administrative costs and expenses include facility-related costs not otherwise included in research and development costs and expenses, and professional fees for legal and accounting services. We expect selling, marketing and general and administrative expenses to increase in 2015 and beyond as we continue our focus on marketing and sales of the GlucoTrack® model DF-F and incur increased costs to comply with the reporting and other obligations applicable to public reporting companies.

Financing (income) expenses, net

Financing expense, net was $570,603 for the three month period ended June 30, 2015, as compared to financing income of $(6,144,254) for the prior-year period. The change is primarily attributable to the non-cash loss on partial extinguishment of Series A Preferred Stock and Series A Warrants (see Note 3B of Item I – Financial Statement, above) during the three month period ended June 30, 2015 and the decrease in the fair value estimate during the three month period ended June 30, 2014 relating to our warrants with down-round protection that were issued to investors. In accordance with U.S. GAAP, we mark the Warrants to market on a quarterly basis based on the fair value estimate derived by using a binomial pricing model, with the changes in fair value recognized as finance expense or income, as applicable, in our consolidated statement of operations.

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Net income (loss)

Net loss was $(1,666,806) for the three month period ended June 30, 2015, as compared to a net income of $5,261,928 for the prior-year period. The increase in net loss is due primarily to the change in financing (income) expenses, net and increase in our operating expenses, as described above.

Liquidity and Capital Resources

We currently have limited liquidity.  As of June 30, 2015 and August 10, 2015, cash on hand was approximately $3.5 million and $2.9 million, respectively.  Based on our current cash burn rate, strategy and operating plan, we believe that our cash and cash equivalents will enable us to operate for a period of approximately seven months from the date of this report. In order to fund our anticipated liquidity needs beyond such time period (or possibly earlier if our current cash burn rate, strategy or operating plan change in a way that accelerates or increases our liquidity needs), we will need to increase our revenue, raise additional capital, or both.

As of June 30, 2015, we had NIS 300,000 (approximately $79,597 based on the exchange rate of 3.769 NIS/dollar as of June 30, 2015) available for borrowing under our line of credit with Bank HaPoalim. Borrowings under the line of credit are secured by our funds on deposit with the bank at the time of borrowing, which generally must be sufficient to cover the principal amount of the borrowings in full. As of June 30, 2015, we did not have any borrowings outstanding under the line of credit.

Messrs. Avner Gal and Zvi Cohen collectively loaned Integrity Israel NIS 176,000 ($46,697 based on the same exchange rate) in May 15, 2002 pursuant to a board approval. Messrs. Nir Tarlovsky, Yitzhak Fisher and Asher Kugler loaned Integrity Israel NIS 336,300 ($89,228 based on the same exchange rate) on March 16, 2004. These loans are not required to be repaid until the first year in which we realize profits in our annual statement of operations (accounting profit). At such time, the loans are to be repaid on a quarterly basis in an amount equal to 10% of our total sales in the relevant quarter, beginning on the quarter following the first year in which we realize profits in our annual statement of operations. The total amount to be repaid by us to each lender shall be an amount equal to the aggregate principal amount loaned by such lender to us, plus an amount equal to the product of the amount of each payment made by us in respect of such loan multiplied by the percentage difference between the Israeli Consumer Price Index on the date on which the loan was made and the Israeli Consumer Price Index on the date of such payment. However, notwithstanding the above-mentioned mechanism, we will not be required to repay the loans during any time when such repayment would cause a deficit in our working capital. Our board of directors is entitled to modify the repayment terms of these loans, so long as such modification does not discriminate against any particular lender, and provided that all payments must be allocated among the lenders on a pro-rata basis.

Integrity Israel is required to pay royalties to the Office of the Chief Scientist of the Ministry of Industry, Trade and Labor of the State of Israel at a rate ranging between 3-5% of the proceeds from the sale of the Company’s products arising from the development plan up to an amount equal to $93,462, plus interest at LIBOR from the date of grant. As of June 30, 2015, the contingent liability with respect to royalty payment on future sales equals to approximately $87,375, excluding interest.

Net Cash Used in Operating Activities for the Six Month Periods Ended June 30, 2015 and June 30, 2014

Net cash used in operating activities was $1,836,282 and $1,556,095 for the six month periods ending June 30, 2015 and 2014, respectively. Net cash used in operating activities primarily reflects the net income (loss) for those periods of $(3,201,337) and $4,525,009, respectively, increased and offset by non-cash changes in fair value of Warrants with down-round protection of $91,309 and $6,293,705, respectively. Net cash used in operating activities was also partially offset by the non-cash loss on extinguishment of Series A Preferred Stock and Series A Warrants in the amount of $1,270,971 and $0, respectively and net changes in operating assets and liabilities in the amounts of $156,759 and $177,452, respectively.

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Net Cash Used in Investing Activities for the Six Month Periods Ended June 30, 2015 and June 30, 2014

Net cash used in investing activities was $43,171 and $47,919  for the six month periods ended June 30, 2015, and 2014, respectively. During the six month periods ended June 30, 2015, and 2014, cash used primarily to purchase equipment (such as computers, research and development and office equipment) amounted to $18,892 and $47,919 respectively, and cash used to fund deposits in respect of employees rights upon retirement amounted to $24,279 and $0, respectively.

Net Cash Provided by Financing Activities for the Six Month Periods Ended June 30, 2015 and June 30, 2014

Net cash used in financing activities was $486,975 and $185,263 for the six month period ended June 30, 2015 and 2014, respectively. Cash used in financing activities reflects primarily the repayment of stockholders loan to Dimri (see Note 3A of Item I – Financial Statement, above) in the amount of $439,939 and $0, and cash dividends paid to the holders of our Series A Preferred Stock in the amounts of $47,036 and $185,263 for the six month period ended June 30, 2015 and 2014, respectively.

Off-Balance Sheet Arrangements

As of June 30, 2015, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

Item 3.                      Quantitative and Qualitative Disclosures About Market Risk.

Not required for smaller reporting companies.

Item 4.                      Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2015.  The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2015, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 2.                      Unregistered Sales of Equity Securities and Use of Proceeds.

Effective as of January 1, 2015 and April 1, 2015, respectively, the Company issued an aggregate of (a) 4,341.035 and 2,525.104 shares of Series B 5.5% Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), (b) five-year warrants to purchase up to an aggregate of 754,153 and 435,350 shares of common stock, par value $0.001 per share (“Common Stock”), at an exercise price of $5.80 per share (the “Series B-1 Warrants”) and (c) five-year warrants to purchase up to an aggregate of 754,153 and 435,350 shares of Common Stock at an exercise price of $10.00 per share (the “Series B-2 Warrants).  Such shares of Series B Preferred Stock, Series B-1 Warrants and Series B-2 Warrants (collectively, the “Exchange Securities”) were issued in exchange for outstanding shares of Series A Preferred Stock, and the warrants issued together therewith, upon the exercise by the holders of such exchanged securities of their “most favored nation” rights pursuant to the Securities Purchase Agreement, dated March 13, 2013, by and among the Company and the purchasers party thereto.  Such exchange was completed without registration in reliance upon the exemption contained in Section 3(a)(9) of the United States Securities Act of 1933, as amended, as the exchange involved only securities of the Company exchanged with existing securities holders of the Company; no additional consideration was tendered by any exchanging shareholder in consideration for their Exchange Securities; and no commission or other remuneration was paid or given directly indirectly for soliciting such exchange. This Exchange Securities described above include 2,723.81 shares of Series B Preferred Stock, 391,338 Series B-1 Warrants and 391,337 Series B-2 Warrants the issuance of which is pending the receipt by the Company of complete documentation with respect to the exercise by the holders of certain Series A Units of their “most favored nation rights” under the Purchase Agreement.

Item 6.                      Exhibits.

Exhibit No.	Description
3.1	Certificate of Incorporation of Integrity Applications, Inc. (1)
3.2	Certificate of Amendment to Certificate of Incorporation of Integrity Applications, Inc. (1)
3.3	Certificate of Designation of Preferences and Rights of Series A 5% Convertible Preferred Stock (2)
3.4	Certificate of Designation of Preferences and Rights of Series B 5.5% Convertible Preferred Stock (3)
3.5	Bylaws of Integrity Applications, Inc. (1)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document (4)
101.SCH	XBRL Schema Document (4)
101.CAL	XBRL Calculation Linkbase Document (4)
101.LAB	XBRL Label Linkbase Document (4)
101.PRE	XBRL Presentation Linkbase Document (4)
101.DEF	XBRL Definition Linkbase Document (4)

—————————————

(1) Previously filed as an exhibit to the Company’s Registration Statement on Form S-1, as filed with the SEC on August 22, 2011, which exhibit is incorporated herein by reference.

(2) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on March 18, 2013, which exhibit is incorporated herein by reference.

(3) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on September 5, 2014, which exhibit is incorporated herein by reference.

(4) Pursuant to Rule 406T of Regulation S-T, the interactive files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated:  August 14, 2015

INTEGRITY APPLICATIONS, INC.
By:	/s/ Avner Gal
Name:	Avner Gal
Title	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

By:	/s/ Eran Hertz
Name:	Eran Hertz
Title	Chief Financial Officer (Principal Accounting Officer)

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EXHIBIT INDEX

Exhibit No.	Description
3.1	Certificate of Incorporation of Integrity Applications, Inc. (1)
3.2	Certificate of Amendment to Certificate of Incorporation of Integrity Applications, Inc. (1)
3.3	Certificate of Designation of Preferences and Rights of Series A 5% Convertible Preferred Stock (2)
3.4	Certificate of Designation of Preferences and Rights of Series B 5.5% Convertible Preferred Stock (3)
3.5	Bylaws of Integrity Applications, Inc. (1)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document (4)
101.SCH	XBRL Schema Document (4)
101.CAL	XBRL Calculation Linkbase Document (4)
101.LAB	XBRL Label Linkbase Document (4)
101.PRE	XBRL Presentation Linkbase Document (4)
101.DEF	XBRL Definition Linkbase Document (4)

—————————————

(1) Previously filed as an exhibit to the Company’s Registration Statement on Form S-1, as filed with the SEC on August 22, 2011, which exhibit is incorporated herein by reference.

(2) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on March 18, 2013, which exhibit is incorporated herein by reference.

(3) Previously filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on September 5, 2014, which exhibit is incorporated herein by reference.

(4) Pursuant to Rule 406T of Regulation S-T, the interactive files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Avner Gal, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2015 of Integrity Applications, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2015	By:	/s/ Avner Gal
		Avner Gal
		Chairman of the Board and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Eran Hertz, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2015 of Integrity Applications, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2015	By:	/s/ Eran Hertz
		Eran Hertz
		Chief Financial Officer

EX-31.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Integrity Applications, Inc. (the “Company”) for the six month period ended June 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Avner Gal, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Avner Gal
	Avner Gal
	Chairman of the Board and Chief Executive Officer
Dated: August 14, 2015

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Integrity Applications, Inc. (the “Company”) for the six month period ended June 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Eran Hertz, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(3) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(4) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Eran Hertz
	Eran Hertz
	Chief Financial Officer
Dated: August 14, 2015

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2015

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Basis of presentation

The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with our consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (“fiscal 2014”). The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) related to interim financial statements. As permitted under those rules, certain information and footnote disclosures normally required or included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted. The financial information contained herein is unaudited; however, management believes all adjustments have been made that are considered necessary to present fairly the results of the Company's financial position and operating results for the interim periods. All such adjustments are of a normal recurring nature.

The results for the six and three month periods ended June 30, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015 or for any other interim period or for any future period.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and the wholly- owned subsidiary. All significant intercompany balances have been eliminated in consolidation.

B. Warrants with down-round protection

The Company has determined its derivative warrant liability with respect to the Series A Warrants to be a Level 3 fair value measurement and has used the Binomial pricing model to calculate its fair value. Because the warrants contain a price protection feature, the probability that the exercise price of the warrants would decrease as the stock price decreased was incorporated into the valuation calculations. The key inputs used in the fair value calculations were as follows:

	June 30, 2015
Dividend yield (%)		-
Expected volatility (%) (*)		105.14
Risk free interest rate (%)		1.01
Expected term of options (years) (**)		2.70
Exercise price (US dollars)		5.80
Share price (US dollars) (***)		2.31
Fair value (US dollars)		1.00

(*)

Due to the low trading volume of the Company's Common Stock, the expected volatility was based on the historical volatility of the share price of other public companies that operate in the same industry sector as the Company.

( **) Due to the fact that the Company does not have sufficient historical exercise data, the expected term was determined based on the "simplified method" in accordance with Staff Accounting Bulletin No. 110.

(***) The Common Stock price, per share, reflects the Company's management's estimation of the fair value per share of Common Stock as of June 30, 2015. In reaching its estimation, management considered, among other things, a valuation prepared by a third-party valuation firm following the issuance of the Series B Units.

