INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

18. INCOME TAXES

Eightco Holdings Inc. is taxed as a corporation and pays corporate federal, state and local taxes on income.

Forever 8 Fund, LLC, BlockHiro, LLC and Cryptyde Shares Services, LLC are limited liability companies which are disregarded entities for income tax purposes and are owned 100% by Eightco Holdings Inc. and Ferguson Containers, Inc., respectively. The Company pays corporate federal, state and local taxes on income allocated to it from BlockHiro, LLC and 8co Holdings Shared Services, LLC.

CW Machines, LLC is a limited liability company for income tax purposes and is owned 51% by Eightco Holdings Inc. The Company pays corporate federal, state and local taxes on income allocated to it from CW Machines, LLC.

Ferguson Containers is taxed as a corporation and pays corporate federal, state and local taxes on income.

Forever 8 UK Ltd. is taxed as a corporation and pays foreign taxes on income.

F8 Fund EU Holdings BV is taxed as a corporation and pays foreign taxes on income.

Components of income before income taxes were as follows:

	2023			2022
United States	$	(67,719,971	)	$	(46,850,995	)
Foreign		(600,443	)		(768,062	)
Income before income tax expense	$	(68,320,414	)	$	(47,619,057	)

The tax effects of temporary differences that give rise to deferred tax assets or liabilities are presented below:

	2023			2022
Deferred tax assets:
Stock-based compensation	$	(8,387	)	$	154,298
Goodwill and intangibles		270,574			54,453
Leases		-			14,808
Reserves		140,143			-
Net operating loss carryforwards		8,755,550			4,419,519
Less: valuation allowance		(9,157,880	)		(4,628,672	)
Net deferred tax assets	$	-		$	14,406
Deferred tax liabilities:
Right of use assets	$	-			(14,406	)
Property and equipment	$	(82,104	)		(82,104	)
Net deferred tax liabilities	$	(82,104	)	$	(96,510	)
Net deferred taxes	$	(82,104	)	$	(82,104	)

The income tax provision consists of the following:

	2023			2022
Current:
Federal	$	-		$	(172,997	)
State		-			-
Foreign		-			-
Total current		-			(172,997	)
Deferred:
Federal		(4,415,124	)		(4,150,207	)
State		-			-
Foreign		(114,084	)		145,932
Less: change in valuation allowance		4,529,208			4,004,275
Total deferred		-			-
Total income tax provision	$	-		$	(172,997	)

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:

	2023			2022
Tax at federal statutory rate		21.0	%		21.0	%
Income from pass-through entities taxable to noncontrolling interests		0.0	%		-0.1	%
Warrant valuation		-14.5	%		-11.2	%
Nondeductible expenses		-0.1	%		-0.7	%
State and local income taxes		0.0	%		0.0	%
Foreign income not subject to U.S. federal taxes		-0.2	%		-0.3	%
U.S. income taxes subject to valuation allowance		-6.2	%		-8.7	%
Other		0.0	%		0.4	%
Total income tax provision		0.0	%		0.4	%

Income tax (benefit) expense for the years ended December 31, 2023 and 2022 was $0 and ($172,997), respectively. The Company has recorded a full valuation allowance on the deferred tax assets.

The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of January 1, 2023, the Company had no unrecognized tax benefits and no charge during 2023, and accordingly, the Company did not recognize any interest or penalties during 2023 related to unrecognized tax benefits. There is no accrual for uncertain tax positions as of December 31, 2023.

The Company files U.S. income tax returns and a state income tax return. With few exceptions, the U.S. and state income tax returns filed for the tax years ending on December 31, 2021 and thereafter are subject to examination by the relevant taxing authorities.

As of December 31, 2023, the Company had a net operating loss carryforward for federal income tax purposes of approximately $8,755,550 and credit carryforwards are subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The Company’s net operating loss carryforward begins to expire in 2041.

EIGHTCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years ended December 31, 2023 and 2022