Energous Corp Income Taxes Disclosure

Note 13 – Income Taxes

Losses before taxes by jurisdiction for the years ended December 31, 2025 and 2024 are as follows (in thousands):

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Current and deferred income tax expense for the years ended December 31, 2025 and 2024 are as follows (in thousands):

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Note 13 – Income Taxes, continued

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During the year ended December 31, 2025, the Company adopted ASU 2023-09 to enhance the income taxes disclosure and the rate reconciliation disclosure. See Note 3 – Summary of Significant Accounting Policies, Adoption of New Accounting Standard for additional details.

A summary of taxes paid by jurisdiction for the years ended December 31, 2025 and 2024 is as follows:

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Reconciliation between the effective tax rate on income from continuing operations and the statutory tax rate of 21% is as follows:

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Note 13 – Income Taxes, continued

As of December 31, 2025 and 2024, the Company’s deferred tax assets (liabilities) consisted of the effects of temporary differences attributable to the following (in thousands):

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The Company considers all available evidence, both positive and negative, including historical levels of taxable income, expectations and risks associated with estimates of future taxable income, and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. Because of the Company’s recent history of operating losses, management believes that it is more likely than not that all of the Company’s deferred tax assets will not be realized and accordingly, has provided a full valuation allowance for its deferred tax asset as of December 31, 2025 and 2024.

The change in the Company’s valuation allowance is as follows:

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As of December 31, 2025 and 2024, the Company has NOL carryforwards for U.S. federal income tax purposes of approximately $340.0 million and $320.2 million, respectively, and for state income tax purposes, approximately $304.5 million and $294.9 million, respectively. NOL carryforwards of $255.3 million will be carried forward indefinitely for U.S. federal tax purposes and $84.7 million will expire beginning in 2033. State net operating loss carryforwards, if not utilized, will begin to expire on various dates starting in 2033. The Company has federal and state R&D tax credit carryforwards of approximately $7.8 million and $6.2 million, respectively. The federal R&D credit carryforwards will expire beginning in 2032 and state R&D credit carryforwards do not expire.

Under Section 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change attributes, such as research tax credits, to offset its post-change income may be limited. As a result of such ownership changes, the annual limitation may result in the expiration of net operating losses and credits before utilization. In general, an “ownership change” will occur if there is a cumulative change in the Company’s ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws.

Note 13 – Income Taxes, continued

The Company accounts for uncertain tax position in accordance with ASC 740. Tax positions are evaluated in a two-step process, whereby the Company first determines whether it is more likely than not that a tax position will be sustained upon examination by tax authorities, including resolutions of any related appeals or litigation processes, based on technical merit. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognized in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

The total amount of unrecognized tax benefits as of December 31, 2025 is $1.4 million. If recognized, none of the unrecognized tax benefits would impact the effective tax rate because of the valuation allowance. The Company recognizes interest and penalties related to income tax matters as a component of income tax expense. As of December 31, 2025, there were no accrued interest and penalties related to unrecognized tax benefits. The Company does not anticipate any significant change of the unrecognized tax benefits within twelve months of this reporting date.

A reconciliation of the beginning and ending balance of total unrecognized tax benefits is as follows (in thousands):

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The Company files income tax returns in the U.S. federal and various state jurisdictions. Due to the Company’s net operating loss carryforwards, all tax years since inception remain subject to examination by all taxing authorities. The Company is not currently under audit in any tax jurisdiction.