C. Recently issued accounting pronouncements

1. Accounting Standard Update 2014-09, “Revenue from Contracts with Customers”

In May 2014, the FASB issued Accounting Standard Update 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09").

ASU 2014-09 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 also requires entities to disclose sufficient information, both quantitative and qualitative, to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

An entity should apply the amendments in this ASU using one of the following two methods: 1. Retrospectively to each prior reporting period presented with a possibility to elect certain practical expedients, or, 2. Retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. If an entity elects the latter transition method, it also should provide certain additional disclosures.

For a public entity, the amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period (the first quarter of fiscal year 2017 for the Company). However, during July 2015, the FASB decided to delay the effective date of ASU 2014-09 by one year and to permit limited early adoption. A final accounting standard that will reflect the revised date was not finalized as of the date of issuance of these interim financial statements.

The Company is in the process of assessing the impact, if any, of ASU 2014-09 on its consolidated financial statements.

2. Accounting Standards Update 2014-15, “Presentation of Financial Statements—Going Concern”

In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASU 2014-15").

ASU 2014-15 provides guidance on management's responsibility in evaluating whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable).

ASU 2014-15 also provides guidance related to the required disclosures as a result of management's evaluation. 

The amendments in ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.

The Company is in the process of assessing the impact, if any, of ASU 2014-15 on its consolidated financial statements or related disclosures.

3. Accounting Standard Update 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity”

In November 2014, the FASB issued Accounting Standard Update 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity ("ASU 2014-16").

The amendments in ASU 2014-16 clarify how current U.S. GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument. The amendments also clarify that, in evaluating the nature of a host contract, an entity should assess the substance of the relevant terms and features (i.e., the relative strength of the debt-like or equity-like terms and features given the facts and circumstances) when considering how to weigh those terms and features. The assessment of the substance of the relevant terms and features should incorporate a consideration of the characteristics of the terms and features themselves; the circumstances under which the hybrid financial instrument was issued or acquired; and the potential outcomes of the hybrid financial instrument, as well as the likelihood of those potential outcomes.

The amendments in ASU 2014-16 apply to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share.

The amendments in ASU 2014-16 are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 (fiscal 2016 for the Company). Early adoption, including adoption in an interim period, is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

The effects of initially adopting the amendments in ASU 2014-16 should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted to all relevant prior periods.

The Company is in the process of assessing the impact, if any, of ASU 2014-16 on its consolidated financial statements.

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GENERAL

6 Months Ended

Jun. 30, 2015

GENERAL [Abstract]

GENERAL

NOTE 1 – GENERAL

A. Integrity Applications, Inc. (the "Company") was incorporated on May 18, 2010 under the laws of the State of Delaware.On July 15, 2010, Integrity Acquisition Corp. Ltd. (hereinafter: "Integrity Acquisition"), a wholly owned Israeli subsidiary of the Company, which was established on May 23, 2010, completed a merger with A.D. Integrity Applications Ltd. (hereinafter: "Integrity Israel"), an Israeli corporation that was previously held by the stockholders of the Company.Pursuant to the merger, all equity holders of Integrity Israel received the same proportional ownership in the Company as they had in Integrity Israel prior to the merger. Following the merger, Integrity Israel remained a wholly-owned subsidiary of the Company.As the merger transaction constituted a structural reorganization, the merger has been accounted for at historical cost in a manner similar to a pooling of interests. Integrity Israel was incorporated in 2001 and commenced its operations in 2002.Integrity Israel, a medical device company, focuses on the design, development and commercialization of non-invasive glucose monitoring devices for home use by persons suffering from diabetes.

B. Going concern uncertainty

Since its incorporation, the Company did not conduct any material operations other than those carried out by Integrity Israel.The development and commercialization of Integrity Israel's product is expected to require substantial expenditures.Integrity Israel and the Company (collectively, the "Group") have not yet generated material revenues from operations, and therefore they are dependent upon external sources for financing their operations. As of June 30, 2015, the Group has incurred accumulated deficit of $26,521,231, stockholder's deficit of $4,540,718 and negative operating cash flows.These factors raise substantial doubt about the Group's ability to continue as a going concern.The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.During 2012, the Company raised a total amount of approximately $1.0 million (net of related expenses) from the issuance of Common Stock. During 2013, the Company raised funds in an approximate amount of $5.3 million (net of related cash expenses) from the issuance of units (the “Series A Units”) consisting of shares of the Company's Series A Convertible Preferred Stock (the “Series A Preferred Stock”) and detachable warrants to purchase shares of the Company's Common Stock (the “Series A Warrants” or “Warrants with down-round protection”).During the period between August and December of 2014, the Company raised funds in an aggregate amount of approximately $7.3 million (net of related cash expenses) from the issuance of units (the “Series B Units”), each consisting of (a) one share of the Company's newly designated Series B 5.5% Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), convertible into Common Stock at an initial conversion price of $5.80 per share, (b) a five year warrant to purchase, at an exercise price of $5.80 per share, up to such number of shares of Common Stock issuable upon conversion of such share of Series B Preferred Stock (each a “Series B-1 Warrant”) and (c) a five year warrant to purchase, at an exercise price of $10.00 per share, up to such number of shares of Common Stock issuable upon conversion of such share of Series B Preferred Stock (each a “Series B-2 Warrant” and, together with the Series B-1 Warrants, collectively, the “Series B Warrants”). See Note 3B regarding the exchange of certain Series A Units into Series B Units.

Until such time as the Group generates sufficient revenue to fund its operations (if ever), the Group plans to finance its operations through the sale of equity or equity-linked securities and/or debt securities and, to the extent available, short term and long term loans. There can be no assurance that the Group will succeed in obtaining the necessary financing to continue its operations. 

C. Risk factors

The Group has a limited operating history and faces a number of risks, including uncertainties regarding continuation of the development process, demand and market acceptance of the Group's products, the effects of technological changes, competition and the development of products by competitors.Additionally, other risk factors also exist, such as the ability to manage growth and the effect of planned expansion of operations on the Group's future results. In addition, the Group expects to continue incurring significant operating costs and losses in connection with the development of its products and marketing efforts. The Group has not yet generated material revenues from its operations to fund its activities and therefore the Group is dependent on the receipt of additional funding from its stockholders and investors in order to continue as a going concern (See Note 1B).

D. Use of estimates in the preparation of financial statements

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. As applicable to these condensed consolidated interim financial statements, the most significant estimates and assumptions relate to (i) the fair value estimate of the Warrants with down-round protection, (ii) the fair value measurement of the Series B Units and the estimate of the loss arising from the partial extinguishment of the Series A Units with Series B Units, and (iii) the going concern assumptions.

