10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________

FORM 10-Q
___________________

ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

Commission file number 0-54856

OWC PHARMACEUTICAL RESEARCH CORP.
(Exact Name Of Registrant As Specified In Its Charter)

Delaware	98-0573566
(State of Incorporation)	(I.R.S. Employer Identification No.)
22 Shaham Steet, P.O. Box 8324, Petach Tikva, Israel	4918103
(Address of Principal Executive Offices)	(ZIP Code)

Registrant's Telephone Number, Including Area Code: +972 (0) 3-758-2657

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act) or a smaller reporting company.

Large accelerated filer ¨ Accelerated filer ¨ Non-Accelerated filer ¨ Smaller reporting company x

On November 14, 2016, the Registrant had 135,305,474 shares of common stock issued and outstanding.

TABLE OF CONTENTS

Item	Description	Page
	PART I - FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS		3
	Consolidated Balance Sheets		3
	Consolidated Statements of Operations		4
	Consolidated Statements of Comprehensive Loss		5
	Consolidated Statements of Cash Flows		6
	Notes to Unaudited Interim Consolidated Financial Statements		7
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.		13
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.		18
ITEM 4.	CONTROLS AND PROCEDURES.		18
	PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS.		18
ITEM 1A.	RISK FACTORS.		19
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.		19
ITEM 3.	DEFAULT UPON SENIOR SECURITIES.		19
ITEM 4.	MINE SAFETY DISCLOSURE.		19
ITEM 5.	OTHER INFORMATION.		19
ITEM 6.	EXHIBITS.		19

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS Back to Table of Contents

OWC Pharmaceutical Research Corp.
Consolidated Balance Sheets
At September 30, 2016 (Unaudited) and December 31, 2016
Back to Table of Contents
		September 30, 2016
		(Unaudited)		December 31, 2015
ASSETS
Current assets:
Cash	$	90,327	$	357,161
Other receivables		12,218		11,797
Prepaid expenses		9,716		38,591
Total current assets		112,261		407,549
Property and equipment, net		17,504		22,899
Total Assets	$	129,765	$	430,448
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable - trade	$	8,866	$	28,125
Accrued expenses		25,821		24,607
Customer deposit		150,000		50,000
Advances and accounts payable to related parties		1,820		1,820
Convertible notes payable, net of discount		-		3,074
Total current liabilities		186,507		107,626
Non-current liabilities
Notes payable		50,000		-
Total non-current liabilities		50,000		107,626
Total liabilities		236,507		107,626
Stockholders' equity (deficit):
Preferred stock, $0.00001 par value; 20,000,000 shares authorized; no shares issued and outstanding		-		-
Common stock, $0.00001 par value; 500,000,000 shares authorized; and
121,416,585 and 81,460,875 issued and outstanding at September 30, 2016 and December 31, 2015, respectively		1,216		815
Additional paid in capital		8,708,358		8,533,525
Common stock subscription receivable		(651,730)		(651,730)
Common stock subscription payable		12,500		-
Accumulated deficit		(8,177,778)		(7,548,866)
Accumulated other comprehensive income		692		(10,922)
Total stockholders' equity		(106,742)		322,822
Total Liabilities and Stockholders' equity (deficit)	$	129,765	$	430,448
See notes to unaudited interim consolidated financial statements.

OWC Pharmaceutical Research Corp.
Consolidated Statements of Operations
For the Three and Nine-Month Periods Ended September 30, 2016 and 2015
(Unaudited)
Back to Table of Contents
		For the three		For the three		For the nine		For the nine
		Months ended		Months ended		Months ended		Months ended
		September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015
Revenues	$	-	$	-	$	-	$	-
Expenses
General and administrative		74,898		311,391		380,920		1,135,481
Research and development		30,363		96,834		102,182		286,774
(Loss) from operations		(105,261)		(408,225)		(483,102)		(1,422,255)
Other income (expense)
Loss on settlement of debt		(4,521)		-		(4,521)		-
Interest expense		(2,055)		-		(43,615)		-
Change in fair value of derivative liabilities		(2,426)		-		(14,024)		-
Amortization of debt discount		(26,531)		-		(83,650)		-
Total other income (expense)		(35,533)		-		(145,810)		-
Total costs and expenses		(140,794)		(408,225)		(628,912)		(1,422,255)
Net loss before income taxes		(140,794)		(408,225)		(628,912)		(1,422,255)
Income tax		-		-		-		-
Net loss	$	(140,794)	$	(408,225)	$	(628,912)	$	(1,422,255)
Basic and diluted per share amounts:
Basic and diluted net loss	$	(0.00)	$	(0.00)	$	(0.01)	$	(0.02)
Weighted average shares outstanding
(basic and diluted)		85,204,293		81,219,430	$	82,717,789	$	80,308,561
See notes to unaudited interim consolidated financial statements.

OWC Pharmaceutical Research Corp.
Consolidated Statements Comprehensive Loss
For the Three and Nine Months Ended September 30, 2016 and 2015
(Unaudited)
Back to Table of Contents
		For the three		For the three		For the nine		For the nine
		months ended		months ended		months ended		months ended
		September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015
Net loss	$	(140,794)	$	(408,225)	$	(628,912)	$	(1,422,255)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		3,933		893		11,614		(4,715)
Total other comprehensive income (loss), net of tax		3,933		893		11,614		(4,715)
Comprehensive loss	$	(136,861)	$	(407,332)	$	(617,298)	$	(1,426,970)
See notes to unaudited interim consolidated financial statements.

OWC Pharmaceutical Research Corp.
Consolidated Statements of Cash Flows
For the Nine-Month Periods Ended September 30, 2016 and 2015
(Unaudited)
Back to Table of Contents
		For the Nine		For the Nine
		Months ended		Months ended
		September 30, 2016		September 30, 2015
Cash flows from operating activities:
Net loss	$	(628,912)	$	(1,422,255)
Adjustments to reconcile net loss to net cash used in operating activities:
Derivative valuation adjustments		14,024		-
Loss on settlement of debt		4,521		-
Amortization of debt discount		83,650		-
Depreciation expense		7,255		6,960
Common stock issued for services		-		360,369
Warrants issued for services		8,074		10,839
Changes in net assets and liabilities:
(Increase) decrease in accounts receivable		(421)		-
(Increase) decrease in accounts receivable - related party		-		13,346
(Increase) decrease in prepaid expenses		29,454		-
Increase (decrease) accounts payable - related party		(1,820)		(138)
Increase (decrease) in accounts payable		(19,258)		28,020
Increase (decrease) in customer deposits		100,000		-
Increase (decrease) in accrued expenses		5,595		(40,693)
Cash used in operating activities		(397,838)		(1,043,552)
Cash flow from investing activities:
Purchase of equipment		(1,860)		(3,179)
Cash used in investing activities		(1,860)		(3,179)
Cash flow from financing activities:
Proceeds from issuance of common stock		-		114,000
Proceeds of debt borrowings		50,000		-
Proceeds of debt borrowings - convertible		78,500		-
Payment of financing costs		(7,250)		-
Cash provided by financing activities		121,250		114,000
Foreign currency translation		11,614		(4,715)
Change in cash		(266,834)		(937,446)
Cash - beginning of period		357,161		1,469,267
Cash - end of period	$	90,327	$	531,821
Supplement cash flow information:
Non-cash transactions:
Debt discount arising from derivatives	$	41,974	$	-
Conversion of debt	$	175,138	$	-

OWC Pharmaceutical Research Corp.
Notes to Unaudited Interim Consolidated Financial Statements
September 30, 2016
Back to Table of Contents

1. The Company and Significant Accounting Policies

Organizational Background:

OWC Pharmaceutical Research Corp. ("OWCP" or the "Company") is a Delaware corporation and was incorporated under the laws of the State of Delaware on March 7, 2008. We are a medical cannabis research and development company that applies conventional pharmaceutical research protocols and disciplines to the field of medical cannabis with the objective of establishing a leadership position in the research and development of medical cannabis therapies, products and delivery technologies. We are currently engaged in the research and development of cannabis-based medical products (the "Product Prospects") for the treatment of multiple myeloma, psoriasis and fibromyalgia as well as development of a cannabis soluble tablet delivery system that may have applications for other indications. We also provide consulting services to governmental and private entities to assist them with developing and implementing tailor-made comprehensive medical cannabis programs.

OWC Pharmaceutical Research Corp. ("OWCP" or the "Company") is a Delaware corporation and was incorporated under the laws of the State of Delaware on March 7, 2008. The Company is engaged in two distinct business activities: (i) work with GUMI to commercialize and market the Company's Electromagnetic Percussion Device (the "Device"); and (ii) research and development of Cannabis-based medical products for the treatment of a variety of medical conditions and/or diseases such as multiple myeloma, psoriasis, PTSD, migraines and a unique delivery system.

The accompanying financial statements of OWCP were prepared from the accounts of the Company under the accrual basis of accounting. Certain amounts in the financial statements have been reclassified to conform to the current presentation. The reclassifications had no effect on the reported net loss.

Basis of Presentation:

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not established any source of revenue to cover its operating costs, and as such, has incurred an operating loss since inception. These and other factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

Principles of Consolidation:

The financial statements include the accounts of OWC Pharmaceutical Research Corp. and its wholly owned subsidiary One World Cannabis, Inc. (OWC). All significant inter-company balances and transactions have been eliminated.

Significant Accounting Policies

Use of Estimates:

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.

Cash and Cash Equivalents:

For financial statement presentation purposes, the Company considers those short-term, highly liquid investments with original maturities of three months or less to be cash or cash equivalents. There were no cash equivalents at September 30, 2016 and December 31, 2015.

Property and Equipment:

New property and equipment are recorded at cost. Property and equipment included in the bankruptcy proceedings and transferred to the Trustee had been valued at liquidation value. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 5 years. Expenditures for renewals and betterments are capitalized. Expenditures for minor items, repairs and maintenance are charged to operations as incurred. Gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place.

Valuation of Long-Lived Assets:

We review the recoverability of our long-lived assets including equipment, goodwill and other intangible assets, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Our primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.

Foreign Currency:

Non-U.S. entity operations are recorded in the functional currency of each entity. Results of operations for non-U.S. dollar functional currency entities are translated into U.S. dollars using average currency rates. Assets and liabilities are translated using currency rates at period end. Foreign currency translation adjustments are recorded as a component of other comprehensive income (loss) within stockholders' equity.

Stock Based Compensation:

Stock-based awards are accounted for using the fair value method in accordance with ASC 718, Share-Based Payments. Our primary type of share-based compensation consists of stock options. We use the Black-Scholes option pricing model in valuing options. The inputs for the valuation analysis of the options include the market value of the Company's common stock, the estimated volatility of the Company's common stock, the exercise price of the warrants and the risk free interest rate.

Accounting For Obligations And Instruments Potentially To Be Settled In The Company's Own Stock:

We account for obligations and instruments potentially to be settled in the Company's stock in accordance with FASB ASC 815, Accounting for Derivative Financial Instruments. This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company's own stock.

Fair Value of Financial Instruments:

FASB ASC 825, "Financial Instruments," requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. FASB ASC 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At September 30, 2016 and December 31, 2015, the carrying value of certain financial instruments (cash and cash equivalents, accounts payable and accrued expenses.) approximates fair value due to the short-term nature of the instruments or interest rates, which are comparable with current rates.

Fair Value Measurements:

The Company measures fair value under a framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs which prioritize the inputs used in measuring fair value are:

Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2: Inputs to the valuation methodology include:
- Quoted prices for similar assets or liabilities in active markets;
- Quoted prices for identical or similar assets or liabilities in inactive markets;
- Inputs other than quoted prices that are observable for the asset or liability;
- Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The assets or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The following table presents assets that were measured and recognize at fair value on September 30, 2016 and December 31, 2015 and the year then ended on a recurring basis: 

Fair Value Measurements at September 30, 2016
				Quoted Prices in Active		Significant Other		Significant
				Markets for Identical Assets		Observable Inputs		Unobservable Inputs
		Total		(Level 1)		(Level 2)		(Level 3)
None	$	-	$	-	$	-	$	-
Total assets and liabilities at fair value	$	-	$	-	$	-	$	-

Fair Value Measurements at December 31, 2015
				Quoted Prices in Active		Significant Other		Significant
				Markets for Identical Assets		Observable Inputs		Unobservable Inputs
		Total		(Level 1)		(Level 2)		(Level 3)
None	$	-	$	-	$	-	$	-
Total assets and liabilities at fair value	$	-	$	-	$	-	$	-

When the Company changes its valuation inputs for measuring financial assets and liabilities at fair value, either due to changes in current market conditions or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the fiscal periods ended September 30, 2016 and December 31, 2015, there were no significant transfers of financial assets or financial liabilities between the hierarchy levels.

Earnings per Common Share:

We compute net income (loss) per share in accordance with ASC 260, Earning per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

Income Taxes:

We have adopted ASC 740, Accounting for Income Taxes. Pursuant to ASC 740, we are required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities using the tax rates and laws in effect when the differences are expected to reverse. ASC 740 provides for the recognition of deferred tax assets if realization of such assets is more likely than not to occur. Realization of our net deferred tax assets is dependent upon our generating sufficient taxable income in future years in appropriate tax jurisdictions to realize benefit from the reversal of temporary differences and from net operating loss, or NOL, carryforwards. We have determined it more likely than not that these timing differences will not materialize and have provided a valuation allowance against substantially all of our net deferred tax asset.

Management will continue to evaluate the realizability of the deferred tax asset and its related valuation allowance. If our assessment of the deferred tax assets or the corresponding valuation allowance were to change, we would record the related adjustment to income during the period in which we make the determination. Our tax rate may also vary based on our results and the mix of income or loss in domestic and foreign tax jurisdictions in which we operate.

In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and to the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we will reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We will record an additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be.

ASC 740 which requires recognition of estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income tax is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized.

Uncertain Tax Positions:

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of FASB ASC 740-10, Accounting for Uncertain Income Tax Positions, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Our federal and state income tax returns are open for fiscal years ending on or after December 31, 2010. We are not under examination by any jurisdiction for any tax year. At September 30, 2016, we had no material unrecognized tax benefits and no adjustments to liabilities or operations were required under FASB ASC 740-10.

Recent Accounting Pronouncements

Share-Based Payments: 

In March 2016, amended guidance was issued for employee share-based payment awards. The amended guidance makes several modifications related to the accounting for forfeitures, employer tax withholding on share-based compensation and excess tax benefits or deficiencies. The amended guidance also clarifies the statement of cash flows presentation for share-based awards. The amended guidance is effective for us prospectively commencing in the first quarter of 2018. Early adoption is permitted.

Deferred Income Taxes:

In November 2015, amended guidance was issued for the balance sheet classification of deferred income taxes. The amended guidance requires the classification of all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. Early adoption is permitted.

In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-03, "Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs." ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Currently, debt issuance costs are recognized as deferred charges and recorded as other assets. The guidance is effective for annual and interim periods beginning after December 15, 2015 with early adoption permitted and is to be implemented retrospectively. Adoption of the new guidance will only affect the presentation of the Company's consolidated balance sheets and will have no impact to our financial statements.

Management does not anticipate that the adoption of these standards will have a material impact on the financial statements.

The preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related intangible assets, income taxes, insurance obligations and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates under different assumptions or conditions.

The Financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our December 31, 2015 Annual Report and should be read in conjunction with the Notes to Financial Statements which appear in that report.

In the opinion of management, the information furnished in these interim financial statements reflects all adjustments necessary for a fair statement of the financial position and results of operations and cash flows as of and for the three and nine-month periods ended September 30, 2016 and 2015. All such adjustments are of a normal recurring nature. The Financial Statements do not include some information and notes necessary to conform to annual reporting requirements.

2. Stockholders' Equity

Common Stock issued in 2016

Shares Issued upon Conversion of Debt:

In September 2016, the Company agreed to the conversion of $116,000 in principal and $3,140 in interest due on two convertible notes of which resulted into the issuance of 39,955,710 and 13,888,889 shares which are subject to stock payable with a value of $12,500 resulting in a loss of $4,521.

Options Issued for Services:

During the three months ended March 31, 2016 we issued 200,000 common stock options. The options valued at $8,074 were granted for services provided by unrelated parties. The fair value of the options was estimated at the date of grant using the Black-Sholes-Merton pricing model. The Black-Sholes-Merton pricing model assumptions used are as follows: expected dividend yield of 0%; risk-free interest rate of 1.11%; expected volatility of 196%, and option term of 2.75 years.

Common Stock issued in 2015

Stock Issued for Cash:

In August of 2015, we also received $24,000 through a placement of 100,000 common stock units. Those units were sold at $0.24 per unit. Each unit consisted of two shares of common stock and two warrants to purchase common stock. 100,000 warrants are exercisable at $0.12 and expire on August 31, 2016 while the other 100,000 warrants are exercisable at $0.25 and expire on August 31, 2017.

In February of 2015 we sold 800,000 shares to one investor for the offering price of $0.05 per share that resulted in total proceeds of $40,000. During 2015, we also received $50,000 through a placement of common stock units. Those units were sold at $0.15 per unit. Each unit consisted of one share of common stock and one warrant to purchase common stock. The related warrants are exercisable at $0.25 and expire on December 31, 2016.

Stock Issued for Services:

During the interim period ended September 30, 2015 we issued 1,614,935 shares of our common stock to unrelated parties as payment for services. The shares were valued at the closing price as of the date of the agreements (ranging from $0.19 to $0.25) and resulted in full recognition of $360,369 in consulting services expense. During the period ended June 30, 2015, the Company cancelled 500,000 shares of common stock previously issued for services.

Warrants Granted

As part of the 2015 unit offering, the Company issued a total of 333,333 warrants to purchase up to 333,333 shares of common stock at $0.25 per share.

The relative fair value of the warrants attached to the common stock issued was estimated at the date of grant using the Black-Sholes-Merton pricing model. The relative fair value of the attached to the common stock component is $26,416 and the relative fair value of the warrants is $23,584 as of the grant date.

In February, 2015 we issued 64,935 warrants for services. The warrants are exercisable at $0.25 and expire February 23, 2016. We used the Black-Scholes-Merton pricing model and inputs described below to estimate the fair value of $10,839.

The Black-Sholes-Merton pricing model assumptions used are as follows: expected dividend yield of 0%; risk-free interest rate of 0.10%-.0.11%; expected volatility of 242%, and warrant exercise period based upon the stated terms.

3. Related Party Transactions

Due Related Parties: Amounts due related parties totaled $1,820 at September 30, 2016 and $1,820 at December 31, 2015, respectively. The Company paid $16,163 during the period ended September 30, 2016 and $21,943 in  2015 in rent to a related party.

4. Notes Payable

Unsecured Notes Payable Without Conversion Rights

A loan agreement for up to $300,000 was issued September 28, 2016. The agreement allows for six incremental draws of $50,000 to be drawn monthly beginning September 1, 2016 in order to meet future working capital demands. The loan advances are non-interest bearing. The loan is may be repaid at any time but matures 36 months from the date of issue. As of September 30th, 2016 the company has drawn down $50,000 leaving an available balance of $250,000.

