Income Taxes

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 13 – Income Taxes

The Company’s current and deferred income tax provision are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Current provision:
States	$	14,000	$	15,000	$	34,000	$	29,000
Total current provision	$	14,000	$	15,000	$	34,000	$	29,000

Deferred income taxes reflect the temporary differences between the financial statement carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, adjusted by the relevant tax rate. The components of deferred tax assets and liabilities are as follows:

	June 30,		December 31,
	2022		2021
Deferred tax assets:
Net operating loss carry-forwards	$	21,997,000	$	14,503,000
Acquisition-related costs		517,000		539,000
Film library and other intangibles		16,418,000		16,883,000
State taxes and other		737,000		337,000
Less: valuation allowance		(38,828,000)		(31,412,000)
Total deferred tax assets		841,000		850,000
Deferred tax liabilities:
Programming costs		304,000		299,000
Other assets		537,000		551,000
Total deferred tax liabilities		841,000		850,000
Net deferred tax asset	$	—	$	—

The Company and its subsidiaries have combined net operating losses of approximately $81,550,000, 10,843,000, of which were incurred before 2018 and expire between 2031 and 2037 with the balance of $70,707,000 having no expiration under changes made by the Tax Cuts and Jobs Act but may only be utilized generally to offset only 80 percent of taxable income. The ultimate realization of the tax benefit from net operating losses is dependent upon future taxable income, if any, of the Company.

Internal Revenue Code Section 382 imposes limitations on the use of net operating loss carryovers when the stock ownership of one or more 5% stockholders (stockholders owning 5% or more of the Company’s outstanding capital stock) has increased by more than 50 percentage points. Additionally the separate-return-limitation-year (SRLY) rules that apply to consolidated returns may limit the utilization of losses in a given year when consolidated tax returns are filed. Management has determined that because of a recent history of recurring losses, the ultimate realization of the net operating loss carryovers is not assured and has recorded a full valuation allowance. Public trading of company stock poses a risk of an ownership change beyond the control of the Company that could trigger a limitation of the use of the loss carryover.

The deferred tax asset valuation allowance increased by $4,409,000 and $2,589,000 during the three months ended June 30, 2022 and 2021, respectively. The deferred tax asset valuation allowance increased by $7,416,000 and $3,885,000 during the six months ended June 30, 2022 and 2021, respectively.