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Current Assets
Cash and cash equivalents	$ 3,516,073	$ 5,827,560
Accounts receivable, net	26,591	23,250
Inventories	138,039	83,653
Other current assets	135,127	113,842
Total current assets	3,815,830	6,048,305
Property and Equipment, Net	127,040	122,491
Funds in Respect of Employee Rights Upon Retirement	207,827	177,470
Total assets	4,150,697	6,348,266
Current Liabilities
Accounts payable	255,182	104,711
Other current liabilities	$ 538,210	440,764
Long-term loans from Stockholders, current portion		454,532
Total current liabilities	$ 793,392	1,000,007
Long-Term Liabilities
Long-term loans from Stockholders	166,640	163,459
Liability for employee rights upon retirement	217,409	210,700
Warrants with down-round protection	392,874	2,057,618
Total long-term liabilities	776,923	2,431,777
Total liabilities	$ 1,570,315	$ 3,431,784
Commitments and Contingent Liabilities
Temporary Equity
Convertible Preferred Stock of $ 0.001 par value ("Preferred Stock"): 10,000,000 shares of Preferred Stock authorized as of June 30, 2015 and December 31, 2014	$ 7,121,100	$ 7,748,685
Stockholders' Deficit
Common Stock of $ 0.001 par value ("Common Stock"): 40,000,000 shares authorized as of June 30, 2015 and December 31, 2014; 5,512,867 and 5,323,058 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively	5,513	5,324
Additional paid in capital	21,852,610	18,182,866
Accumulated other comprehensive income	122,390	66,670
Accumulated deficit	(26,521,231)	(23,087,063)
Total stockholders' deficit	(4,540,718)	(4,832,203)
Total liabilities, temporary equity and stockholders' deficit	4,150,697	6,348,266
Series A Preferred Stock [Member]
Temporary Equity
Convertible Preferred Stock of $ 0.001 par value ("Preferred Stock"): 10,000,000 shares of Preferred Stock authorized as of June 30, 2015 and December 31, 2014	259,383	4,356,657
Series B Preferred Stock [Member]
Temporary Equity
Convertible Preferred Stock of $ 0.001 par value ("Preferred Stock"): 10,000,000 shares of Preferred Stock authorized as of June 30, 2015 and December 31, 2014	$ 6,861,717	$ 3,392,028

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities:
Income (loss) for the period	$ (3,201,337)	$ 4,525,009
Adjustments to reconcile income (loss) for the period to net cash used in operating activities:
Depreciation	18,359	16,610
Stock-based compensation	12,147	19,854
Change in the fair value of Warrants with down-round protection	(91,309)	(6,293,705)
Linkage difference on principal of loans from stockholders	(1,872)	$ (1,315)
Loss on partial extinguishment of Series A Preferred Stock and Series A Warrants	1,270,971
Changes in assets and liabilities:
Increase in accounts receivable	(3,149)
Increase in inventory	(51,036)
Increase in other current assets	(17,474)	$ (24,756)
Increase in accounts payable	145,388	118,346
Increase in other current liabilities	83,030	83,862
Net cash used in operating activities	(1,836,282)	$ (1,556,095)
Cash flows from investing activities:
Increase in funds in respect of employee rights upon retirement	(24,279)
Purchase of property and equipment	(18,892)	$ (47,919)
Net cash used in investment activities	(43,171)	(47,919)
Cash flows from financing activities
Cash dividend on Series A Preferred Stock	(47,036)	$ (185,263)
Repayment of loan from stockholders	(439,939)
Net cash used in financing activities	(486,975)	$ (185,263)
Effect of exchange rate changes on cash and cash equivalents	54,941	(6,898)
Decrease in cash and cash equivalents	(2,311,487)	(1,796,175)
Cash and cash equivalents at beginning of the period	5,827,560	2,385,911
Cash and cash equivalents at end of the period	$ 3,516,073	$ 589,736

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INVENTORIES (Details) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
INVENTORIES [Abstract]
Raw materials	$ 81,984	$ 55,557
Work in progress	45,596	16,459
Finished products	10,459	11,637
Total	$ 138,039	$ 83,653

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INCOME (LOSS) PER SHARE (Details) - USD ($)		3 Months Ended		6 Months Ended
		Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income (loss) for the period		$ (1,666,806)	$ 5,261,928	$ (3,201,337)	$ 4,525,009
Income attributable to participating securities (Preferred Stock)			(1,003,097)		(842,475)
Income (loss) for the period attributable to common stockholders		$ (1,795,886)	$ 4,166,242	$ (3,434,168)	$ 3,497,271
Number of shares:
Common shares used in computing basic income (loss) per share		5,441,253	5,304,072	5,382,682	5,303,529
Common shares used in computing diluted income (loss) per share	[1]	5,441,253	5,336,019	5,382,682	5,361,570
Total weighted average number of common shares related to outstanding convertible Preferred Stock, options and warrants excluded from the calculations of diluted income (loss) per share	[2]	9,537,309	3,369,743	9,367,247	3,324,535
Series A Preferred Stock [Member]
Dividend on Preferred Stock		$ (26,522)	$ (92,589)	$ (47,036)	$ (185,263)
Series B Preferred Stock [Member]
Dividend on Preferred Stock		$ (102,558)		$ (185,795)

[1] In applying the treasury method, the average market price of Common Stock was based on management's estimate (see Note 2D, above).

[2] The Company excludes from the calculation of diluted income (loss) per share, shares that will be issued upon the exercise of options and warrants with exercise prices, that are greater than the estimated average market value of the Company's Common Stock and shares issuable upon conversion of Preferred Stock because their effect would be anti-dilutive.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - 6 months ended Jun. 30, 2015 - USD ($)	Total
Series A Preferred Stock [Member]
Conversion of Stock [Line Items]
Number of units converted	100
Series B Preferred Stock [Member]
Conversion of Stock [Line Items]
Stock dividend	$ 185,795
Conversion of Preferred Stock into Common Stock [Member]
Conversion of Stock [Line Items]
Stock issued upon conversion	17,242
Amount of stock converted	$ 58,817
Exchange One [Member]
Conversion of Stock [Line Items]
Number of units converted	1,427,432
Non-cash charge included in finance expenses	$ 1,270,971
Exchange One [Member] | Series B-1 Warrant [Member]
Conversion of Stock [Line Items]
Stock issued upon conversion	1,189,503
Amount allocated	$ 1,816,759
Exchange One [Member] | Series B-2 Warrant [Member]
Conversion of Stock [Line Items]
Stock issued upon conversion	1,189,503
Amount allocated	$ 1,596,415
Exchange One [Member] | Series A Warrant [Member]
Conversion of Stock [Line Items]
Amount of stock converted	$ 1,573,435
Exchange One [Member] | Series A Preferred Stock [Member]
Conversion of Stock [Line Items]
Number of units converted	6,866
Amount of stock converted	$ 4,038,457
Exchange One [Member] | Series B Preferred Stock [Member]
Conversion of Stock [Line Items]
Stock issued upon conversion	6,866
Amount allocated	$ 3,469,689

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Temporary Equity
Common Stock, par value per share	$ 0.001	$ 0.001
Common Stock, shares authorized	40,000,000	40,000,000
Common Stock, shares issued	5,512,867	5,323,058
Common Stock, shares outstanding	5,512,867	5,323,058
Preferred Stock [Member]
Temporary Equity
Convertible Preferred Stock, par value per share	$ 0.001	$ 0.001
Convertible Preferred Stock, shares authorized	10,000,000	10,000,000
Series A Preferred Stock [Member]
Temporary Equity
Convertible Preferred Stock, shares issued	441	7,407
Convertible Preferred Stock, shares outstanding	441	7,407
Series B Preferred Stock [Member]
Temporary Equity
Convertible Preferred Stock, shares issued	15,366	8,500
Convertible Preferred Stock, shares outstanding	15,366	8,500

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FINANCING (INCOME) EXPENSES, NET (Tables)

6 Months Ended

Jun. 30, 2015

FINANCING (INCOME) EXPENSES, NET [Abstract]

Schedule of Financing (Income) Expenses, Net

	US dollars						US Dollars
	Six month period ended June 30,						Three month period ended June 30,
	2015			2014			2015			2014
	(unaudited)						(unaudited)
Israeli CPI linkage difference on principal of loans from stockholders		(1,872	)		(1,315	)		1,808			3,402
Exchange rate differences		38,269			(3,724	)		90,872			(1,757	)
Change in fair value of Warrants with down round protection		(91,309	)		(6,293,705	)		(25,539	)		(6,147,835	)
Interest expenses on credit from banks and other		8,378			4,223			5,788			1,936
Loss on partial extinguishment of Series A Preferred Stock and Series A Warrants		1,270,971			-			497,674			-
		1,224,437			(6,294,521	)		570,603			(6,144,254	)

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Jul. 31, 2015
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2015
Entity Registrant Name	Integrity Applications, Inc.
Entity Central Index Key	0001506983
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		5,512,867

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INCOME (LOSS) PER SHARE (Tables)

6 Months Ended

Jun. 30, 2015

INCOME (LOSS) PER SHARE [Abstract]

Schedule of Income (Loss) and Weighted Average Number of Shares

	US dollars						US dollars
	Six month period ended June 30,						Three month period ended June 30,
	2015			2014			2015			2014
	(unaudited)						(unaudited)
Income (loss) for the period		(3,201,337	)		4,525,009			(1,666,806	)		5,261,928
Cash dividend on Series A Preferred Stock		(47,036	)		(185,263	)		(26,522	)		(92,589	)
Stock dividend on Series B Preferred Stock		(185,795	)		-			(102,558	)		-
Income attributable to participating securities (Preferred Stock)		-			(842,475	)		-			(1,003,097	)
Income (loss) for the period attributable to common stockholders		(3,434,168	)		3,497,271			(1,795,886	)		4,166,242
	Number of shares						Number of shares
	Six month period ended June 30,						Three month period ended June 30,
	2015			2014			2015			2014
Number of shares:
Common shares used in computing basic
income (loss) per share		5,382,682			5,303,529			5,441,253			5,304,072
Common shares used in computing diluted
income (loss) per share (*)		5,382,682			5,361,570			5,441,253			5,336,019
Total weighted average number of common shares related to outstanding convertible Preferred Stock, options and warrants excluded from the calculations of diluted income (loss) per share (**)		9,367,247			3,324,535			9,537,309			3,369,743

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($)		3 Months Ended		6 Months Ended
		Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) [Abstract]
Revenues		$ 67,342		$ 143,167
Research and development expenses		557,980	$ 454,789	1,036,305	$ 905,873
Selling, marketing and general and administrative expenses		605,565	427,537	1,083,762	863,639
Total operating expenses		1,163,545	882,326	2,120,067	1,769,512
Operating loss		1,096,203	882,326	1,976,900	1,769,512
Financing (income) expenses, net		570,603	(6,144,254)	1,224,437	(6,294,521)
Income (loss) for the period		(1,666,806)	5,261,928	(3,201,337)	4,525,009
Other comprehensive income (loss):
Foreign currency translation adjustment		97,383	(16,905)	55,720	(16,033)
Comprehensive income (loss) for the period		$ (1,569,423)	$ 5,245,023	$ (3,145,617)	$ 4,508,976
Income (loss) per share (Basic)		$ (0.33)	$ 0.79	$ (0.64)	$ 0.66
Income (loss) per share (Diluted)		$ (0.33)	$ 0.78	$ (0.64)	$ 0.65
Common shares used in computing Basic income (loss) per share		5,441,253	5,304,072	5,382,682	5,303,529
Common shares used in computing Diluted income (loss) per share	[1]	5,441,253	5,336,019	5,382,682	5,361,570

[1] In applying the treasury method, the average market price of Common Stock was based on management's estimate (see Note 2D, above).

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FINANCING (INCOME) EXPENSES, NET

6 Months Ended

Jun. 30, 2015

FINANCING (INCOME) EXPENSES, NET [Abstract]

FINANCING (INCOME) EXPENSES, NET

NOTE 5 – FINANCING (INCOME) EXPENSES, NET

	US dollars						US Dollars
	Six month period ended June 30,						Three month period ended June 30,
	2015			2014			2015			2014
	(unaudited)						(unaudited)
Israeli CPI linkage difference on principal of loans from stockholders		(1,872	)		(1,315	)		1,808			3,402
Exchange rate differences		38,269			(3,724	)		90,872			(1,757	)
Change in fair value of Warrants with down round protection		(91,309	)		(6,293,705	)		(25,539	)		(6,147,835	)
Interest expenses on credit from banks and other		8,378			4,223			5,788			1,936
Loss on partial extinguishment of Series A Preferred Stock and Series A Warrants		1,270,971			-			497,674			-
		1,224,437			(6,294,521	)		570,603			(6,144,254	)

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INVENTORIES

6 Months Ended

Jun. 30, 2015

INVENTORIES [Abstract]