Unsecured Notes Payable With Conversion Rights

A convertible note for $78,500 issued on February 2, 2016, bears interest at 8.0% per annum until paid or converted and matures November 2, 2016. Any or all of the outstanding balance of the note may be converted at the option of the holder at any time into common stock of the company at a variable conversion price of 65% of market price. Upon the issuance of the convertible note, the Company bifurcated the embedded conversion feature and recorded an initial derivative liability of $41,974 (the estimated fair market value at the date of grant based on the Binomial option pricing model) all of which was allocated as debt discount.

During 2015 the Company agreed to provide unsecured promissory notes with an unrelated party for $37,500. The note is non-interest bearing and is due on September 16, 2016. The note has not been paid and is in default at September 30, 2016. The note has a future conversion right that allows the holder to convert the principal balance into the Company's common stock at the lender's sole discretion at 50% of the then market price per share. In accordance with ASC 470, the Company has analyzed the beneficial nature of the conversion terms and determined that a beneficial conversion feature (BCF) exists because the effective conversion price was less than the quoted market price at the time of the issuance. The Company calculated the value of the BCF using the intrinsic method as stipulated in ASC 470. The BCF of $37,500 had been recorded as a discount to the notes payable and to Additional Paid-in Capital.

For the nine months September 30, 2016, the Company has amortized $83,650 ($0 in 2015) of the discount arising from the embedded derivative and beneficial conversion feature of the two outstanding notes.

During August and September 2016, in accordance with the original terms of the notes, at the option of the note holders, the entire combined balance of $116,000 and interest of $3,140 was converted into 39,955,710 and 13,888,889 shares which are subject to stock payable with a value of $12,500 resulting in a loss of $4,521. At the date of conversions, the entire derivative liability associated with the bifurcated conversion feature of was marked-to-market, resulting in an increase of $2,426, to a total derivative liability of $55,998 which was reclassified to paid in capital on the date of conversion. The $2,426 change was recorded as a derivative valuation charge in the Consolidated Statement of Operations.

In September, 2016 the Company authorized the issuance of 53,844,599 shares of common stock upon the conversion of $116,000 in principal and $3,140 in interest due on two convertible notes of which 39,955,710 were issued and 13,888,889 shares are subject to stock payable with a value of $12,500 resulting in a loss of $4,521 .

5. Derivative Liabilities

Embedded Conversion Feature

To properly account for the convertible notes payable discussed in Note 4, the Company performed a detailed analysis to obtain a thorough understanding of the transaction. The Company reviewed FASB ASC 815, to identify whether any equity-linked features in the notes are freestanding or embedded. The notes were then analyzed in accordance with FASB ASC 815 to determine if the anti-dilution feature should be bifurcated and accounted for at fair value and remeasured at fair value in income. The Company determined that the anti-dilution feature met the requirements for bifurcation pursuant to FASB ASC 815 due to the variable conversion price and therefore accounted for the anti-dilution features of the notes as a derivative liability. Changes in fair value of the derivative financial instruments are recognized in the Company's statement of operations as a derivative valuation gain or loss.

The conversion of $55,998 during the three months ended September 30, 2016 resulted in a charge of $14,024 and an adjustment charge to the market of $2,426 for the three months ended September 30, 2016.

The Company values its simple conversion option derivatives using the a lattice model. Assumptions used include:

- life through the note maturity date
- expected volatility-152%,
- expected dividends-none
- exercise prices as set forth in the agreements,
- common stock price of the underlying share on the valuation date, and
- number of shares to be issued if the instrument is converted

During August and September 2016, in accordance with the original terms of the notes, at the option of the note holders, the entire balance of $78,500 and interest of $3,140 was converted into 20,142,568 shares of common stock. At the date of conversions, the entire derivative liability associated with the bifurcated conversion feature of was marked-to-market, resulting in an increase of $2,496, to a total derivative liability of $55,998 which was reclassified to paid in capital on the date of conversion. The $2,426 change was recorded as a derivative valuation charge in the Consolidated Statement of Operations

6. Going Concern

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not established any source of revenue to cover its operating costs, and as such, has incurred an operating loss since inception. Further, as of September 30, 2016, the cash resources of the Company were insufficient to meet its current business plan. These and other factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of asset or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

7. Subsequent Events

There were no subsequent events following the period ended September 30, 2016 and throughout the date of the filing of Form 10-Q.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION Back to Table of Contents

The following discussion contains forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use of words such as "anticipate", "estimate", "expect", "project", "intend", "plan", "believe", and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. From time to time, we also may provide forward-looking statements in other materials we release to the public.

Plan of Operations

We are engaged in research and development of cannabis-based medical products for the treatment of a variety of medical conditions such as multiple myeloma, psoriasis, fibromyalgia, post-traumatic stress disorder (PTSD) and migraine, and (ii) consulting services to companies and governmental agencies with respect to complex international medical cannabis protocols and regulations.

We have not yet commenced any significant activities related to our consulting services.

Our goal is to become a leader in the research and development of cannabis-based medical drugs and treatments. To achieve our goal, we plan to focus our activities on the following areas:

Research and Development

Our research and development is focused primarily on exploring several formulations containing active compounds from the cannabis plant, including (but not exclusive to) the cannabinoids CBD and THC, and identifying potential therapeutic applications of the synergistic effects of these active compounds. The synergistic contributions of our formulations have not yet been scientifically researched and demonstrated. We aim to standardize the formulations across the extracts as a whole, not simply by reference to their key active components (CBD and/or THC).

Although there are existing reports and studies on CBD and THC, our formulations will contain several active compounds from the cannabis plant, that must be fully researched and documented in order to verify its effectiveness to indications, at what doses and which method of administration will be the most appropriate and effective.

One World Cannabis plans to produce pharmaceutical-grade cannabinoid-based products and treatments, that will be standardized in composition, formulation and dose, administered by means of an appropriate and efficient delivery system, and tested in properly controlled pre-clinical and clinical studies. OWC plans to conduct its researche, led by internationally renowned investigators, at the facilities of leading Israeli hospitals and scientific institutions. The Company will adhere to legislation, rules and guidelines regarding the investigations. Dr. Baruch, OWC's Director of Research and Regulatory Affairs, and Alon Sinai, OWC's Chief Operating Officer, will monitor the investigations and researches.

To date, OWC has signed three research collaboration and license agreements with Sheba Academic Medical Center, Tel Hashomer, Israel ("Sheba"). Sheba is a university-affiliated hospital that serves as Israel's national medical center and the most comprehensive medical center in the Middle East. Within the framework of the agreements with Sheba, OWC will initiate three studies at the Sheba facilities to explore the effect of three formulations, all based on active ingredients in the cannabis extracts, on multiple myeloma, psoriasis and fibromyalgia (a specific formulation to each indication).

In addition, OWC signed an R&D service agreement with G.C. Group Ltd., an Israeli pharmaceutical R&D company, in April 2015, to provide formulation development services for OWC's new delivery system in the form of a cannabis soluble tablet. The cannabis soluble tablet could provide physicians with the ability to control and administrate optimal dosage, to replace the most common usage/delivery method of medical cannabis today, which is not acceptable by scientists and physicians, such as smoking, edibles and oil extracts with no adequate means of dosage control. The agreement was terminated on December 31, 2015.

The Company expects to start developing other delivery systems, designed for different indications, during 2016.

The Company has recently signed a Memorandum of Understanding (MoU) with Emilia Cosmetics Ltd., a large Israeli private label manufacturer, for the development, manufacture and marketing of a cannabinoid-based topical cream to treat psoriasis. The Company will initiate the development of the topical cream by the end of the first quarter of 2016, at Emilia Cosmetics labs located in Yerucham, Israel. After the completion of the formulation development, expected to be during the second quarter of 2016, the Company will initiate a phase I study at the Sheba facilities to explore the effect of topical cream on psoriasis. However, we do not know if our expectations will be fulfilled in a timely manner, if at all, or that the costs of development will exceed our anticipation.

To date, One World Cannabis has filed eight provisional patents with the United States Patent and Regulatory Office (USPTO), all related to its line of activity related to cannabis-based medical products. Assuming the successful completion of the clinical trials, of which there can be no assurance, the Company believes that it will be able to retain the intellectual rights and secure patent protections.

While we retain full ownership on our intellectual property rights that we conceived prior to the signing of the research collaboration and license agreements with Sheba Academic Medical Center, the psoriasis and fibromyalgia agreements with Sheba provide that all intellectual property rights that is conceived during the course of the research is to be jointly owned by Sheba and One World Cannabis.

Pursuant to the collaboration agreements, we expect to pay Sheba $330,000 for conducting the multiple myeloma trial between the 3rd quarter of 2015 and the second quarter of 2016. In addition, we expect to commence pre-clinical studies on fibromyalgia and psoriasis during the second quarter of 2016. Pursuant to the collaboration agreements, we are obliged to pay Sheba $300,000 throughout 2016 for conducting the psoriasis research, and $100,000 for the fibromyalgia research during the two years of the study. We currently have the financial resources to fund our obligations under these agreements, but anticipate that we will require additional funding during the next 12 months for our continuing and planned expanded operations.

Research and Development Status

The following table summarizes the stages of development for each of our current Product Prospects.

Target Indication	Collaborator	Status
Multiple Myeloma	Sheba	●	Entered into a research agreement for in vitro studies
	Academic	●	Negotiating terms of a research agreement for in vivo studies
	Medical Center	●	Completed one in vitro study
		●	Proceeding with further pre-clinical in vitro studies (safety and toxicity, pharmacokinetic, and pharmacodynamic)
		●	Submitted a clinical trial protocol to the Israeli Institutional Review Board and received its approval to commence a clinical study
		●	Intend to commence a clinical study in the first quarter of 2016
		●	Drafted a clinical trial protocol synopsis, which we believe will assist us in preparing an application for orphan status designation
		●	Entered into a Research Collaboration and License Agreement but have not commenced any studies to date
Psoriasis	Sheba Academic Medical Center	●	Drafted a protocol of a Phase I, double blind, randomized, placebo controlled, multiple escalating dose study to determine the safety, tolerability and pharmacokinetic profile of medical grade cannabis in healthy volunteers
		●	Entered into a nonbinding memorandum of understanding for the development, manufacture and marketing of a cannabinoid-based topical cream
Psoriasis	Emilia Cosmetics Ltd.	●	Intend to enter into a binding agreement in the second quarter of 2016
		●	Intend to initiate development of the topical cream in the second quarter of 2016
		●	Entered into a research agreement for in vitro studies \
Fibromyalgia	Sheba Academic Medical Center	●	Drafted a clinical trial protocol synopsis, which we believe will assist us in preparing an application for orphan status designation
New delivery system - cannabis soluble tablet	G.C. Group Ltd.	●	Completed a proof of concept (the R=Research phase) of the desired end product (the soluble tablet) to test the fabric, durability, solidification and other features of the cannabis soluble tablet.

OWC's Investigation on Multiple Myeloma

Dr. Merav Leiba, Head of Multiple Myeloma Outpatient Clinic and Multiple Myeloma Research Lab at Sheba's Hematology Institute, led the in vitro tests on multiple myeloma. Dr. Leiba, a specialist in Internal Medicine and Hematology, was a postdoctoral fellow at the Jerome Lipper Multiple Myeloma Center at Dana Farber Cancer Institute, Boston, Massachusetts (2006-2008). Dr. Leiba has participated in numerous clinical and investigational studies aimed at developing novel drugs for multiple myeloma.

Our in vitro tests results on multiple myeloma cells studied outside their normal biological context, on which we announced on June 17, 2015, led us to proceed with further pre-clinical study (safety and toxicity, PK, PD) of our formulation, to find out whether it has scientific merit for further development as an investigational new drug. While we are encouraged by the results of the limited in vitro tests, there can be no assurance that any clinical trial will result in commercially viable products or treatments.

Clinical trials are expensive, time consuming and difficult to design and implement. We, as well as the regulatory authorities in Israel and elsewhere, such as an IRB (Helsinki committee), IMCU - Israel Medical Cannabis Unit, or the FDA, may suspend, delay or terminate our clinical trials at any time, may require us, for various reasons, to conduct additional clinical trials, or may require a particular clinical trial to continue for a longer duration than originally planned, including, among others:

● lack of effectiveness of any formulation or delivery system during clinical trials;

● discovery of serious or unexpected toxicities or side effects experienced by trial participants or other safety issues;

● slower than expected rates of subject recruitment and enrollment rates in clinical trials;

● delays or inability in manufacturing or obtaining sufficient quantities of materials for use in clinical trials due to regulatory and manufacturing constraints;

● delays in obtaining regulatory authorization to commence a trial, including IRB approvals, licenses required for obtaining and using cannabis for research, either before or after a trial is commenced;

● unfavorable results from ongoing pre-clinical studies and clinical trials.

● patients or investigators failing to comply with study protocols;

● patients failing to return for post-treatment follow-up at the expected rate;

● sites participating in an ongoing clinical study withdraw, requiring us to engage new sites;

● third-party clinical investigators decline to participate in our clinical studies, do not perform the clinical studies on the anticipated schedule, or act in ways inconsistent with the established investigator agreement, clinical study protocol, good clinical practices, and other Institutional Review Board requirements;

● third-party entities do not perform data collection and analysis in a timely or accurate manner or at all;

● regulatory inspections of our clinical studies require us to undertake corrective action or suspend or terminate our clinical studies;

Any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.

Consulting Services

OWCP believes that the complexity of the medical cannabis programs has created a demand for consulting and advisory services in different aspects of the medical cannabis industry. The Company's services are designed to help government officials, policy-makers and regulatory agencies develop and implement tailor-made comprehensive medical cannabis programs. In addition, One World Cannabis offers medical cannabis regulatory compliance services and patient-care consultancy services.

Our initial activities to secure consulting contracts will be in member states of the European Union and states of the United States that allow for public medical cannabis programs.

OWC management has the expertise in designing training programs for physicians, caregivers, and researches that are essential to the establishment of a successful, patient-focused medical cannabis program. By working with policy-makers, government officials, public agencies, and privately owned businesses, we believe we can also raise the public's awareness of the benefits of cannabis-based treatments and products.

In furtherance of our plans, we may, in the future, consider strategic acquisitions and joint ventures as well as other projects to grow our business activities including but not limited to: product licensing and royalty agreements, consulting, and strategic alliances to support our Product Prospect development. However, there can be no assurance that this strategy will be successful in generating any revenues or growing out business.

Results of Operations during the three months ended September 30, 2016 as compared to the three months ended September 30, 2015

We have not generated any revenue during the three months ended September 30, 2016 and 2015. We have operating expenses related to general and administrative expenses and research and development. During the three months ended September 30, 2016, we incurred a net loss of $140,794 due to general and administrative expenses of $74,898, research and development expenses of $30,363, a loss of $4,521 related to a debt settlement, interest expense of $2,055, a valuation loss on derivatives of $2,426 and expenses due to amortization of debt discount of $26,531 as compared to a net loss of $408,225 due to general and administrative expenses of $311,391 and research and development expenses of $96,834.

Our general and administrative expenses decreased by $236,493 during the three months ended September 30, 2016 as compared to the same period in the prior year. This decrease of 76% is primarily the result of decreased stock-based compensation. The charge relating to stock-based compensation expense was $0 for the three months ended September 30, 2016, compared to $119,199 for the three months ended September 30, 2015.

Our research and development expenses decreased to $30,363 during the three months ended September 30, 2016, compared to $96,834 during the same period in the prior year. The decrease by $66,471 or 69% was primarily due to decreased payments related to our collaboration agreements.

Results of Operations during the nine months ended September 30, 2016 as compared to the nine months ended September 30, 2015

We have not generated any revenue during the nine months ended September 30, 2016 and 2015. We have operating expenses related to general and administrative expenses and research and development. During the nine months ended September 30, 2016, we incurred a net loss of $628,912 due to general and administrative expenses of $380,920, research and development expenses of $102,182, a loss of $4,521 related to a debt settlement, interest expense of $43,615, a valuation loss on derivatives of $14,024 and expenses due to amortization of debt discount of $83,650 as compared to a net loss of $1,422,255 due to general and administrative expenses of $1,135,481 and research and development expenses of $286,774.

Our general and administrative expenses decreased by $754,561 during the nine months ended September 30, 2016 as compared to the same period in the prior year. This decrease of 66% is primarily the result of decreased stock-based compensation. The charge relating to stock-based compensation expense was $0 for the nine months ended September 30, 2016, compared to $360,369 for the nine months ended September 30, 2015.

Our research and development expenses decreased to $102,182 during the nine months ended September 30, 2016, compared to $286,774 during the same period in the prior year. The decrease by $184,592 or 64% was primarily due to decreased payments related to our collaboration agreements.

Liquidity and Capital Resources

On September 30, 2016, we had current assets of $112,261 consisting of $90,327 in cash, other receivables of $12,218 and prepaid expenses of $9,716. We had property and equipment, net of accumulated depreciation of $19,118 valued at $17,504 as of September 30, 2016. We had total assets of $129,765 as of September 30, 2016.

On December 31, 2015, we had current assets of $407,549 consisting of $357,161 in cash, other receivables of $11,797 and prepaid assets of $38,591. We had property and equipment, net of accumulated depreciation of  $11,863, valued at $22,899 as of December 31, 2015. We had total assets of $430,448 as of December 31, 2015.

On September 30, 2016, we had $186,507 in current liabilities consisting of $8,866 in accounts payable, $25,281 in accrued expenses, customer deposits of $150,000 and $1,820 in advances and accounts payable to related parties.

On December 31, 2015, we had $107,626 in current liabilities consisting of $28,125 in accounts payable, $24,607 in accrued expenses, customer deposits of $50,000, $1,820 in advances and accounts payable to related parties and convertible notes payable of $3,074.

We had negative working capital of $74,246 at September 30, 2016 as compared to positive working capital of $299,923 on December 31, 2015. Our accumulated deficit as of September 30, 2016 and December 31, 2015 were $8,177,778 and $7,548,866, respectively.

We used $397,838 in our operating activities during the nine month ended September 30, 2016, which was due to a net loss of $628,912 offset by derivative valuations adjustments of $14,024, a loss of $4,521 related to debt settlements, amortization of debt discount expense of $83,650, depreciation expense of $7,255, warrant expenses valued at $8,074, a decrease in accounts receivable of $421, a decrease in prepaid expenses of $29,454, an increase in accounts payable to related party of $1,820, an increase in accounts payable of $19,258, an increase in customer deposits of $100,000 and an increase in accrued expenses of $5,595.

We used $1,043,552 in our operating activities during the nine months ended September 30, 2015, which was due to a net loss of $1,422,255 offset by depreciation expenses of $6,960, shares issued for services valued at $360,369, warrants issued for services valued at $10,839, a decrease in accounts receivable of $13,346, a decrease in accounts payable to a related party of $138, an increase in accounts payable of $28,020 and an increase in accrued expenses of $40,693.

We used $1,860 and $3,179 during the nine months ended September 30, 2016 and 2015, respectively, to purchase property and equipment.

Our financing activities during the nine months ended September 30, 2016 provided us with $121,250 from debt borrowings of $128,500 offset buy $7,250 in debt issuance cost. We financed our negative cash flow from operations during the nine months ended September 30, 2015 through proceeds from issuance of common stock of $90,000.

