5. INCOME TAXES:

The Company recorded tax expense of approximately $22.9 million on a pre-tax loss from continuing operations of approximately $19.4 million for the nine months ended September 30, 2015, based on the actual effective tax rate for the current period. Because our income tax expense does not have a correlation to our pre-tax earnings, small changes in those earnings can have a significant impact on the income tax expense we recognize. The Company continues to estimate a range of possible outcomes due to the proportion of deferred tax expense from indefinite-lived intangible assets over pre-tax earnings. As a result, we believe the actual effective tax rate best represents the estimated effective rate for the nine months ended September 30, 2015, in accordance with ASC 740-270, “Interim Reporting.”

As of September 30, 2015, the Company continues to maintain a full valuation allowance on its deferred tax assets for substantially all entities and jurisdictions, for its net deferred tax assets, but excludes deferred tax liabilities related to indefinite-lived intangible assets. In accordance with ASC 740, “Accounting for Income Taxes”, the Company continually assesses the adequacy of the valuation allowance by assessing the likely future tax consequences of events that have been realized in the Company’s financial statements or tax returns, tax planning strategies, and future profitability. As of September 30, 2015, the Company does not believe it is more likely than not that the deferred tax assets will be realized. As part of the assessment, the Company has not included the deferred tax liability related to indefinite-lived intangible assets as a source of future taxable income to support realization of the deferred tax assets.

On April 17, 2015, the Company purchased Comcast’s membership interest in TV One (See Note 2 – Acquisitions and Dispositions) which resulted in approximately $196.7 million of tax basis increase for the assets acquired. The increased ownership of TV One and the resulting increase in the tax basis of the assets, resulted in an adjustment to the deferred tax liability (“DTL”) related to the indefinite-lived assets of TV One. The Company evaluated the DTL and determined that a portion will not reverse within the requisite period and cannot be offset against the deferred tax assets.