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 June 30, 2015

Commission file number 0-54856

OWC PHARMACEUTICAL RESEARCH CORP.
(Exact Name of Registrant in its Charter) 

Delaware	98-0573566
(State or other Jurisdiction of Incorporation)	(IRS Employer Identification No.)

 

22 Shaham Steet, P.O. Box 8324, Petach Tikva, 4918103, Israel
(Address of Registrant’s Principal Executive Offices and Principal Place of Business) 

Registrant's Telephone Number, Including Area Code: Phone: +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 August 17, 2015, the Registrant had 80,654,176 shares of common stock outstanding.

TABLE OF CONTENTS

Item	Description	Page
	PART I - FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS - UNAUDITED.		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.		18
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.		18
ITEM 3.	DEFAULT UPON SENIOR SECURITIES.		18
ITEM 4.	MINE SAFETY DISCLOSURE.		18
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 June 30, 2015 and December 31, 2014
Back to Table of Contents
		June 30, 2015
		(Unaudited)		December 31, 2014
ASSETS
Current assets:
Cash	$	799,374	$	1,469,267
Other current assets		12,903		24,091
Total current assets		812,277		1,493,358
Property and equipment, net		28,109		29,454
Total Assets	$	840,386	$	1,522,812
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade	$	52,559	$	16,523
Accrued expenses		2,947		43,643
Advances and accounts payable to related parties		-		138
Total current liabilities		55,506		60,304
Total liabilities		55,506		60,304
Stockholders' equity:
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
80,320,843 and 78,429,241 issued and outstanding at June 30, 2015 and December 31, 2014, respectively		803		784
Additional paid in capital		8,292,838		8,000,847
Common stock subscriptions receivable		(651,730)		(651,730)
Common stock subscription payable		50,000		-
Accumulated deficit		(6,907,908)		(5,893,878)
Accumulated other comprehensive income		877		6,485
Total stockholders' equity		784,880		1,462,508
Total liabilities and stockholders' equity	$	840,386	$	1,522,812
See notes to unaudited interim consolidated financial statements.

OWC Pharmaceutical Research Corp.
Consolidated Statements of Operations
For the Three and Six-Months Ended June 30, 2015 and 2014
(Unaudited)
Back to Table of Contents
		For the three		For the three		For the six		For the six
		months ended		months ended		months ended		months ended
		June 30, 2015		June 30, 2014		June 30, 2015		June 30, 2014
Revenues	$	-	$	-	$	-	$	-
Expenses
General and administrative		532,815		(106,930)		824,090		365,212
Research and development		76,612		-		189,940		-
(Loss) from operations		(609,427)		106,930		(1,014,030)		(365,212)
Other income (expense):
Interest expense		-		(86)		-		(2,923)
Amortization of debt discount		-		-		-		(34,034)
Total other (expense)		-		(86)		-		(36,957)
Total costs and expenses		(609,427)		106,844		(1,014,030)		(402,169)
Net income (loss) before income taxes		(609,427)		106,844		(1,014,030)		(402,169)
Income tax		-		-		-		-
Net income (loss)	$	(609,427)	$	106,844	$	(1,014,030)	$	(402,169)
Basic and diluted per share amounts:
Basic and diluted net loss	$	(0.02)	$	0.00	$	(0.02)	$	(0.01)
Weighted average shares outstanding (basic and diluted)		40,129,063		47,666,243	$	58,799,819	$	38,562,849
See notes to unaudited interim financial statements.

 

OWC Pharmaceutical Research Corp.
Consolidated Statements Comprehensive Loss
For the Three and Six Months Ended June 30, 2015 and 2014
(Unaudited)
Back to Table of Contents
		For the three months		For the three months		For the six months		For the six months
		ended June 30, 2015		ended June 30, 2014		ended June 30, 2015		ended June 30, 2014
Net loss	$	(609,427)	$	106,844	$	(1,014,030)	$	(402,169)
Other comprehensive income, net of tax:
Foreign currency translation adjustments		(650)		-		(5,608)		-
Total other comprehensive income, net of tax		(650)		-		(5,608)		-
Comprehensive loss	$	(610,077)	$	106,844	$	(1,019,638)	$	(402,169)
See notes to unaudited interim consolidated financial statements.

