The reconciliation between the expected income tax benefit, computed using the statutory federal rate of 34%, and the actual income tax benefit for the years ended October 31, 2016 and 2015, is as follows:

The composition of deferred tax assets/liability is as follows:

The valuation allowance increased by $1,035,768 during the year ended October 2014 and did not change for the years ended October 31, 2016 and 2015. The Company established a valuation allowance to fully offset the net deferred income tax assets due to the uncertainty of the Company’s ability to generate future taxable income necessary to realize these net deferred income tax assets, considering the Company’s history of significant operating losses. In addition, future utilization of the available net operating loss carryforwards may be limited under Internal Revenue Code Section 382 as a result of any future changes in ownership.

For federal income tax purposes, the Company has net operating losses of approximately $13,136,558 at October 31, 2016. These losses expire as follows: