12. Income Taxes

        The components of loss before income tax is as follows (in thousands):

                                                                                                                                                                                    

        During the years ended December 31, 2017, 2016 and 2015, the Company recorded no income tax benefits for the net operating losses (NOLs) incurred due to the uncertainty of realizing a benefit from those items.

        A reconciliation of the Company's effective tax rate to the U.S. Federal statutory rate is as follows:

                                                                                                                                                                                    

        The effective tax rate is different from the federal statutory tax rate primarily due to a foreign rate differential and a valuation allowance against deferred tax assets as a result of the Company's history of losses.

        The principal components of the Company's net deferred tax assets are as follows (in thousands)

                                                                                                                                                                                    

        The Company recorded a valuation allowance against its deferred tax assets at December 31, 2017 and 2016 because Company management believed that it was more likely than not that these assets would not be fully realized in the future. The valuation allowance increased by approximately $9.1 million and $7.0 million for the years ended December 31, 2017 and 2016, respectively. Changes in the valuation allowance for deferred tax assets relate primarily to the increase in the Company's net operating loss carryforward.

        As of December 31, 2017, the Company had federal NOL carryforwards of approximately $42.1 million and state NOL carryforwards of approximately $94.5 million which are available to reduce future taxable income. The NOLs will begin to expire in 2034, if not utilized.

        As of December 31, 2017, the Company also had $3.0 million of federal and $2.1 million of state research and development tax credit carryforwards available to reduce future income taxes. The federal research and development tax credits will begin to expire 2035, if not utilized. The state research and development tax credits have no expiration date.

        Utilization of NOL carryforwards and credits may be subject to an annual limitation due to the ownership change provisions provided by the Internal Revenue Code of 1986, as amended ("Code"), and similar state provisions. An annual limitation may result in the expiration of NOLs and credits before utilization. In March and April 2016, the Company issued a total of 5.2 million shares of common stock associated with its IPO. In addition, during the third quarter of 2015, the Company issued a new series of convertible preferred stock. Such common and preferred stock issuances may have created an ownership change under these provisions of the Code and similar state provisions. As of December 31, 2017, NOLs and credits are not expected to expire unused in the carryforward period as a result of these issuances of convertible preferred shares.

        On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; (6) creating the base erosion anti-abuse tax (BEAT), a new minimum tax; (7) creating a new limitation on deductible interest expense; and (8) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.

        The SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company's accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

        Our accounting for the following elements of the Tax Act is complete:

        Reduction of US federal Corporate Tax Rate: The Tax Act reduces the corporate tax rate to 21%, effective January 1, 2018. Accordingly, we have re-measured all deferred taxes at 21% as of December 31, 2017. Consequently, we have recorded a decrease related to the net deferred tax asset balance of $4.9 million, with a corresponding net adjustment to the Company's valuation allowance.

        Deemed Repatriation Transition Tax: The Deemed Repatriation Transition Tax ("Transition Tax") is a tax on previously untaxed accumulated and current earnings and profits (E&P) of certain of our foreign subsidiaries. To determine the amount of the Transition Tax, we must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. the Company has a cumulative foreign E&P deficit as of December 31, 2017. As such, the Company does not have a transition tax liability in the 2017 tax year.

        Our accounting for the following elements of the Tax Act is incomplete:

        Global Intangible Low Taxed Income ("GILTI"): The Tax Act creates a new requirement that certain income (i.e., GILTI) earned by a controlled foreign corporations ("CFCs") must be included currently in the gross income of the CFCs' U.S. shareholder. GILTI is the excess of the shareholder's "net CFC tested income" over the net deemed tangible income return, which is currently defined as the excess of (1) 10% of the aggregate of the U.S. shareholder's pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expense taken into account in the determination of net CFC-tested income. Because of the complexity of the new GILTI tax rules, we are continuing to evaluate this provision of the Tax Act and the application of ASC 740. Under U.S. GAAP, we are allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the "period cost method") or (2) factoring such amounts into a company's measurement of its deferred taxes (the "deferred method"). Our selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing our global income to determine whether we expect to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. Because whether we expect to have future U.S. inclusions in taxable income related to GILTI depends on not only our current structure and estimated future results of global operations but also our intent and ability to modify our structure and/or our business, we are not yet able to reasonably estimate the effect of this provision of the Tax Act. Therefore, we have not made any adjustments related to potential GILTI tax in our financial statements and have not made a policy decision regarding whether to record deferred taxes on GILTI.

        As of December 31, 2017, the Company had unrecognized tax benefits ("UTBs") of approximately $1.2 million. All of the deferred tax assets associated with these UTBs are fully offset by a valuation allowance. The following table summarizes the activity related to UTBs:

                                                                                                                                                                                    

        The Company follows the provisions of ASC 740, Accounting for Income Taxes, and the accounting guidance related to accounting for uncertainty in income taxes. The Company determines its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be sustained upon examination by the relevant income tax authorities. The Company will recognize both accrued interest and penalties related to unrecognized benefits in income tax expense. Since the Company is in a loss carryforward position, the Company is generally subject to examination by the U.S. federal, state and local income tax authorities for all tax years in which a loss carryforward is available.