OWC Pharmaceutical Research Corp.
Statements of Cash Flows
For the Six Months Ended June 30, 2015 and 2014
(Unaudited)
Back to Table of Contents
		For the six		For the six
		months ended		months ended
		June 30, 2015		June 30, 2014
Cash flows from operating activities:
Net loss	$	(1,014,030)	$	(402,169)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		-		34,034
Depreciation		4,524		-
Common stock issued for services		241,170		326,000
Fair value of warrants issued for services		10,839		-
Changes in net assets and liabilities:
(Increase) decrease in accounts receivable		2,612		-
(Increase) decrease in accounts receivable - related party		11,188		-
Advances and accounts payable to related parties		138		-
Increase (decrease) in accounts payable		35,762		-
Increase (decrease) in accrued expenses		(40,697)		2,950
Cash used in operating activities		(751,106)		(39,212)
Cash flow from investing activities:
Purchase of equipment		(3,179)		-
Cash used in investing activities		(3,179)		-
Cash flow from financing activities:
Proceeds from issuance of common stock		90,000		868,800
Proceeds of debt borrowings		-		14,500
Cash provided by financing activities		90,000		883,300
Foreign currency translation		(5,608)		-
Change in cash		(669,893)		844,088
Cash - beginning of period		1,469,267		2,469
Cash - end of period	$	799,374	$	846,557
Supplement cash flow information:
Non-cash transactions:
Debt and accrued interest converted to equity	$	-	$	130,849
See notes to unaudited interim financial statements.

OWC Pharmaceutical Research Corp.
Notes to Unaudited Interim Consolidated Financial Statements
June 30, 2015
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. 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 June 30, 2015 and December 31, 2014.

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 June 30, 2015 and December 31, 2014, 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 June 30, 2015 and December 31, 2014 and the year then ended on a recurring basis: 

Fair Value Measurements at June 30, 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 at fair value	$	-	$	-	$	-	$	-

Fair Value Measurements at December 31, 2014
				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 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 June 30, 2015 and December 31, 2014, 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 June 30, 2015 we had no material unrecognized tax benefits and no adjustments to liabilities or operations were required under FASB ASC 740-10.

Recent Accounting Pronouncements

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 Financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our December 31, 2014 Annual Report and should be read in conjunction with the Notes to Financial Statements which appear in that report.

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.

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 six-month periods ended June 30, 2015 and 2014. 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

Stock Issued for Cash:

In connection with a private placement of 10,000,000 shares of common stock 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. We are obligated to issue 333,333 shares to one investor of this offering. The $50,000 received through the unit offering is carried as subscription payable in stockholders' equity at June 30, 2015. The related warrants are exercisable at $0.25 and expire on December 31, 2016. During the period ended June 30, 2015, the Company cancelled 500,000 shares of common stock previously issued for services.

Stock Issued for Services:

During the interim period ended June 30, 2015 we issued 1,091,602 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 $241,170 in consulting services expense.

Historical Activity in 2014:

Stock Issued upon conversion of debt- On July 1, 2014 we issued 179,300 shares of our common stock in settlement of $1,500 in convertible note payable plus associated accrued interest of $293. The conversion occurred within the terms of the promissory note and no gain or loss resulted. On February 28, 2014 we issued 13,084,000 shares of our common stock in settlement of $114,414 in convertible note payable plus associated accrued interest of $16,435. The conversion occurred within the terms of the promissory note and no gain or loss resulted.

Stock Issued for Services:

During the interim period ended September 30, 2014 we issued 300,000 shares of our common stock to an unrelated party as payment for services. We also issued 400,000 shares to two former officers and directors of the company as part of a severance agreement. The shares were valued at the closing price as of the date of the agreements ($0.25 and $0.28, respectively) and resulted in full recognition of $187,000 in consulting services expense. During the interim periods ended on or before June 30, 2014 we issued 9,208,600 shares of our common stock to seven unrelated parties as payment for services. The shares were valued at the closing price as of the date of the agreement ($0.05) and resulted in full recognition of $481,430 in consulting services expense. In June we cancelled 3,108,600 of these shares valued at $155,430 resulting in $305,000 in consulting expense through September 30, 2014.

