Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

6. Income Taxes:

The components of the income tax expense for the years ended December 31, 2022 and 2021 were as follows:

	Years Ended December 31,
	2022		2021
Current:
Federal	$	22,850	$	-
State		32,259		-
Total current expense		55,109		-
Deferred:
Federal		-		-
State		-		-
Total deferred expense		-		-
Income tax expense	$	55,109	$	-

The difference between expected income tax expense (benefit) and income tax expense (benefit) recorded in the financial statements is explained below: 

	Years Ended December 31,
	2022			2021
Income taxes expense (benefit) computed at statutory rate	$	2,514,182		$	(62,713	)
State income tax expense (benefit), net		520,196			(12,976	)
Other		(70,951	)		(905	)
Change in valuation allowance		(2,908,318	)		76,594
Total	$	55,109		$	—

The significant components of deferred income tax assets and liabilities consist of the following:

	December 31,
Deferred tax assets (liabilities)	2022			2021
In-process research and development	$	742,574		$	742,574
Net operating loss carry forward		3,870,413			6,685,183
R&D credit		78,336			171,884
Share-based compensation		34,231			34,231
Other		6,061			6,061
		4,731,615			7,639,933
Less: valuation allowance		(4,731,615	)		(7,639,933	)
Total	$	—		$	—

In accordance with GAAP, it is required that a deferred tax asset be reduced by a valuation allowance if, based on the weight of available evidence it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. At December 31, 2022 and 2021, the Company recorded a 100% valuation allowance against its deferred tax assets as it has determined such amounts will not be currently realizable.

The Company has historically generated federal and state net operating loss (“NOLs”). Under Section 382 and 383 of the Internal Revenue Code, if an ownership change occurs with respect to a “loss corporation”, as defined, there are annual limitations on the amount of the NOLs and other deductions which are available to the Company. Although the NOLs are available to be used to offset the taxable income generated from the Settlement Agreement, otherwise the NOLs incurred prior to December 13, 2022 are subject to this limitation. As such, the use of these NOLs to offset taxable income is limited to approximately $37,000 in 2022 subsequent to the Effective Date of the Settlement Agreement and $0.7 million per year in future periods. As of December 31, 2022 and 2021, the Company’s federal and state NOLs are approximately $15.3 million and $26.4 million.

INHIBITOR THERAPEUTICS, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2022 AND 2021