INVENTORIES

NOTE 4 – INVENTORIES

	US dollars
	June 30,		December 31,
	2015		2014
	(unaudited)		(audited)
Raw materials		81,984		55,557
Work in progress		45,596		16,459
Finished products		10,459		11,637
		138,039		83,653

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FINANCING (INCOME) EXPENSES, NET (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
FINANCING (INCOME) EXPENSES, NET [Abstract]
Israeli CPI linkage difference on principal of loans from stockholders	$ 1,808	$ 3,402	$ (1,872)	$ (1,315)
Exchange rate differences	90,872	(1,757)	38,269	(3,724)
Change in fair value of Warrants with down round protection	(25,539)	(6,147,835)	(91,309)	(6,293,705)
Interest expenses on credit from banks and other	5,788	$ 1,936	8,378	$ 4,223
Loss on partial extinguishment of Series A Preferred Stock and Series A Warrants	497,674		1,270,971
Financing expenses, net	$ 570,603	$ (6,144,254)	$ 1,224,437	$ (6,294,521)

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GENERAL (Details) - USD ($)	5 Months Ended	6 Months Ended		12 Months Ended
	Dec. 31, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2012
GENERAL [Abstract]
Accumulated deficit	$ 23,087,063	$ 26,521,231
Stockholders' deficit	4,832,203	$ 4,540,718
Proceeds from issuance of Common Stock, net of cash issuance expenses				$ 1,000,000
Proceeds from convertible preferred stock and warrants	$ 7,300,000		$ 5,300,000
Series B-1 Warrant [Member]
Class of Stock [Line Items]
Warrant term		5 years
Warrant exercise price		$ 5.80
Series B-2 Warrant [Member]
Class of Stock [Line Items]
Warrant term		5 years
Warrant exercise price		$ 10.00
Series B Preferred Stock [Member]
Class of Stock [Line Items]
Dividend rate		5.50%
Par value per share		$ 0.001
Conversion price		$ 5.80

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Jun. 30, 2015

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Schedule of Fair Value Assumptions Used

	June 30, 2015
Dividend yield (%)		-
Expected volatility (%) (*)		105.14
Risk free interest rate (%)		1.01
Expected term of options (years) (**)		2.70
Exercise price (US dollars)		5.80
Share price (US dollars) (***)		2.31
Fair value (US dollars)		1.00

(*)

Due to the low trading volume of the Company's Common Stock, the expected volatility was based on the historical volatility of the share price of other public companies that operate in the same industry sector as the Company.

( **) Due to the fact that the Company does not have sufficient historical exercise data, the expected term was determined based on the "simplified method" in accordance with Staff Accounting Bulletin No. 110.

(***) The Common Stock price, per share, reflects the Company's management's estimation of the fair value per share of Common Stock as of June 30, 2015. In reaching its estimation, management considered, among other things, a valuation prepared by a third-party valuation firm following the issuance of the Series B Units.

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INCOME (LOSS) PER SHARE

6 Months Ended

Jun. 30, 2015

INCOME (LOSS) PER SHARE [Abstract]

INCOME (LOSS) PER SHARE

NOTE 6–INCOME (LOSS) PER SHARE

Basic income (loss) per share is computed by dividing net income (loss) for the period after consideration of the effect of dividend on preferred stock by the weighted average number of shares outstanding during the period.

The income (loss) and the weighted average number of shares used in computing basic and diluted income (loss) per share for the six and three month periods ended June 30, 2015 and 2014 are as follows:

	US dollars						US dollars
	Six month period ended June 30,						Three month period ended June 30,
	2015			2014			2015			2014
	(unaudited)						(unaudited)
Income (loss) for the period		(3,201,337	)		4,525,009			(1,666,806	)		5,261,928
Cash dividend on Series A Preferred Stock		(47,036	)		(185,263	)		(26,522	)		(92,589	)
Stock dividend on Series B Preferred Stock		(185,795	)		-			(102,558	)		-
Income attributable to participating securities (Preferred Stock)		-			(842,475	)		-			(1,003,097	)
Income (loss) for the period attributable to common stockholders		(3,434,168	)		3,497,271			(1,795,886	)		4,166,242
	Number of shares						Number of shares
	Six month period ended June 30,						Three month period ended June 30,
	2015			2014			2015			2014
Number of shares:
Common shares used in computing basic
income (loss) per share		5,382,682			5,303,529			5,441,253			5,304,072
Common shares used in computing diluted
income (loss) per share (*)		5,382,682			5,361,570			5,441,253			5,336,019
Total weighted average number of common shares related to outstanding convertible Preferred Stock, options and warrants excluded from the calculations of diluted income (loss) per share (**)		9,367,247			3,324,535			9,537,309			3,369,743

(*)

In applying the treasury method, the average market price of Common Stock was based on management's estimate (see Note 2D, above).

(**)

The Company excludes from the calculation of diluted income (loss) per share, shares that will be issued upon the exercise of options and warrants with exercise prices, that are greater than the estimated average market value of the Company's Common Stock and shares issuable upon conversion of Preferred Stock because their effect would be anti-dilutive.

Outstanding shares that will be issued upon conversion or exercise, as applicable, of all convertible Preferred Stock, stock options and warrants, have been excluded from the calculation of the diluted net loss per share for all the reported periods for which net loss was reported because the effect of the common shares issuable as a result of the exercise or conversion of these instruments was anti-dilutive.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policy)

6 Months Ended

Jun. 30, 2015

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Basis of presentation

A. Basis of presentation

The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with our consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (“fiscal 2014”). The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) related to interim financial statements. As permitted under those rules, certain information and footnote disclosures normally required or included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted. The financial information contained herein is unaudited; however, management believes all adjustments have been made that are considered necessary to present fairly the results of the Company's financial position and operating results for the interim periods. All such adjustments are of a normal recurring nature.

The results for the six and three month periods ended June 30, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015 or for any other interim period or for any future period.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and the wholly- owned subsidiary. All significant intercompany balances have been eliminated in consolidation.

Warrants with Down-Round Protection

B. Warrants with down-round protection

The Company has determined its derivative warrant liability with respect to the Series A Warrants to be a Level 3 fair value measurement and has used the Binomial pricing model to calculate its fair value. Because the warrants contain a price protection feature, the probability that the exercise price of the warrants would decrease as the stock price decreased was incorporated into the valuation calculations. The key inputs used in the fair value calculations were as follows:

	June 30, 2015
Dividend yield (%)		-
Expected volatility (%) (*)		105.14
Risk free interest rate (%)		1.01
Expected term of options (years) (**)		2.70
Exercise price (US dollars)		5.80
Share price (US dollars) (***)		2.31
Fair value (US dollars)		1.00

(*)

Due to the low trading volume of the Company's Common Stock, the expected volatility was based on the historical volatility of the share price of other public companies that operate in the same industry sector as the Company.

