11. Income Taxes

The Company had federal, state and foreign net operating loss carryforwards of approximately $81,614, $63,520 and $69,970, respectively, as of December 31, 2017. The U.S. tax losses expire at various times through 2036. The foreign losses are primarily from Israel and have an indefinite carryforward.

The Company may be able to utilize its net operating loss carryforwards to reduce future federal and State income tax liabilities. However, these net operating losses are subject to various limitations under Internal Revenue Code section 382, which limit the use of net operating loss carryforwards to the extent there has been in ownership change of more than 50 percentage points. In addition, the net operating loss carryforwards are subject to examination by the taxing authorities and could be adjusted or disallowed due to such exams. Although the Company has not undergone an IRC section 382 analysis, it is possible that the utilization of the Company's net operating loss carryforwards may be limited.

In addition, the Company has federal and state research and development tax credits of approximately $1,799 and $293, respectively, that begin expiring in 2031 for federal tax purposes and 2030 for state tax purposes.

There is no provision for income taxes in the United States or Israel, because the Company has historically incurred operating losses and maintains a full valuation allowance against its deferred tax assets in these jurisdictions. The deferred tax asset recorded in the consolidated balance sheets relates to the Company's Australian operations.

A summary of the Company's current and deferred expense for income tax is as follows:

	Year Ended December 31,
	2017			2016
Current expense (benefit):
Federal	$	—		$	—
State		—			—
Foreign		—			—

Total current expense (benefit):	$	—		$	—
Deferred expense (benefit):
Federal	$	—		$	—
State		—			—
Foreign		(157	)		—

Total deferred expense (benefit):	$	(157	)	$	—

Total income tax expense (benefit):	$	(157	)	$	—

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

	Year Ended December 31,
	2017			2016
Federal statutory income tax rate		34.00	%		34.00	%
State taxes, net of federal benefit		4.42	%		—
Permanent differences		(2.27	)%		(6.50	)%
Tax credits		3.45	%		—
Tax law change		(37.65	)%		—
Foreign rate differential		(0.02	)%		—
Valuation allowance		(3.11	)%		(31.90	)%
Other		1.68	%		4.40	%

		0.50	%		0.00	%

The significant components of the company's deferred tax assets as of December 31, 2017 and 2016 were as follows:

	Year Ended September 30,
	2017			2016
Federal net operating loss carryforwards	$	33,232		$	18,258
State net operating loss carryforwards		4,014			1,858
Stock Options		1,348			43
Federal research tax credits		1,799			1,308
State research tax credits		231			119
License fees		1,659			2,616
Accrued expenses		29			599
Other		182			31

Total deferred tax assets	$	42,494		$	24,832
Valuation allowance		(42,336	)		(24,832	)

Net deferred tax asset (liability)	$	158		$	—

As of December 31, 2017 and 2016, the Company had provided a full valuation allowance against its net deferred tax assets, except for its Australian deferred tax assets, because realization of any future tax benefit cannot be reasonably assured. The valuation allowance increased during the years ended December 31, 2017 and 2016, by $17,504 and $9,060, respectively.

On December 22, 2017, President Trump signed into law H.R. 1, "An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018" (this legislation was formerly called the "Tax Cuts and Jobs Act" and is referred to herein as the "The Act"). The Act provides for significant changes in the U.S. Internal Revenue Code of 1986, as amended. The Act contains provisions with separate effective dates but is generally effective for taxable years beginning after December 31, 2017.

The Act has the following effects on our income tax expense for the year ending December 31. 2017:

• The Act imposes a tax on post-1986 earnings of non-U.S. affiliates that have not been repatriated for purposes of US federal income tax ("toll charge"), with those earnings taxed at rates of 15.5% for earnings reflected by cash and cash equivalent items and 8% for other assets. We estimate that we will not owe any cash taxes as a result of this change in law due to being able to use our current year tax loss in the U.S. to offset the income from the toll charge.

• Under Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 740, Income Taxes ("ASC 740"), we are required to revalue any deferred tax assets or liabilities in the period of enactment of change in tax rates. The Act lowers our US corporate income tax rate from 34% to 21%. The revaluation of our U.S. deferred tax assets and liabilities will reduce our net U.S. deferred tax assets by approximately $11.3 million and is reflected in our tax provision for the year ended December 31, 2017.

The Act will fully affect us in 2018 as certain other of its provisions related to the taxation of non-U.S. activity on a current basis will impact our results, particularly the "global intangible low-taxed income" tax that imposes a tax on earnings that are not subject to tax by non-U.S. jurisdictions above a certain minimum rate. Similar to the toll charge noted above, we do not expect the other provisions to result in cash taxes payable due to application of our tax losses in the US.

The Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 ("SAB 118") on December 23, 2017. SAB 118 provides a one-year measurement period from a registrant's reporting period that includes The Act's enactment date to allow the registrant sufficient time to obtain, prepare and analyze information to complete the accounting required under ASC 740.

The ultimate impact of The Act on our reported results and beyond, particularly the impact of the toll charge, may differ from the estimates provided herein, possibly materially, due to, among other things, changes in interpretations and assumptions we have made, guidance that may be issued, and other actions we may take as a result of the U.S. Tax Act different from that presently contemplated.

The Company follows the authoritative guidance on accounting for and disclosure of uncertainty in tax positions, which requires the Company to determine whether a tax position of the Company is more likely than not to be sustained upon examination, including resolution of any related appeals of litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate settlement with the relevant taxing authority.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. The earliest tax years that may be subject to examination by jurisdiction are 2013 for both federal and state purposes. The Company's policy is to record interest and penalties related to income taxes as part of the tax provision. There were no interest and penalties pertaining to uncertain tax positions for the years ended December 31, 2017 or 2016.