Based upon our cash position of $90,327 at September 30, 2016, we believe that we need to raise additional capital, either equity or debt during the remainder of fiscal year 2016 in order to fund our plan of operations including our research and development initiatives for the next twelve months. There can be no assurance, however, that additional capital will be sufficient to fund our currently anticipated expenditure requirements for the next twelve-month period nor can there be any assurance that financing will be available at satisfactory terms and conditions or at all, for that matter.

Our auditors have issued an opinion on our financial statements which includes a statement describing our going concern status. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills and meet our other financial obligations. This is because we have not generated any revenues and no revenues are anticipated until we begin marketing the product. Accordingly, we must raise capital from sources other than the actual sale of the product. We must raise capital to implement our project and stay in business. Even if we raise the maximum amount of money in this offering, we do not know how long the money will last, however, we do believe it will last at least twelve months.

Our lack of operating history may make it difficult to raise capital. Our inability to borrow funds or raise equity capital to facilitate our business plan may have a material adverse effect on our financial condition and future prospects.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Back to Table of Contents

None.

ITEM 4. CONTROLS AND PROCEDURES Back to Table of Contents

Evaluation of disclosure controls and procedures.

As of September 30, 2016, the Company's chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures as provided under the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013), our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were ineffective as September 30, 2016. Management has identified corrective actions to address the weaknesses and plans to implement them during the fourth quarter of 2016.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company's internal control over financial reporting during the period covered by this report, which were identified in connection with management's evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS Back to Table of Contents

We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. However, from time to time, we may become a party to certain legal proceedings in the ordinary course of business.

ITEM 1A. RISK FACTORS  Back to Table of Contents

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1. Description of Business, subheading "Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, which could materially affect our business, financial condition or future results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Back to Table of Contents

During the three-months ended September 30, 2016, the Company issued 2,307,692 restricted shares of common stock valued at $300,000 to Michepro Holding Ltd. in reliance upon the exemptions provided in Section 4(2) of the Securities Act of 1933, as amended (the "Act") and Regulation D and Regulation S promulgated by the United States Securities and Exchange Commission (the "SEC") under the Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES Back to Table of Contents

None.

ITEM 4. MINE SAFETY DISCLOSURE. Back to Table of Contents

Not applicable.

ITEM 5. OTHER INFORMATION Back to Table of Contents

Not applicable.

ITEM 6. EXHIBITS Back to Table of Contents

(a) The following documents are filed as exhibits to this report on Form 10-Q or incorporated by reference herein. Any document incorporated by reference is identified by a parenthetical reference to the SEC filing that included such document.

Exhibit No.	Description
31.1	Section 302 Certification of the Sarbanes-Oxley Act of 2002 of the Company's CEO, Mordechi Bignitz, filed herewith.
31.2	Section 302 Certification of the Sarbanes-Oxley Act of 2002 of the Company's CFO, Shmuel De-Saban, filed herewith.
32.1	Section 906 of the Sarbanes-Oxley Act of 2002 of Mordechi Bignitz as CEO, filed herewith
32.2	Section 906 of the Sarbanes-Oxley Act of 2002 of Shmuel De-Saban as CFO, filed herewith

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned.

Signature	Title	Date
/s/ Mordechai Bignitz	Chief Executive Officer (Principal Executive Officer)	November 14, 2016
Mordechai Bignitz
/s/ Shmuel De-Saban	Chief Financial Officer (Principal Financial and Accounting Officer)	November 14, 2016
Shmuel De-Saban

Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Mordechai Bignitz	Chief Executive Officer	November 14, 2016
Mordechai Bignitz
/s/ Mordechai Bignitz	Chairman	November 14, 2016
Mordechai Bignitz

EX-31

CERTIFICATION

I, Mordechi Bignitz, certify that:

1. I have reviewed this quarterly report of OWC Pharmaceutical Research Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the  issuer as of, and for, the periods presented in this report;

4. The  issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as 4efined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the  issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the  issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the  issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the  issuer's internal control over financial reporting that occurred during the  issuer's most recent fiscal quarter (the  issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the   issuer's internal control over financial reporting; and

5. The  issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the   issuer's auditors and the audit committee of the  issuer's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the  issuer's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether r not material, that involves management or other employees who have a significant role in the  issuer's internal control over financial reporting.

Date: November 14, 2016

/s/ Mordechi Bignitz
CEO

EX-31

CERTIFICATION

I, Shmuel De-Saban, certify that:

1. I have reviewed this quarterly report of OWC Pharmaceutical Research Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the  issuer as of, and for, the periods presented in this report;

4. The  issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as 4efined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the  issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the  issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the  issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the  issuer's internal control over financial reporting that occurred during the  issuer's most recent fiscal quarter (the  issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the   issuer's internal control over financial reporting; and

5. The  issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the   issuer's auditors and the audit committee of the  issuer's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the  issuer's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether r not material, that involves management or other employees who have a significant role in the  issuer's internal control over financial reporting.

Date: November 14, 2016

/s/ Shmuel De-Saban
CFO

EX-32

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of OWC Pharmaceutical Research Corp. (the "Company") on Form 10-Q for the period ended September 30, 2016 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, I, Mordechi Bignitz, CEO of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Mordechi Bignitz

Mordechi Bignitz
CEO
Dated: November 14, 2016

A signed original of this written statement required by Section 906 has been provided to OWC Pharmaceutical Research Corp. and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of OWC Pharmaceutical Research Corp. (the "Company") on Form 10-Q for the period ended September 30, 2016 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, I, Shmuel De-Saban, CFO of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Shmuel De-Saban

Shmuel De-Saban
CFO
Dated: November 14, 2016

A signed original of this written statement required by Section 906 has been provided to OWC Pharmaceutical Research Corp. and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Document and Entity Information - USD ($)	9 Months Ended
	Sep. 30, 2016	Jun. 30, 2015
Document and Entity Information:
Entity Registrant Name	OWC Pharmaceutical Research Corp.
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
Trading Symbol	owcp
Amendment Flag	false
Entity Central Index Key	0001431934
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding	121,416,585
Entity Public Float		$ 2,430,069
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3

XML

OWC Pharmaceutical Research Corp. - Consolidated Balance Sheets		Sep. 30, 2016 USD ($)	Dec. 31, 2015 USD ($)
Current Assets:
Cash		$ 90,327	$ 357,161
Other receivables		12,218	11,797
Prepaid expenses		9,716	38,591
Total current assets		112,261	407,549
Property and equipment, net		17,504	22,899
Total assets		129,765	430,448
Current Liabilities:
Accounts payable - trade		8,866	28,125
Accrued expenses		25,821	24,607
Customer deposit		150,000	50,000
Advances and accounts payable to related parties		1,820	1,820
Convertible notes payable - net of discount		0	3,074
Total current liabilities		186,507	107,626
Non-current liabilities:
Notes payable		50,000	0
Total non-current liabilities		50,000	107,626
Total liabilities		236,507	107,626
Stockholders' equity:
Preferred stock	[1]	0	0
Common stock	[2]	1,216	815
Additional paid-in capital		8,708,358	8,533,525
Common stock subscriptions receivable		$ (651,730)	$ (651,730)
Common stock subscriptions payable		12,500	0
Accumulated deficit		$ (8,177,778)	$ (7,548,866)
Accumulated other comprehensive income		692	(10,922)
Total stockholders' equity (deficit)		(106,742)	322,822
Total liabilities and stockholders' equity		$ 129,765	$ 430,448

[1] $0.0001 par value. Authorized 20,000,000 shares: none issued and outstanding at June 30, 2016 and December 31, 2015

[2] $0.0001 par value. Authorized 500,000,000 shares: 121,416,585 and 81,460,875 shares issued and outstanding at September 30, 2016 and December 31, 2015

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OWC Pharmaceutical Research Corp. - Consolidated Statements of Operations	3 Months Ended		9 Months Ended
	Sep. 30, 2016 USD ($) $ / shares shares	Sep. 30, 2015 USD ($) $ / shares shares	Sep. 30, 2016 USD ($) $ / shares shares	Sep. 30, 2015 USD ($) $ / shares shares
Consolidated Statements of Operations
Revenues	$ 0	$ 0	$ 0	$ 0
Expenses:
General and administrative expenses	74,898	311,391	380,920	1,135,481
Research and development	30,363	96,834	102,182	286,774
Loss from operations	(105,261)	(408,225)	(483,102)	(1,422,255)
Other income (expenses):
Loss on settlement of debt	(4,521)	0	(4,521)	0
Interest expense	(2,055)	0	(43,615)	0
Change in fair value of derivative liabilities	(2,426)	0	(14,024)	0
Amortization of debt discount	$ (26,531)	$ 0	$ (83,650)	$ 0
Total other income (expense)	(35,533)	0	(145,810)	0
Total costs and expenses	$ (140,794)	$ (408,225)	$ (628,912)	$ (1,422,255)
Loss loss before income taxes	(140,794)	(408,225)	(628,912)	(1,422,255)
Income tax	0	0	0	0
Net loss	$ (140,794)	$ (408,225)	$ (628,912)	$ (1,422,255)
Basic and diluted per share amounts:
Basic and diluted net loss | $ / shares	$ (0.00)	$ (0.01)	$ (0.01)	$ (0.02)
Weighted average shares outstanding (basic and diluted) | shares	85,204,293	81,219,430	82,717,789	80,308,561

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OWC Pharmaceutical Research Corp. - Consolidated Statements Comprehensive Income (Loss)	3 Months Ended		9 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)
Consolidated Statements Comprehensive Income (Loss)
Net loss	(140,794)	(408,225)	(628,912)	(1,422,255)
Other comprehensive income, net of tax:
Foreign currency translation adjustments	$ 3,933	$ 893	$ 11,614	$ (4,715)
Total other comprehensive income, net of tax	3,933	893	11,614	(4,715)
Comprehensive income (loss)	$ (136,861)	$ (407,332)	$ (617,298)	$ (1,426,970)

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OWC Pharmaceutical Research Corp. - Consolidated Statements of Cash Flow	9 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)
Cash flows from operating activities:
Net loss	(628,912)	(1,422,255)
Adjustments to reconcile net loss to net cash used in operating activites:
Derivative valuation of debt	14,024	0
Loss on settlement of debt	4,521	0
Amortization of debt discount	83,650	0
Depreciation expense	7,255	6,960
Common stock issued for services	0	360,369
Fair value of warrants issued for services	8,074	10,839
Changes in net assets and liabilities:
(Increase) decrease in accounts receivable	$ (421)	$ 0
(Increase) decrease in accounts receivable - related party	0	13,346
(Increase) decrease prepaid expenses	$ 29,454	$ 0
Increase (decrease) in accounts payable - related party	(1,820)	(138)
Increase (decrease) in accounts payable	$ (19,258)	$ 28,020
Increase (decrease) in customer deposits	$ 100,000	$ 0
Increase (decrease) in accrued expenses	5,595	(40,693)
Net cash provided by (used in) operating activities	$ (397,838)	$ (1,043,552)
Cash flows from investing activities:
Purchase of equipment	(1,860)	(3,179)
Net cash used in investing activities	$ (1,860)	$ (3,179)
Cash flows from financing activities:
Proceeds from issuance of common stock	$ 0	$ 114,000
Proceeds of debt borrowings	50,000	0
Proceeds of debt borrowings - convertible	78,500	0
Principal payments on financing costs	(7,250)	0
Net cash provided by financing activities	$ 121,250	$ 114,000
Foreign currency translation	11,614	(4,715)
Change in cash	$ (266,834)	$ (937,446)
Cash at beginning of period	357,161	1,469,267
Cash at end of period	90,327	531,821
Non cash transactions:
Debt discount arising from derivatives	41,974	0
Conversion of debt	175,138	0

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1. The Company and Significant Accounting Policies

9 Months Ended

Sep. 30, 2016

Notes

1. The Company and Significant Accounting Policies

1. The Company and Significant Accounting Policies

Organizational Background:

OWC Pharmaceutical Research Corp. ("OWCP" or the "Company") is a Delaware corporation and was incorporated under the laws of the State of Delaware on March 7, 2008. We are a medical cannabis research and development company that applies conventional pharmaceutical research protocols and disciplines to the field of medical cannabis with the objective of establishing a leadership position in the research and development of medical cannabis therapies, products and delivery technologies. We are currently engaged in the research and development of cannabis-based medical products (the "Product Prospects") for the treatment of multiple myeloma, psoriasis and fibromyalgia as well as development of a cannabis soluble tablet delivery system that may have applications for other indications. We also provide consulting services to governmental and private entities to assist them with developing and implementing tailor-made comprehensive medical cannabis programs.

OWC Pharmaceutical Research Corp. ("OWCP" or the "Company") is a Delaware corporation and was incorporated under the laws of the State of Delaware on March 7, 2008. The Company is engaged in two distinct business activities: (i) work with GUMI to commercialize and market the Company's Electromagnetic Percussion Device (the "Device"); and (ii) research and development of Cannabis-based medical products for the treatment of a variety of medical conditions and/or diseases such as multiple myeloma, psoriasis, PTSD, migraines and a unique delivery system.

The accompanying financial statements of OWCP were prepared from the accounts of the Company under the accrual basis of accounting. Certain amounts in the financial statements have been reclassified to conform to the current presentation. The reclassifications had no effect on the reported net loss.

Basis of Presentation:

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not established any source of revenue to cover its operating costs, and as such, has incurred an operating loss since inception. These and other factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

Principles of Consolidation:

The financial statements include the accounts of OWC Pharmaceutical Research Corp. and its wholly owned subsidiary One World Cannabis, Inc. (OWC). All significant inter-company balances and transactions have been eliminated.

Significant Accounting Policies

Use of Estimates:

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.

Cash and Cash Equivalents:

For financial statement presentation purposes, the Company considers those short-term, highly liquid investments with original maturities of three months or less to be cash or cash equivalents. There were no cash equivalents at September 30, 2016 and December 31, 2015.

Property and Equipment:

New property and equipment are recorded at cost. Property and equipment included in the bankruptcy proceedings and transferred to the Trustee had been valued at liquidation value. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 5 years. Expenditures for renewals and betterments are capitalized. Expenditures for minor items, repairs and maintenance are charged to operations as incurred. Gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place.

Valuation of Long-Lived Assets:

We review the recoverability of our long-lived assets including equipment, goodwill and other intangible assets, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Our primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.

Foreign Currency:

Non-U.S. entity operations are recorded in the functional currency of each entity. Results of operations for non-U.S. dollar functional currency entities are translated into U.S. dollars using average currency rates. Assets and liabilities are translated using currency rates at period end. Foreign currency translation adjustments are recorded as a component of other comprehensive income (loss) within stockholders' equity.

Stock Based Compensation:

Stock-based awards are accounted for using the fair value method in accordance with ASC 718, Share-Based Payments. Our primary type of share-based compensation consists of stock options. We use the Black-Scholes option pricing model in valuing options. The inputs for the valuation analysis of the options include the market value of the Company's common stock, the estimated volatility of the Company's common stock, the exercise price of the warrants and the risk free interest rate.

Accounting For Obligations And Instruments Potentially To Be Settled In The Company's Own Stock:

We account for obligations and instruments potentially to be settled in the Company's stock in accordance with FASB ASC 815, Accounting for Derivative Financial Instruments. This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company's own stock.

Fair Value of Financial Instruments:

FASB ASC 825, "Financial Instruments," requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. FASB ASC 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At September 30, 2016 and December 31, 2015, the carrying value of certain financial instruments (cash and cash equivalents, accounts payable and accrued expenses.) approximates fair value due to the short-term nature of the instruments or interest rates, which are comparable with current rates.

Fair Value Measurements:

The Company measures fair value under a framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs which prioritize the inputs used in measuring fair value are:

Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2: Inputs to the valuation methodology include: - Quoted prices for similar assets or liabilities in active markets; - Quoted prices for identical or similar assets or liabilities in inactive markets; - Inputs other than quoted prices that are observable for the asset or liability; - Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability. Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The assets or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The following table presents assets that were measured and recognize at fair value on September 30, 2016 and December 31, 2015 and the year then ended on a recurring basis:

Fair Value Measurements at September 30, 2016
				Quoted Prices in Active		Significant Other		Significant
				Markets for Identical Assets		Observable Inputs		Unobservable Inputs
		Total		(Level 1)		(Level 2)		(Level 3)
None	$	-	$	-	$	-	$	-
Total assets and liabilities at fair value	$	-	$	-	$	-	$	-

Fair Value Measurements at December 31, 2015
				Quoted Prices in Active		Significant Other		Significant
				Markets for Identical Assets		Observable Inputs		Unobservable Inputs
		Total		(Level 1)		(Level 2)		(Level 3)
None	$	-	$	-	$	-	$	-
Total assets and liabilities at fair value	$	-	$	-	$	-	$	-

When the Company changes its valuation inputs for measuring financial assets and liabilities at fair value, either due to changes in current market conditions or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the fiscal periods ended September 30, 2016 and December 31, 2015, there were no significant transfers of financial assets or financial liabilities between the hierarchy levels.

Earnings per Common Share:

We compute net income (loss) per share in accordance with ASC 260, Earning per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

Income Taxes:

We have adopted ASC 740, Accounting for Income Taxes. Pursuant to ASC 740, we are required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities using the tax rates and laws in effect when the differences are expected to reverse. ASC 740 provides for the recognition of deferred tax assets if realization of such assets is more likely than not to occur. Realization of our net deferred tax assets is dependent upon our generating sufficient taxable income in future years in appropriate tax jurisdictions to realize benefit from the reversal of temporary differences and from net operating loss, or NOL, carryforwards. We have determined it more likely than not that these timing differences will not materialize and have provided a valuation allowance against substantially all of our net deferred tax asset.

Management will continue to evaluate the realizability of the deferred tax asset and its related valuation allowance. If our assessment of the deferred tax assets or the corresponding valuation allowance were to change, we would record the related adjustment to income during the period in which we make the determination. Our tax rate may also vary based on our results and the mix of income or loss in domestic and foreign tax jurisdictions in which we operate.

In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and to the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we will reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We will record an additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be.

ASC 740 which requires recognition of estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income tax is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized.

Uncertain Tax Positions:

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of FASB ASC 740-10, Accounting for Uncertain Income Tax Positions, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Our federal and state income tax returns are open for fiscal years ending on or after December 31, 2010. We are not under examination by any jurisdiction for any tax year. At September 30, 2016, we had no material unrecognized tax benefits and no adjustments to liabilities or operations were required under FASB ASC 740-10.

Recent Accounting Pronouncements

Share-Based Payments: 

In March 2016, amended guidance was issued for employee share-based payment awards. The amended guidance makes several modifications related to the accounting for forfeitures, employer tax withholding on share-based compensation and excess tax benefits or deficiencies. The amended guidance also clarifies the statement of cash flows presentation for share-based awards. The amended guidance is effective for us prospectively commencing in the first quarter of 2018. Early adoption is permitted.

Deferred Income Taxes:

In November 2015, amended guidance was issued for the balance sheet classification of deferred income taxes. The amended guidance requires the classification of all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. Early adoption is permitted.

