Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 12. Income Taxes

The provision (benefit) for income taxes for the year ended December 31, 2023 consisted of the following components.

	Year Ended December 31, 2023
Current
U.S. Federal	—
State	—
Total Current	—
Deferred
U.S. Federal	—
State	—
Total Deferred	—
Total provision (benefit) for income taxes	—

The income tax (benefit) provision for the year ended December 31, 2022 is not presented as Prairie LLC was a flow-through entity not subject to income taxes for the year ended December 31, 2022.

The following reconciles the provision (benefit) for income taxes included in the consolidated statement of operations with the provision (benefit) which would result from the application of the statutory federal income tax rate:

	Year Ended December 31, 2023
Income tax expense (benefit) at federal statutory rate	$	(16,606,561	)
State tax expense (benefit), net		(3,111,717	)
Loss on adjustment to fair value		11,030,238
Other nondeductible expenses		510,661
Change in valuation allowance		8,177,379
Total provision (benefit) for income taxes	$	—

Deferred income taxes are provided to reflect the future tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements.

The Company’s deferred tax assets have been reduced by a valuation allowance due to a determination made that it is more likely than not that some or all of the deferred assets will not be realized based on the weight of all available evidence. The Company closely monitors and weighs all available evidence, including both positive and negative, in making its determination whether to maintain a valuation allowance. As a result of the significant weight placed on the Company’s cumulative negative earnings position, the Company’s net deferred tax asset has been reduced by a full valuation allowance as of December 31, 2023.

Temporary differences and carryforwards which give rise to deferred tax assets and liabilities consisted of the following at December 31, 2023:

	Year Ended December 31, 2023
Deferred tax assets
Property and equipment	$	3,890,639
Stock-based compensation		727,829
Federal NOL carryforward		7,488,580
State NOL carryforward		1,923,870
Valuation allowance		(13,926,989	)
Total deferred tax assets	$	103,929
Deferred tax liabilities
Lease asset (net)	$	(4,784	)
Investment in partnership		(99,145	)
Total deferred tax liabilities	$	(103,929	)
Net deferred tax liability	$	—

The Company has U.S. federal income tax net operating loss carryforwards (“NOLs”) of approximately $33.3 million available to reduce future U.S. taxable income. Of the $33.3 million of federal NOLs, $8.9 million expire during the years 2030 through 2037, while $24.4 million do not have an expiration date. In addition, the Company has approximately $42.6 million of state NOLs of which $21.5 million expire during the years 2040 through 2043, while $21.1 million do not have an expiration date.

The Company believes that it is likely that an ownership change as defined in Section 382 of the Code has occurred. If the Company has experienced such an ownership change, utilization of the NOLs would be subject to an annual limitation, which is determined by first multiplying the value of our stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments, as required. Any such limitation may result in the expiration of a portion of the NOL before utilization. Any carryforwards that expire prior to utilization as a result of the limitation will be removed from deferred tax assets with a corresponding adjustment to the valuation allowance.

The Company files income tax returns in the U.S. and various state jurisdictions and is subject to examination in the various jurisdictions in which the Company files. The Company’s tax years 2020 to present remain open for federal examination. Additionally, tax years 2010 through 2019 remain subject to examination for the purpose of determining the amount of federal NOL. The number of years open for state tax audits varies, depending on the state, but is generally from three to five years.

The Company did not have any unrecognized tax benefits at December 31, 2023.