13. INCOME TAXES

The income tax provision (benefit) consists of the following:

The expected tax benefit based on the statutory rate is reconciled with actual tax benefit as follows:

Deferred tax assets consist of the effects of temporary differences attributable to the following:

Due to the changes in ownership of the Company in connection with the change in control and related transactions in March 2015, approximately $55,000 in existing net operating loss carryforwards (computed in accordance with IRS section 382) are available to reduce future taxable income. These NOLs begin to expire in 2019. In addition, losses incurred from the date of the merger to August 31, 2015 aggregating approximately $415,000 are also available to reduce future taxable income. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax assets for every period because it is more likely than not that all of the deferred tax assets will not be realized.

A reconciliation of the changes in valuation allowance for the year ended August 31, 2015 is as follows: