Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v3.10.0.1
Income Taxes
6 Months Ended
Jun. 30, 2018
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
Note 6 — Income Taxes
 
United States and foreign components of (loss) income before income taxes were as follows:
 
 
 
For the Three Months

Ended June 30,
 
 
For the Six Months

Ended
June 30,
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
United States
 
$
(1,308,118
)
 
$
(63,474
)
 
$
(3,367,603
)
 
$
(11,891
)
Foreign
 
 
660,757
 
 
 
684,732
 
 
 
1,208,010
 
 
 
1,216,329
 
(Loss) income before income taxes
 
$
(647,361
)
 
$
621,258
 
 
$
(2,159,593
)
 
$
1,204,438
 
 
Fergco was a Subchapter S pass-through entity for income tax purposes prior to its acquisition by Xspand on September 30, 2017. Accordingly, Fergco was not subject to income taxes prior to the acquisition and therefore the tax provision related to the United States income is only for the period from January 1, 2018 to June 30, 2018.
 
The Company’s foreign entity is SRM, which is an entity subject to the Hong Kong, China tax regime. The Hong Kong tax returns remain subject to examination by local taxing authorities beginning with the tax year ended December 31, 2011.
 
The tax effects of temporary differences that give rise to deferred tax assets or liabilities are presented below:
 
 
 
June 30,
 
 
December 
31,
 
 
 
2018
 
 
2017
 
Deferred tax assets:
 
 
 
 
 
 
 
 
Net operating loss carryforwards
 
$
796,320
 
 
$
50,524
 
Less: valuation allowance
 
 
(796,320
)
 
 
(50,524
)
Net deferred tax assets
 
 
-
 
 
 
-
 
Deferred tax liabilities:
 
 
 
 
 
 
 
 
Property and equipment
 
 
34,209
 
 
 
34,209
 
Deferred tax liabilities
 
 
34,209
 
 
 
34,209
 
 Net deferred tax liabilities
 
$
34,209
 
 
$
34,209
 
 
The income tax provision consists of the following:
 
 
 
For the Three Months
Ended June 30,
 
 
For the Six Months

Ended 
June 30,
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
Current:
 
 
 
 
 
 
 
 
 
 
 
 
Federal
 
$
20,053
 
 
$
-
 
 
$
38,794
 
 
$
-
 
Foreign
 
 
49,557
 
 
 
47,486
 
 
 
90,601
 
 
 
91,225
 
State and local
 
 
9,690
 
 
 
-
 
 
 
14,978
 
 
 
-
 
Income tax provision
 
$
79,300
 
 
$
47,486
 
 
$
144,373
 
 
$
91,225
 
  
 
 
A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:
 
 
 
For the Six Months
Ended 
June 30,
 
 
 
2018
 
 
2017
 
Tax at federal rate
 
 
21.0
%
 
 
34.0
%
U.S. income attributable to pass-through entity
 
 
0.0
%
 
 
-3.0
%
U.S. income subject to valuation allowance
 
 
-34.7
%
 
 
0.0
%
State and local income taxes
 
 
-0.5
%
 
 
0.0
%
Foreign income not subject to U.S. federal tax
 
 
11.7
%
 
 
-31.0
%
Foreign tax
 
 
-4.2
%
 
 
7.5
%
Effective income tax rate
 
 
-6.7
%
 
 
7.5
%