In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-03, "Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs." ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Currently, debt issuance costs are recognized as deferred charges and recorded as other assets. The guidance is effective for annual and interim periods beginning after December 15, 2015 with early adoption permitted and is to be implemented retrospectively. Adoption of the new guidance will only affect the presentation of the Company's consolidated balance sheets and will have no impact to our financial statements.

Management does not anticipate that the adoption of these standards will have a material impact on the financial statements.

The preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related intangible assets, income taxes, insurance obligations and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates under different assumptions or conditions.

The Financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our December 31, 2015 Annual Report and should be read in conjunction with the Notes to Financial Statements which appear in that report.

In the opinion of management, the information furnished in these interim financial statements reflects all adjustments necessary for a fair statement of the financial position and results of operations and cash flows as of and for the three and nine-month periods ended September 30, 2016 and 2015. All such adjustments are of a normal recurring nature. The Financial Statements do not include some information and notes necessary to conform to annual reporting requirements.

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2. Stockholders' Equity

9 Months Ended

Sep. 30, 2016

Notes

2. Stockholders' Equity

2. Stockholders' Equity

Common Stock issued in 2016

Shares Issued upon Conversion of Debt:

In September 2016, the Company agreed to the conversion of $116,000 in principal and $3,140 in interest due on two convertible notes of which resulted into the issuance of 39,955,710 and 13,888,889 shares which are subject to stock payable with a value of $12,500 resulting in a loss of $4,521.

Options Issued for Services:

During the three months ended March 31, 2016 we issued 200,000 common stock options. The options valued at $8,074 were granted for services provided by unrelated parties. The fair value of the options was estimated at the date of grant using the Black-Sholes-Merton pricing model. The Black-Sholes-Merton pricing model assumptions used are as follows: expected dividend yield of 0%; risk-free interest rate of 1.11%; expected volatility of 196%, and option term of 2.75 years.

Common Stock issued in 2015

Stock Issued for Cash:

In August of 2015, we also received $24,000 through a placement of 100,000 common stock units. Those units were sold at $0.24 per unit. Each unit consisted of two shares of common stock and two warrants to purchase common stock. 100,000 warrants are exercisable at $0.12 and expire on August 31, 2016 while the other 100,000 warrants are exercisable at $0.25 and expire on August 31, 2017.

In February of 2015 we sold 800,000 shares to one investor for the offering price of $0.05 per share that resulted in total proceeds of $40,000. During 2015, we also received $50,000 through a placement of common stock units. Those units were sold at $0.15 per unit. Each unit consisted of one share of common stock and one warrant to purchase common stock. The related warrants are exercisable at $0.25 and expire on December 31, 2016.

Stock Issued for Services:

During the interim period ended September 30, 2015 we issued 1,614,935 shares of our common stock to unrelated parties as payment for services. The shares were valued at the closing price as of the date of the agreements (ranging from $0.19 to $0.25) and resulted in full recognition of $360,369 in consulting services expense. During the period ended June 30, 2015, the Company cancelled 500,000 shares of common stock previously issued for services.

Warrants Granted

As part of the 2015 unit offering, the Company issued a total of 333,333 warrants to purchase up to 333,333 shares of common stock at $0.25 per share.

The relative fair value of the warrants attached to the common stock issued was estimated at the date of grant using the Black-Sholes-Merton pricing model. The relative fair value of the attached to the common stock component is $26,416 and the relative fair value of the warrants is $23,584 as of the grant date.

In February, 2015 we issued 64,935 warrants for services. The warrants are exercisable at $0.25 and expire February 23, 2016. We used the Black-Scholes-Merton pricing model and inputs described below to estimate the fair value of $10,839.

The Black-Sholes-Merton pricing model assumptions used are as follows: expected dividend yield of 0%; risk-free interest rate of 0.10%-.0.11%; expected volatility of 242%, and warrant exercise period based upon the stated terms.

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3. Related Party Transactions

9 Months Ended

Sep. 30, 2016

Notes

3. Related Party Transactions

3. Related Party Transactions

Due Related Parties: Amounts due related parties totaled $1,820 at September 30, 2016 and $1,820 at December 31, 2015, respectively. The Company paid $16,163 during the period ended September 30, 2016 and $21,943 in  2015 in rent to a related party.

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4. Notes Payable

9 Months Ended

Sep. 30, 2016

Notes

4. Notes Payable

4. Notes Payable

Unsecured Notes Payable Without Conversion Rights

A loan agreement for up to $300,000 was issued September 28, 2016. The agreement allows for six incremental draws of $50,000 to be drawn monthly beginning September 1, 2016 in order to meet future working capital demands. The loan advances are non-interest bearing. The loan is may be repaid at any time but matures 36 months from the date of issue. As of September 30th, 2016 the company has drawn down $50,000 leaving an available balance of $250,000.

Unsecured Notes Payable With Conversion Rights

A convertible note for $78,500 issued on February 2, 2016, bears interest at 8.0% per annum until paid or converted and matures November 2, 2016. Any or all of the outstanding balance of the note may be converted at the option of the holder at any time into common stock of the company at a variable conversion price of 65% of market price. Upon the issuance of the convertible note, the Company bifurcated the embedded conversion feature and recorded an initial derivative liability of $41,974 (the estimated fair market value at the date of grant based on the Binomial option pricing model) all of which was allocated as debt discount.

During 2015 the Company agreed to provide unsecured promissory notes with an unrelated party for $37,500. The note is non-interest bearing and is due on September 16, 2016. The note has not been paid and is in default at September 30, 2016. The note has a future conversion right that allows the holder to convert the principal balance into the Company's common stock at the lender's sole discretion at 50% of the then market price per share. In accordance with ASC 470, the Company has analyzed the beneficial nature of the conversion terms and determined that a beneficial conversion feature (BCF) exists because the effective conversion price was less than the quoted market price at the time of the issuance. The Company calculated the value of the BCF using the intrinsic method as stipulated in ASC 470. The BCF of $37,500 had been recorded as a discount to the notes payable and to Additional Paid-in Capital.

For the nine months September 30, 2016, the Company has amortized $83,650 ($0 in 2015) of the discount arising from the embedded derivative and beneficial conversion feature of the two outstanding notes.

During August and September 2016, in accordance with the original terms of the notes, at the option of the note holders, the entire combined balance of $116,000 and interest of $3,140 was converted into 39,955,710 and 13,888,889 shares which are subject to stock payable with a value of $12,500 resulting in a loss of $4,521. At the date of conversions, the entire derivative liability associated with the bifurcated conversion feature of was marked-to-market, resulting in an increase of $2,426, to a total derivative liability of $55,998 which was reclassified to paid in capital on the date of conversion. The $2,426 change was recorded as a derivative valuation charge in the Consolidated Statement of Operations.

In September, 2016 the Company authorized the issuance of 53,844,599 shares of common stock upon the conversion of $116,000 in principal and $3,140 in interest due on two convertible notes of which 39,955,710 were issued and 13,888,889 shares are subject to stock payable with a value of $12,500 resulting in a loss of $4,521.

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5. Derivative Liabilities

9 Months Ended

Sep. 30, 2016

Notes

5. Derivative Liabilities

5. Derivative Liabilities

Embedded Conversion Feature

To properly account for the convertible notes payable discussed in Note 4, the Company performed a detailed analysis to obtain a thorough understanding of the transaction. The Company reviewed FASB ASC 815, to identify whether any equity-linked features in the notes are freestanding or embedded. The notes were then analyzed in accordance with FASB ASC 815 to determine if the anti-dilution feature should be bifurcated and accounted for at fair value and remeasured at fair value in income. The Company determined that the anti-dilution feature met the requirements for bifurcation pursuant to FASB ASC 815 due to the variable conversion price and therefore accounted for the anti-dilution features of the notes as a derivative liability. Changes in fair value of the derivative financial instruments are recognized in the Company's statement of operations as a derivative valuation gain or loss.

The conversion of $55,998 during the three months ended September 30, 2016 resulted in a charge of $14,024 and an adjustment charge to the market of $2,426 for the three months ended September 30, 2016.

The Company values its simple conversion option derivatives using the a lattice model. Assumptions used include:

· life through the note maturity date · expected volatility-152%, · expected dividends-none · exercise prices as set forth in the agreements, · common stock price of the underlying share on the valuation date, and · number of shares to be issued if the instrument is converted

During August and September 2016, in accordance with the original terms of the notes, at the option of the note holders, the entire balance of $78,500 and interest of $3,140 was converted into 20,142,568 shares of common stock. At the date of conversions, the entire derivative liability associated with the bifurcated conversion feature of was marked-to-market, resulting in an increase of $2,496, to a total derivative liability of $55,998 which was reclassified to paid in capital on the date of conversion. The $2,426 change was recorded as a derivative valuation charge in the Consolidated Statement of Operations

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6. Going Concern

9 Months Ended

Sep. 30, 2016

Notes

6. Going Concern

6. Going Concern

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not established any source of revenue to cover its operating costs, and as such, has incurred an operating loss since inception. Further, as of September 30, 2016, the cash resources of the Company were insufficient to meet its current business plan. These and other factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of asset or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

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7. Subsequent Events

9 Months Ended

Sep. 30, 2016

Notes

7. Subsequent Events

7. Subsequent Events

There were no subsequent events following the period ended September 30, 2016 and throughout the date of the filing of Form 10-Q.

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1. The Company and Significant Accounting Policies: Use of Estimates (Policies)

9 Months Ended

Sep. 30, 2016

Policies

Use of Estimates:

Use of Estimates:

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.