( **) Due to the fact that the Company does not have sufficient historical exercise data, the expected term was determined based on the "simplified method" in accordance with Staff Accounting Bulletin No. 110.

(***) The Common Stock price, per share, reflects the Company's management's estimation of the fair value per share of Common Stock as of June 30, 2015. In reaching its estimation, management considered, among other things, a valuation prepared by a third-party valuation firm following the issuance of the Series B Units.

Recently issued accounting pronouncements

C. Recently issued accounting pronouncements

1. Accounting Standard Update 2014-09, “Revenue from Contracts with Customers”

In May 2014, the FASB issued Accounting Standard Update 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09").

ASU 2014-09 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 also requires entities to disclose sufficient information, both quantitative and qualitative, to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

An entity should apply the amendments in this ASU using one of the following two methods: 1. Retrospectively to each prior reporting period presented with a possibility to elect certain practical expedients, or, 2. Retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. If an entity elects the latter transition method, it also should provide certain additional disclosures.

For a public entity, the amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period (the first quarter of fiscal year 2017 for the Company). However, during July 2015, the FASB decided to delay the effective date of ASU 2014-09 by one year and to permit limited early adoption. A final accounting standard that will reflect the revised date was not finalized as of the date of issuance of these interim financial statements.

The Company is in the process of assessing the impact, if any, of ASU 2014-09 on its consolidated financial statements.

2. Accounting Standards Update 2014-15, “Presentation of Financial Statements—Going Concern”

In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASU 2014-15").

ASU 2014-15 provides guidance on management's responsibility in evaluating whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable).

ASU 2014-15 also provides guidance related to the required disclosures as a result of management's evaluation. 

The amendments in ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.

The Company is in the process of assessing the impact, if any, of ASU 2014-15 on its consolidated financial statements or related disclosures.

3. Accounting Standard Update 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity”

In November 2014, the FASB issued Accounting Standard Update 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity ("ASU 2014-16").

The amendments in ASU 2014-16 clarify how current U.S. GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument. The amendments also clarify that, in evaluating the nature of a host contract, an entity should assess the substance of the relevant terms and features (i.e., the relative strength of the debt-like or equity-like terms and features given the facts and circumstances) when considering how to weigh those terms and features. The assessment of the substance of the relevant terms and features should incorporate a consideration of the characteristics of the terms and features themselves; the circumstances under which the hybrid financial instrument was issued or acquired; and the potential outcomes of the hybrid financial instrument, as well as the likelihood of those potential outcomes.

The amendments in ASU 2014-16 apply to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share.

The amendments in ASU 2014-16 are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 (fiscal 2016 for the Company). Early adoption, including adoption in an interim period, is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

The effects of initially adopting the amendments in ASU 2014-16 should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted to all relevant prior periods.

The Company is in the process of assessing the impact, if any, of ASU 2014-16 on its consolidated financial statements.

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INVENTORIES (Tables)

6 Months Ended

Jun. 30, 2015

INVENTORIES [Abstract]

Schedule of Inventory

	US dollars
	June 30,		December 31,
	2015		2014
	(unaudited)		(audited)
Raw materials		81,984		55,557
Work in progress		45,596		16,459
Finished products		10,459		11,637
		138,039		83,653

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EVENTS DURING THE REPORTED PERIOD (Details)		5 Months Ended	6 Months Ended
	Mar. 13, 2013 shares	Dec. 31, 2014 shares	Jun. 30, 2015 USD ($) shares	Apr. 30, 2015 USD ($) ₪ / $	Apr. 30, 2015 ILS (₪) ₪ / $	Mar. 23, 2015 USD ($) ₪ / $	Mar. 23, 2015 ILS (₪) ₪ / $	Mar. 18, 2015 shares
Temporary Equity [Line Items]
Number of units sold	6,300	8,500
Series A Preferred Stock [Member]
Temporary Equity [Line Items]
Number of units converted			100
Exchange One [Member]
Temporary Equity [Line Items]
Number of units converted			1,427,432
Non-cash charge included in finance expenses | $			$ 1,270,971
Exchange One [Member] | Series A Preferred Stock [Member]
Temporary Equity [Line Items]
Number of units converted			6,866
Exchange One [Member] | Series B Preferred Stock [Member]
Temporary Equity [Line Items]
Stock issued upon conversion			6,866
Arbitration Proceedings with Shareholder [Member]
Temporary Equity [Line Items]
Number of shares of the Company's outstanding Common Stock transferred								440,652
Amount paid as repayment in full of the outstanding principal amount under the Investment Agreement						$ 439,939	₪ 1,767,674
Exchange rate | ₪ / $				3.861	3.861	4.018	4.018
Partial reimbursement of attorney's fees required to pay				$ 81,870	₪ 316,100
Series B-1 Warrant [Member] | Exchange One [Member]
Temporary Equity [Line Items]
Stock issued upon conversion			1,189,503
Series B-2 Warrant [Member] | Exchange One [Member]
Temporary Equity [Line Items]
Stock issued upon conversion			1,189,503

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT - 6 months ended Jun. 30, 2015 - USD ($)	Total	Common Stock [Member]	Additional paid in capital [Member]	Accumulated other comprehensive income (loss) [Member]	Accumulated Deficit [Member]
Balance at Dec. 31, 2014	$ (4,832,203)	$ 5,324	$ 18,182,866	$ 66,670	$ (23,087,063)
Balance, shares at Dec. 31, 2014	5,323,058	5,323,058
Loss for the period of six months	$ (3,201,337)				$ (3,201,337)
Other comprehensive income	55,720			$ 55,720
Issuance of Series B-1 and Series B-2 Warrants	3,413,174		$ 3,413,174
Conversion of Series A Preferred Stock into Common Stock	$ 58,817	$ 17	58,800
Conversion of Series A Preferred Stock into Common Stock, shares		17,242
Stock dividend to certain Common Stock holders		$ 92	(92)
Stock dividend to certain Common Stock holders, shares		92,136
Stock Issued During Period, Value, Stock Dividend		$ 80	$ 185,715
Stock dividend on Series B Preferred Stock					$ (185,795)
Stock dividend on Preferred Stock		80,431
Cash dividend on Series A Preferred Stock	$ (47,036)				$ (47,036)
Stock-based compensation	12,147		$ 12,147
Stock-based compensation, shares
Balance at Jun. 30, 2015	$ (4,540,718)	$ 5,513	$ 21,852,610	$ 122,390	$ (26,521,231)
Balance, shares at Jun. 30, 2015	5,512,867	5,512,867