Options Issued for services:

During the interim period ended September 30, 2014 we issued 14,350,000 common stock options. 350,000 of those options valued at $82,640 were granted to former related parties while 14,000,000 options valued at $3,774,496 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 0.47% to 0.49%; expected volatility of 241%, and warrant term of two years.

Stock Issued for cash-In connection with a private placement of 10,000,000 shares of common stock in March and April of 2014 we sold 4,700,000 shares to six investors for the offering price of $0.005 per share that resulted in total proceeds of $23,500. During 2014 we received $1,164,300 through a placement of common stock units. Those units were sold at $0.09 per unit. Each unit consisted of one share of common stock and one warrant to purchase common stock. We issued 12,936,662 shares through September 30th to 22 investors of this offering. The warrants are exercisable at $0.16 and expire in June, 2015. During 2014 we received $554,200 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. We issued 3,694,666 shares through September 30th to 4 investors of this offering. The warrants are exercisable at $0.16 and expire in June 2015.

Warrants

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 Not Disclosed Elsewhere

Due Related Parties: Amounts due related parties totaled $0 at June 30, 2015 and $138 at December 31, 2014, respectively. Accounts receivable from related parties was $15,919 at June 30, 2015 and $0 at December 31, 2014.

4. Notes Payable

Unsecured Notes Payable Without Conversion Rights

During 2014, the Company signed a series of three new unsecured promissory notes with unrelated parties for an aggregate of $14,500. The notes bear interest at 1% per annum and are due one year from the date of issuance. The notes were paid in full in 2014.

Unsecured Notes Payable With Conversion Rights

On February 28, 2014 eleven holders of convertible notes with an aggregate principal balance of $114,414 and accrued interest of $16,435 converted their notes and accrued interest into 13,084,000 shares of common stock. Upon conversion, $34,034 of unamortized discount arising from the previously recorded beneficial conversion feature was recognized as additional interest expense. The conversion occurred within the terms of the promissory note and no gain or loss resulted.

5. Future Commitment and Issuance of Warrants

On March 5, 2013, the Company and GUMI Tel Aviv Ltd, a major, privately-held Israeli technology company ("GUMI"), entered into development/manufacturing/marketing agreement ("GUMI Agreement"). GUMI is engaged in the manufacture, import/export, marketing and install industrial equipment and designing technical solutions.

Pursuant to the GUMI Agreement, GUMI agreed to: (i) complete the development of the Prototype of the Patented Device; (ii) manufacture the commercial model(s) of the Patented device; and (iii) market the commercial model(s) of the Patented Device.

In consideration for developing the Prototype and manufacturing and marketing/distributing commercial models of the Patented Device as well as incurring all related costs and expenses in connection therewith, the Company shall compensate GUMI as follows: (i) upon the execution of the GUMI Agreement, the Company granted GUMI warrants (the "Warrants") exercisable to purchase 200,000 shares of the Company's common stock ("Warrant Shares") at an exercise price of USD$0.05 per share (the "Exercise Price"); (ii) upon completion of the Prototype, granting GUMI additional Warrants to purchase 200,000 additional Warrant Shares at the Exercise Price; and (iii) upon completion of a Commercial Device ready for manufacture and sale, granting GUMI additional Warrants to purchase 200,000 additional Warrant Shares at the Exercise Price. The Warrants shall expire 3 years from the date of each grant and shall be subject to adjustment in the event of any recapitalization of the Company's capital stock.

In addition to the consideration represented by the grant of Warrants, the Agreement further provides that following commencement of sale of the Commercial Device and until such time that GUMI has recouped all costs and expenses that it has incurred and paid in connection with the completion of development of the Prototype and the manufacture of the Commercial Device ("Date of Recoupment"), one hundred (100%) percent of the net sales revenues shall be paid and distributed to GUMI. On and after the Date of Recoupment, net sales revenues shall be paid sixty-five (65%) percent to GUMI and thirty-five (35%) percent to the Company.

