Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.23.1
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income TaxesThe significant components of income tax expense (benefit) are as follows (in thousands):
As of December 31,
2022 2021
Current:
Federal $ –  $ – 
State –  – 
Foreign 150  – 
150  – 
Deferred:
  Federal –  – 
  State –  – 
  Foreign (45) – 
(45) – 
Income Tax Expense: $ 105  $ – 
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Net deferred tax assets consist of the following components (in thousands):
As of December 31,
2022 2021
Deferred Tax Assets:
NOL Carryover $ 40,870  $ 22,452 
Lease Liability 3,140  869 
Stock Compensation 2,355  2,058 
Warrants 153  239 
Marketable Securities 1,851  351 
Other 1,924  291 
Subtotal 50,293  26,260 
Valuation Allowance (41,271) (23,931)
Deferred Tax Liabilities:
Right of Use Assets (2,949) (788)
Intangible Assets (6,778) (1,541)
Other –  – 
Net Deferred Tax Liability $ (705) $ – 
The income tax provision differs from the amount of income tax determined by applying the U.S. federal tax rate to pretax income from continuing operations due to the following (in thousands):
Year Ended December 31,
2022 2021
Income Tax Expense Computed at the Statutory Federal Rate $ (9,553) $ (26,521)
State Income Taxes, Net of Federal Tax Effect (1,883) (3,057)
Stock Compensation 1,894  2,421 
Contingent Earn Out (282) (1,228)
Goodwill Impairment 1,020  1,003 
Warrants (53) 14,519 
Other 960  305 
Non-U.S. operations (94) (106)
Valuation Allowance 8,096  12,664 
Income Tax Expense $ 105  $ – 
At December 31, 2022, the Company had Federal, state, and foreign net operating loss carry forwards of approximately $104.8 million, $102.9 million, and $43.2 million, respectively, that may be offset against future taxable income and will begin to expire in 2028, if not utilized. No tax benefit has been reported in the December 31, 2022 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.
The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires the recognition of deferred tax liabilities and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the financial statements or tax returns. A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more likely than not to be realized.
ASC 740 provides guidance on the accounting for uncertainty in income taxes recognized in a company’s financial statements. ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.
The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operation in the provision for income taxes. As of December 31, 2022, the Company had no accrued interest or penalties related to uncertain tax positions.
The Company files income tax returns in the U.S. federal jurisdiction and in the states of California, Massachusetts, and New Jersey. The Company is currently subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities since inception of the Company.

Genius Brands International, Inc. is subject to U.S. income taxes on a stand-alone basis. Genius Brands International, Inc., Beacon Communications Canada, Ameba Inc., and WOW Unlimited Media Inc. file separate stand-alone tax returns in each jurisdiction in which they operate. Beacon Communications Canada, Ameba Inc., and WOW Unlimited Media Inc. are corporations operating in Canada and are subject to Canadian income taxes on their stand-alone taxable incomes.