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EVENTS DURING THE REPORTED PERIOD

6 Months Ended

Jun. 30, 2015

EVENTS DURING THE REPORTED PERIOD [Abstract]

EVENTS DURING THE REPORTED PERIOD

NOTE 3 – EVENTS DURING THE REPORTED PERIOD

A. As more fully described in Note 10.D and Note 19 to the Company's annual report on Form 10-K for the year ended December 31, 2014, from June of 2011 Integrity Israel, Avner Gal, David Malka, Zvi Cohen, Ilana Freger and Alexander Reykhman, on the one hand, and Y.H. Dimri Holdings("Dimri"), on the other hand, which was a shareholder of Integrity Israel prior to the reorganization and merger (described in Note 1 to the Company's annual report on Form 10-K for the year ended December 31, 2014),were involved in arbitration proceedings resulting from certain claims asserted by Dimri following such reorganization. On March 11, 2015, the arbitrator issued a binding arbitration decision (the “Arbitration Decision”) which documents the parties' negotiated settlement of such arbitration proceedings.Pursuant to the terms of the Arbitration Decision, (1) Avner Gal, David Malka, Zvi Cohen, Ilana Freger and Alexander Reykhman transferred to Dimri, on March 18, 2015, an aggregate of 440,652 shares of the Company's outstanding Common Stock held collectively by such shareholders, (2) Integrity Israel (A) paid to Dimri on March 23, 2015, NIS 1,767,674 or $439,939 (based on the exchange rate of 4.018 NIS:$1 as of March 23, 2015), as repayment in full of the outstanding principal amount  under Dimri's investment agreement with Integrity Israel and the founders (the “Investment Agreement”), as adjusted for changes in the Israeli consumer price index since the date on which the loan was made, and (B) paid to Dimri on April 30, 2015, NIS 316,100 or $81,870 (based on the exchange rate of 3.861 NIS:$1 as of April 30, 2015), as partial reimbursement of Dimri's attorney's fees in the arbitration. The Company accrued for the fee reimbursement obligation as part of professional fees within selling, marketing and general and administrative expenses included in its Annual Report on Form 10-K for the fiscal year ended December 31. As of June 30, 2015 such amount was fully paid.

Following the completion of the abovementioned transfers and payments, the Arbitration Decision released Integrity Israel, the Company and the other defendants in the arbitration from any legal claim by Yigal Dimri, the principal shareholder of Dimri, and any other companies under his control in respect of the subject matter of the arbitration, including the shareholder loan granted under and any claim of anti-dilution rights under the Investment Agreement, and similarly released Mr. Dimri and all companies under his control from any legal claim by Integrity Israel, the Company and the other defendants in the arbitration in respect of the subject matter of the arbitration.

B. As more fully described in Note 11 to the Company's annual report on Form 10-K for the year ended December 31, 2014, on March 13, 2013, the Company entered into a Securities Purchase Agreement (“Purchase Agreement”) with certain accredited investors (the “Series A Unit Purchasers”) pursuant to which the Company issued to the Series A Unit Purchasers an aggregate of 6,300 Series A Units. Based on the terms the Purchase Agreement, so long as any initial Series A Unit Purchaser holds any shares of Series A Preferred Stock, if (1) the Company sells any shares of Common Stock or other securities convertible into, or rights to acquire, Common Stock and (2) a Purchaser then holding Series A Preferred Stock, Warrants, Conversion Shares or Warrant Shares reasonably believes that any of the terms and conditions appurtenant to such issuance or sale are more favorable to the purchaser in such subsequent sale of securities than are the terms and conditions granted to such Series A Unit Purchaser, then the Series A Unit Purchaser will be permitted to require the Company to amend the terms of the Series A Unit Sale transaction (only with respect to such Series A Unit Purchaser) so as to match the terms of the subsequent issuance (including, for the avoidance of doubt, any terms and provisions that are or may be less favorable to such Purchaser).

During August and December of 2014, the Company issued to certain accredited investors 8,500 Series B Units. Pursuant to the Purchase Agreement, the Company was required to and did notify the holders of the Series A Preferred Stock of the closing of the sale of the Series B Units, and following receipt thereof such holders of Series A Preferred Stock were entitled, pursuant to the “most favored nation” provisions contained in the Purchase Agreement (as described above), to elect to amend the terms of their purchase of Series A Units to match the terms of the Series B Units. The Company was obligated to amend the terms of any of Series A Units who timely made such election and tendered its Series A Units for exchange.

As of June 30, 2015, approximately 6,866 Unit A holders have elected pursuant to the “most favored nation” provision in the Purchase Agreement to amend the terms of their Series A Units to match the terms of the Series B Units. Accordingly, the Company has exchange 6,866 share of Series A Preferred Stock into 6,866 shares of Series B Stock and 1,427,432 Warrants with down-round protection into 1,189,503Series B-1 Warrants and 1,189,503 Series B-2 Warrants. Due to the differences in the contractual terms of each of the financial instruments exchanged management determined that the exchange constitutes an extinguishment of the exiting instruments and an issuance of new financial instruments. As a result of the exchange elections, the Company recorded during the six months period ended June 30, 2015 a non-cash loss on extinguishment of Series A Preferred Stock and Series A Warrants in the amount of $1,270,971, resulting from the differences between the fair market value estimate of the new Series B Units less the net book value of the exchanged Series A Preferred Stock and less the fair value of the exchanged Warrants with down-round protection (See Note 2B above).

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Jun. 30, 2015 - $ / shares		Total
Common Stock [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Share price	[1]	$ 2.31
Warrant [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Dividend yield
Expected volatility	[2]	105.14%
Risk free interest rate		1.01%
Expected term of options	[3]	2 years 8 months 12 days
Exercise price		$ 5.80
Fair value		$ 1.00

[1] The Common Stock price, per share, reflects the Company's management's estimation of the fair value per share of Common Stock as of June 30, 2015. In reaching its estimation, management considered, among other things, a valuation prepared by a third-party valuation firm following the issuance of the Series B Units.

[2] Due to the low trading volume of the Company's Common Stock, the expected volatility was based on the historical volatility of the share price of other public companies that operate in the same industry sector as the Company.

[3] Due to the fact that the Company does not have sufficient historical exercise data, the expected term was determined based on the "simplified method" in accordance with Staff Accounting Bulletin No. 110.