The Company recorded $107,074 in fiscal year 2013 in expenses related to 600,000 vested warrants previously granted to GUMI Tel Aviv Ltd. The warrants were valued using the Black-Scholes option pricing model. The inputs for the valuation analysis of the warrants include the market value of the Company's common stock were as follows: the estimated volatility of the Company's common stock used in the Black-Scholes option pricing model was 318%, the exercise price and the risk free interest rate used were $0.05 and 0.36%, respectively. All warrants are fully vested.

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 June 30, 2015, 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

In July 2015, the Company issued the previously subscribed to 333,333 shares, which were recorded as stock payable a of June 30, 2015. There were no other subsequent events following the period ended June 30, 2015 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 three distinct business sectors and we may require additional capital to implement our business plan and fund our operations.

Our three distinct business operations are:

(i) continuing to 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 such as multiple myeloma, psoriasis, fibromyalgia, post-traumatic stress disorder (PTSD) and migraine, and
(iii) 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.

In 2008, we acquired the patent for our Device and from 2008 until 2011, we devoted our limited resources and efforts to the development of our Device. During late 2011 and into 2012, we renewed our interest in pursuing development of our Device and, subsequent to our year ended December 31, 2012, we entered into an agreement with GUMI to develop a Device prototype, which was successfully completed. GUMI has completed the manufacture of several commercial models of the Device that GUMI is presently devoting resources to market under the terms of our agreement. We continue to be dependent upon the ability of GUMI to successfully market our Device, which process has started. However, we have not yet derived any revenues from GUMI's on-going marketing efforts, which commenced in late 2013 and are continuing in 2015.

We will utilize the capital we recently raised to fund OWC's business including the assembly of a professional team of highly-qualified medical and scientific experts together with experienced management and marketing executives to develop OWC's business.

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 researches, 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).

At present, OWC is negotiating with two other Israeli leading medical centers for the collaboration in the research of migraine and PTSD (post-traumatic stress disorder). The Company expects these agreements to be finalized during the fourth quarter of 2015. Of course, there can be no assurance that we be able to successfully negotiate these agreements before the end of 2015, if at all.

In addition, OWC signed an R&D service agreement with G.C. Group Ltd. - an Israeli pharmaceutical R&D company, to provide formulation development services for OWC's new delivery system in the form of a cannabis dissoluble tablet. The cannabis dissoluble 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 Company expects to start developing other delivery system, designed for different indications, during the fourth quarter of 2015.

The Company has recently signed a Memorandum of Understanding (MoU) with Emilia Cosmetics Ltd. - a large Israeli private label manufacturer, for the developing, manufacturing and marketing of a cannabinoid-based topical cream to treat psoriasis. The Company will initiate the research and development of the topical cream by the end of the third quarter of 2015, at Emilia Cosmetics labs located in Yerucham, Israel. After the completion of the formulation development, during the fourth quarter of 2015, 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 Intellectual rights related to the multiple myeloma are being negotiated and the Company expects to finalized an agreement during the 4th quarter of 2015.

Pursuant to the collaboration agreements, we are obliged 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 3rd quarter of 2015. Pursuant to the collaboration agreements, we are obliged to pay Sheba $300,000 during the 1st quarter of 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 these studies, 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 Prospect Products.