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1. The Company and Significant Accounting Policies: Cash and Cash Equivalents (Policies)

9 Months Ended

Sep. 30, 2016

Policies

Cash and Cash Equivalents:

Cash and Cash Equivalents:

For financial statement presentation purposes, the Company considers those short-term, highly liquid investments with original maturities of three months or less to be cash or cash equivalents. There were no cash equivalents at September 30, 2016 and December 31, 2015.

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1. The Company and Significant Accounting Policies: Property and Equipment (Policies)

9 Months Ended

Sep. 30, 2016

Policies

Property and Equipment:

Property and Equipment:

New property and equipment are recorded at cost. Property and equipment included in the bankruptcy proceedings and transferred to the Trustee had been valued at liquidation value. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 5 years. Expenditures for renewals and betterments are capitalized. Expenditures for minor items, repairs and maintenance are charged to operations as incurred. Gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place.

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1. The Company and Significant Accounting Policies: Valuation of Long-lived Assets (Policies)

9 Months Ended

Sep. 30, 2016

Policies

Valuation of Long-lived Assets:

Valuation of Long-Lived Assets:

We review the recoverability of our long-lived assets including equipment, goodwill and other intangible assets, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Our primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.

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1. The Company and Significant Accounting Policies: Foreign Currency (Policies)

9 Months Ended

Sep. 30, 2016

Policies

Foreign Currency:

Foreign Currency:

Non-U.S. entity operations are recorded in the functional currency of each entity. Results of operations for non-U.S. dollar functional currency entities are translated into U.S. dollars using average currency rates. Assets and liabilities are translated using currency rates at period end. Foreign currency translation adjustments are recorded as a component of other comprehensive income (loss) within stockholders' equity.

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1. The Company and Significant Accounting Policies: Stock Based Compensation (Policies)

9 Months Ended

Sep. 30, 2016

Policies

Share-based Payments:

Share-Based Payments: 

In March 2016, amended guidance was issued for employee share-based payment awards. The amended guidance makes several modifications related to the accounting for forfeitures, employer tax withholding on share-based compensation and excess tax benefits or deficiencies. The amended guidance also clarifies the statement of cash flows presentation for share-based awards. The amended guidance is effective for us prospectively commencing in the first quarter of 2018. Early adoption is permitted.

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1. The Company and Significant Accounting Policies: Accounting For Obligations and Instruments Potentially To Be Settled in The Company's Own Stock (Policies)

9 Months Ended

Sep. 30, 2016

Policies

Accounting For Obligations and Instruments Potentially To Be Settled in The Company's Own Stock:

Accounting For Obligations And Instruments Potentially To Be Settled In The Company's Own Stock:

We account for obligations and instruments potentially to be settled in the Company's stock in accordance with FASB ASC 815, Accounting for Derivative Financial Instruments. This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company's own stock.

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1. The Company and Significant Accounting Policies: Fair Value of Financial Instruments (Policies)

9 Months Ended

Sep. 30, 2016

Policies

Fair Value of Financial Instruments:

Fair Value of Financial Instruments:

FASB ASC 825, "Financial Instruments," requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. FASB ASC 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At September 30, 2016 and December 31, 2015, the carrying value of certain financial instruments (cash and cash equivalents, accounts payable and accrued expenses.) approximates fair value due to the short-term nature of the instruments or interest rates, which are comparable with current rates.

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1. The Company and Significant Accounting Policies: Fair Value Measurements (Policies)

9 Months Ended

Sep. 30, 2016

Policies

Fair Value Measurements:

Fair Value Measurements:

The Company measures fair value under a framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs which prioritize the inputs used in measuring fair value are:

Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2: Inputs to the valuation methodology include: - Quoted prices for similar assets or liabilities in active markets; - Quoted prices for identical or similar assets or liabilities in inactive markets; - Inputs other than quoted prices that are observable for the asset or liability; - Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability. Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The assets or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The following table presents assets that were measured and recognize at fair value on September 30, 2016 and December 31, 2015 and the year then ended on a recurring basis:

Fair Value Measurements at September 30, 2016
				Quoted Prices in Active		Significant Other		Significant
				Markets for Identical Assets		Observable Inputs		Unobservable Inputs
		Total		(Level 1)		(Level 2)		(Level 3)
None	$	-	$	-	$	-	$	-
Total assets and liabilities at fair value	$	-	$	-	$	-	$	-

Fair Value Measurements at December 31, 2015
				Quoted Prices in Active		Significant Other		Significant
				Markets for Identical Assets		Observable Inputs		Unobservable Inputs
		Total		(Level 1)		(Level 2)		(Level 3)
None	$	-	$	-	$	-	$	-
Total assets and liabilities at fair value	$	-	$	-	$	-	$	-

When the Company changes its valuation inputs for measuring financial assets and liabilities at fair value, either due to changes in current market conditions or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the fiscal periods ended September 30, 2016 and December 31, 2015, there were no significant transfers of financial assets or financial liabilities between the hierarchy levels.

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1. The Company and Significant Accounting Policies: Earnings Per Common Share (Policies)

9 Months Ended

Sep. 30, 2016

Policies

Earnings Per Common Share:

Earnings per Common Share:

We compute net income (loss) per share in accordance with ASC 260, Earning per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

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1. The Company and Significant Accounting Policies: Income Taxes (Policies)

9 Months Ended

Sep. 30, 2016

Policies

Deferred Income Taxes:

Deferred Income Taxes:

In November 2015, amended guidance was issued for the balance sheet classification of deferred income taxes. The amended guidance requires the classification of all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. Early adoption is permitted.

In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-03, "Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs." ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Currently, debt issuance costs are recognized as deferred charges and recorded as other assets. The guidance is effective for annual and interim periods beginning after December 15, 2015 with early adoption permitted and is to be implemented retrospectively. Adoption of the new guidance will only affect the presentation of the Company's consolidated balance sheets and will have no impact to our financial statements.

Management does not anticipate that the adoption of these standards will have a material impact on the financial statements.

The preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related intangible assets, income taxes, insurance obligations and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates under different assumptions or conditions.

The Financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our December 31, 2015 Annual Report and should be read in conjunction with the Notes to Financial Statements which appear in that report.

In the opinion of management, the information furnished in these interim financial statements reflects all adjustments necessary for a fair statement of the financial position and results of operations and cash flows as of and for the three and nine-month periods ended September 30, 2016 and 2015. All such adjustments are of a normal recurring nature. The Financial Statements do not include some information and notes necessary to conform to annual reporting requirements.

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1. The Company and Significant Accounting Policies: Uncertain Tax Positions (Policies)

9 Months Ended

Sep. 30, 2016

Policies

Uncertain Tax Positions:

Uncertain Tax Positions:

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of FASB ASC 740-10, Accounting for Uncertain Income Tax Positions, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Our federal and state income tax returns are open for fiscal years ending on or after December 31, 2010. We are not under examination by any jurisdiction for any tax year. At September 30, 2016, we had no material unrecognized tax benefits and no adjustments to liabilities or operations were required under FASB ASC 740-10.

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1. The Company and Significant Accounting Policies: Share-based Payments (Policies)

9 Months Ended

Sep. 30, 2016

Policies

Share-based Payments:

Share-Based Payments: 

In March 2016, amended guidance was issued for employee share-based payment awards. The amended guidance makes several modifications related to the accounting for forfeitures, employer tax withholding on share-based compensation and excess tax benefits or deficiencies. The amended guidance also clarifies the statement of cash flows presentation for share-based awards. The amended guidance is effective for us prospectively commencing in the first quarter of 2018. Early adoption is permitted.

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1. The Company and Significant Accounting Policies: Deferred Income Taxes (Policies)

9 Months Ended

Sep. 30, 2016

Policies

Deferred Income Taxes:

Deferred Income Taxes:

In November 2015, amended guidance was issued for the balance sheet classification of deferred income taxes. The amended guidance requires the classification of all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. Early adoption is permitted.

In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-03, "Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs." ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Currently, debt issuance costs are recognized as deferred charges and recorded as other assets. The guidance is effective for annual and interim periods beginning after December 15, 2015 with early adoption permitted and is to be implemented retrospectively. Adoption of the new guidance will only affect the presentation of the Company's consolidated balance sheets and will have no impact to our financial statements.

Management does not anticipate that the adoption of these standards will have a material impact on the financial statements.

The preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related intangible assets, income taxes, insurance obligations and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates under different assumptions or conditions.

The Financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our December 31, 2015 Annual Report and should be read in conjunction with the Notes to Financial Statements which appear in that report.

In the opinion of management, the information furnished in these interim financial statements reflects all adjustments necessary for a fair statement of the financial position and results of operations and cash flows as of and for the three and nine-month periods ended September 30, 2016 and 2015. All such adjustments are of a normal recurring nature. The Financial Statements do not include some information and notes necessary to conform to annual reporting requirements.

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1. The Company and Significant Accounting Policies: Fair Value Measurements: Fair Value, Measurement Inputs, Disclosure (Tables)

9 Months Ended

Sep. 30, 2016

Tables/Schedules

Fair Value, Measurement Inputs, Disclosure

Fair Value Measurements at September 30, 2016
				Quoted Prices in Active		Significant Other		Significant
				Markets for Identical Assets		Observable Inputs		Unobservable Inputs
		Total		(Level 1)		(Level 2)		(Level 3)
None	$	-	$	-	$	-	$	-
Total assets and liabilities at fair value	$	-	$	-	$	-	$	-

Fair Value Measurements at December 31, 2015
				Quoted Prices in Active		Significant Other		Significant
				Markets for Identical Assets		Observable Inputs		Unobservable Inputs
		Total		(Level 1)		(Level 2)		(Level 3)
None	$	-	$	-	$	-	$	-
Total assets and liabilities at fair value	$	-	$	-	$	-	$	-