XWELL, Inc. - 10-K filing on 2014-03-10

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Schedule of Income before Income Tax, Domestic and Foreign

For the years ended December 31, 2013 and 2012, and the cumulative period from Inception through December 31, 2013, loss from continuing operations before taxes consists of the following:

	For the year ended December 31,				Cumulative from Inception through
	2013		2012		December 31, 2013
U.S.	$	(41,204)	$	(17,673)	$	(61,631)
Non-U.S.		(544)		(736)		(1,280)
	$	(41,748)	$	(18,409)	$	(62,911)

Schedule of Components of Income Tax Expense (Benefit)

Income tax expense attributable to the operating loss of continuing and discontinued operations consists of the following:

	For the year ended December 31,				Cumulative from Inception through
	2013		2012		December 31, 2013
U.S. (continuing operations)
Current	$	—	$	—	$	—
Deferred		—		—		—
		—		—		—
Non-U.S (discontinued operations)
Current		(245)		(112)		(357)
Deferred		(12)		57		45
	$	(257)	$	(55)	$	(312)

Schedule of Effective Income Tax Rate Reconciliation

Income tax expense attributable to continuing operations differed from the amounts computed by applying the U.S. federal income tax rate of 35% to loss from continuing operations before taxes on income as a result of the following:

	For the year ended December 31, 2012						Cumulative from Inception through December 31,
	2013			2012			2013
Loss from continuing operations before taxes on income	$	(41,748)		$	(18,409)		$	(62,911)
Tax rate		35	%		35	%		35	%

Computed "expected" tax benefit		14,612			6,443			22,019
Foreign tax rate differential		(122)			(147)			(269)
Change in valuation allowance		(17,085)			(7,461)			(25,777)
Nondeductible expenses		(125)			(15)			(140)
State and local income tax, net of federal income tax expense		2,714			1,197			3,911
Other items		6			(17)			256
Income tax expense attributable to continuing operations	$	—		$	—		$	—

Deferred Tax Assets and Liabilities

These deferred tax assets (liabilities) arise from the following types of temporary differences:

	For the year ended December 31,
	2013		2012
Deferred tax assets:
Acquired patents (see also Note 5)	$	—	$	446
Liability for accrued employee vacation and severance pay		7		19
Stock-based compensation		8,104		4,590
Net operating loss carryforwards		36,605		23,127
Total gross deferred tax assets		44,716		28,182

Less:
Valuation allowance		(44,445)		(24,274)
Deferred tax liability for acquired technology (refer to Note 8):		(264)		(3,889)

Net deferred tax assets	$	7	$	19

Summary of Valuation Allowance

The following table presents the changes to valuation allowance during the periods presented:

	Amount
As of Inception	$	—
Charged to cost and expenses		1,231

As of December 31, 2011		1,231
Charged to cost and expenses		12,240
Acquisitions *		10,803

As of December 31, 2012		24,274
Charged to cost and expenses – continuing operations		17,085
Charged to cost and expenses – discontinued operations		3,086

As of December 31, 2013	$	44,445

* As mentioned below, the NOL amounts are presented before Internal Revenue Code, Section 382 limitations.