Targeted Medical Condition	Collaborator	Status
Use of cannabis to treat multiple Myeloma	Sheba Academic Medical Center	Basic Science Research Agreement - signed; Clinical Research Agreement - in negotiation; Pre-clinical study: Approved by Ethics Committee (IRB); In vitro tests - completed. Next: Pre-clinical study: Safety and Toxicity, PK, PD Clinical trial protocol synopsis - draft completed.
Use of cannabis to treat Psoriasis	(1) Sheba Academic Medical Center	Research Collaboration and License Agreement - signed; 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 - draft completed.
Use of cannabis to treat Psoriasis	(2) Emilia Cosmetics Ltd.	Memorandum of Understanding (MoU) for the developing, manufacturing and marketing of a cannabinoid-based topical cream to treat psoriasis - signed; Received license to purchase and use of cannabis for R&D purposes; Formulation development will be initiated during third quarter of 2015.
Use of cannabis to treat Fibromyalgia	Sheba Academic Medical Center	Research Collaboration and License Agreement - signed; Clinical trial protocol synopsis - initial draft completed.
New delivery system - cannabis dissoluble tablet	G.C. Group Ltd.	Formulation development; Received license to purchase and use of cannabis for R&D purposed.
Use of cannabis to treat PTSD	In Negotiations	Clinical trial documents - submitted; Awaiting for Ethics Committee (IRB) final approval.
Use of cannabis to treat Migraine	In Negotiations	Clinical trial protocol synopsis - initial draft completed.

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:

Ÿ  lack of effectiveness of any formulation or delivery system during clinical trials;
Ÿ  discovery of serious or unexpected toxicities or side effects experienced by trial participants or other safety issues;
Ÿ  slower than expected rates of subject recruitment and enrollment rates in clinical trials;
Ÿ  delays or inability in manufacturing or obtaining sufficient quantities of materials for use in clinical trials due to regulatory and manufacturing constraints;
Ÿ  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;
Ÿ  unfavorable results from ongoing pre-clinical studies and clinical trials.
Ÿ  patients or investigators failing to comply with study protocols;
Ÿ  patients failing to return for post-treatment follow-up at the expected rate;
Ÿ  sites participating in an ongoing clinical study withdraw, requiring us to engage new sites;
Ÿ  third-party clinical investigators decline to participate in our clinical studies, do not perform them on the anticipated schedule, or act in ways inconsistent with the investigator agreement, clinical study protocol, good clinical practices, and other Institutional Review Board requirements;
Ÿ  third-party entities do not perform data collection and analysis in a timely or accurate manner or at all;
Ÿ  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

OWC 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 does not allow for comprehensive 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 Prospect Product 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 June 30, 2015 as compared to the three months ended June 30, 2014

We have not generated any revenue during the three months ended June 30, 2015 and 2014. We have operating expenses related to general and administrative expenses and research and development expenses. During the three months ended June 30, 2015, we incurred a net loss of $609,427 due to general and administrative expenses of $532,815 and research and development expenses of $76,612 as compared to a net income of $106,844 due to a gain related to the cancelation of previously issued shares valued at $106,930 and interest expense of $86 during the same period in the prior year.

Our general and administrative expenses increased by $639,745 during the three-month period ended June 30, 2015 as compared to the same period in the prior year. During the three-month period ended June 30, 2015, we incurred $76,612 in research and development expenses as compared to no such expenses in the same period in the prior year.

Our comprehensive net loss during the three months ended June 30, 2015 was $610,077, due to a net loss of $609,427 and $650 in foreign currency translation adjustments as compared to a comprehensive net gain of $106,844 and no foreign currency translation adjustments in the same period in the prior year with no adjustments.

Results of Operations during the six months ended June 30, 2015 as compared to the six months ended June 30, 2014

We have not generated any revenue during the six months ended June 30, 2015 and 2014. We have operating expenses related to general and administrative expenses and research and development expenses. During the six months ended June 30, 2015, we incurred a net loss of $1,014,030 due to general and administrative expenses of $824,090 and research and development expenses of $189,940 as compared to a net loss of $402,169 due to general and administrative expenses of $365,212, interest expenses of $2,923 and expenses related to amortization of debt discount of $34,034.

Our general and administrative expenses increased by $458,878 or 126% during the six-month period ended June 30, 2015 as compared to the same period in the prior year. During the six-month period ended June 30, 2015, we incurred $189,940 in research and development expenses as compared to no such expenses in the same period in the prior year.

Our comprehensive net loss during the six months ended June 30, 2015 was $1,019,638, due to a net loss of $1,014,030 and $5,608 in foreign currency translation adjustments as compared to $402,169 in the same period in the prior year with no adjustments.

