MIME 2017 Annual Report

88 As of March 31, 2018, the Company had U.K. net operating loss carryforwards of approximately $52.6 million that do not expire. As of March 31, 2018, the Company had U.S. federal net operating loss carryforwards of approximately $56.4 million. U.S. federal net operating loss carryforwards generated through March 31, 2017 of approximately $31.5 million expire at various dates through 2037, and U.S. federal net operating loss carryforwards generated during the year ended March 31, 2018 of approximately $24.9 million do not expire. As of March 31, 2018, the Company had U.S. state net operating loss carryforwards of approximately $39.5 million that expire at various dates through 2038. As of March 31, 2018, the Company had Australian net operating loss carryforwards of approximately $17.3 million that do not expire. As of March 31, 2018, the Company had Germany net operating loss carryforwards of approximately $2.4 million that do not expire. As of March 31, 2018, the Company had a U.K. income tax credit carryforward of $1.2 million that does not expire. Under Section 382 of the U.S. Internal Revenue Code, if a corporation undergoes an ownership change, the corporation’s ability to use its pre-change net operating loss carryforwards to offset its post-change income and taxes may be limited. In general, an ownership change occurs if there is a 50 percent cumulative change in ownership of the Company over a rolling three-year period. Similar rules may apply under U.S. state tax laws. The Company believes that it has experienced an ownership change in the past and may experience ownership changes in the future resulting from future transactions in our share capital, some of which may be outside the Company’s control. The Company’s ability to utilize its net operating loss carryforwards or other tax attributes to offset U.S. federal and state taxable income in the future may be subject to future limitations. As of March 31, 2018 and 2017, the Company had liabilities for uncertain tax positions of $6.2 million and $4.9 million, respectively, none of which, if recognized, would impact the Company’s effective tax rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: Year ended March 31, 2018 2017 Beginning balance $ 4,931 $ 2,326 Additions based on tax positions related to current year 142 4,200 Additions for tax positions of prior years 1,444 — Reductions for tax positions of prior years — (1,311) Reductions due to change in tax rate (353) — Expiration of statutes of limitation — (284) Ending balance $ 6,164 $ 4,931 Interest and penalty charges, if any, related to uncertain tax positions are classified as income tax expense in the accompanying consolidated statements of operations. As of March 31, 2018 and 2017, the Company had immaterial accrued interest or penalties related to uncertain tax positions. The Company is subject to taxation in the United Kingdom and several foreign jurisdictions. As of March 31, 2018, the Company is no longer subject to examination by taxing authorities in the United Kingdom for years prior to March 31, 2016. The significant foreign jurisdictions in which the Company operates are no longer subject to examination by taxing authorities for years prior to March 31, 2015. In addition, net operating loss carryforwards in certain jurisdictions may be subject to adjustments by taxing authorities in future years when they are utilized. The majority of the Company’s foreign subsidiaries have incurred losses since inception and do not have any undistributed earnings as of March 31, 2018. Income taxes have not been provided on approximately $8.1 million in undistributed foreign earnings because they are considered to be indefinitely reinvested. The tax payable on the earnings that are indefinitely reinvested in foreign operations would be immaterial. 16. Subsequent Events Share Option and RSU Grant On April 2, 2018, the Company granted approximately 1.3 million share options and 0.2 million RSUs to its employees as part of its annual share-based award grant. The grant date fair value per share for share options and RSUs was $15.20 and $34.82, respectively. On May 18, 2018, the Company executed a sublease for a portion of its Watertown, MA corporate office space and on May 22, 2018, the Company received the required consent to the sublease from the landlord of the Watertown office. Future minimum sublease rental income under the sublease, net of incentives, is approximately $1.8 million.