Liquidity and Capital Resources

On June 30, 2015, we had current assets of $812,277 consisting of $799,374 in cash and $12,903 in other current assets. We had property and equipment valued at $28,109 as of June 30, 2015. We had total assets of $840,386 as of June 30, 2015.

We had total assets of $1,522,812 as of December 31, 2014, consisting of $1,469,267 in cash, $24,091 in other current assets and equipment valued at $29,454.

On June 30, 2015, we had $55,506 in current liabilities consisting of $52,559 in accounts payable and $2,947 in accrued expenses. On December 31, 2014, we had total liabilities of $60,304 consisting of $16,523 in accounts payable, $43,643 in accrued expenses and $138 in advances and accounts payable to related parties.

We had positive working capital of $756,771 at June 30, 2015 and $1,433,054 at December 31, 2014. Our accumulated deficits as of June 30, 2015 and December 31, 2014 were $6,907,908 and $5,893,878, respectively.

We used $751,106 in our operating activities during the six months ended June 30, 2015, which was due to a net loss of $1,014,030 offset by depreciation expenses of $4,524, shares issued for services valued at $241,170, warrants issued for services valued at $10,839, a decrease in accounts receivable of $11,188, an increase in advances and accounts payable to related parties of $138, an increase in accounts payable of $35,762 and a decrease in accrued expenses of $40,697.

We used $39,212 in our operating activities during the six months ended June 30, 2014, which was mainly due to a net loss of $402,169 offset by increases in amortization of debt discount of $34,034, non-cash compensation expenses valued at $326,000 and an increase in accounts payable and accrued liabilities by $2,950.

We used $3,179 during the six months ended June 30, 2015 to purchase property and equipment. We had no investing activities in the same period in the prior year.

Our financing activities during the six months ended June 30, 2015 provided us with $90,000 from the issuance of 800,000 shares of common stock and the recording of $50,000 in stock payable.

We financed our negative cash flow from operations during the six months ended June 30, 2014 through proceeds from issuance of common stock of $868,800 and proceeds from the issuance of notes of $14,500 representing total cash generated by financing activities of $883,300.

Based upon our cash position of $799,374 at June 30, 2015, we believe that we may need to raise additional capital, either equity or debt prior to the end of fiscal 2015 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.

Funding of Our Research Programs

On October 22, 2014, we have entered into a collaboration agreement with Sheba Academic Medical Center, a hospital in Tel-Aviv, Israel, relating to the use of cannabis to treat Myeloma. Within the framework of this collaboration agreement, the Company currently conducts pre-clinical studies on multiple myeloma, which have commenced in April 2015 and we expect to commence pre-clinical studies on fibromyalgia in the third quarter of 2015. Pursuant to the agreement, we are obligated to pay Sheba $330,000 between the third quarter of 2015 and second quarter of 2016.

We are obligated to provide $300,000 in funding in the first quarter of 2016 related to the Psoriasis research conducted at Sheba. We have funding obligations of $100,000 related to the Fibromyalgia research due during two years of the studies.

Our capital expenditures allocated to our corporate activities conducted through our facilities in Petach Tikva are expected to be around $606,000 during 2015.

At present, we use our available working capital to fund these studies. However, we may need to raise additional funding prior to or if clinical studies are to commence.

Off-Balance Sheet Arrangements

As of June 30, 2015 and December 31, 2014, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act of 1934.

Critical Accounting Policies

Our significant accounting policies are described in the notes to our financial statements for the period ended June 30, 2015, and are included elsewhere in this registration statement.

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 June 30, 2015, 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, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.

Changes in internal controls. During the quarterly period covered by this report, no changes occurred in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our 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

You should carefully consider the Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2014, 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

None.

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)	August 17, 2015
Mordechai Bignitz
/s/ Shmuel De-Saban	Chief Financial Officer (Principal Financial and Principal Accounting Officer)	August 17, 2015
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	August 17, 2015
Mordechai Bignitz
/s/ Mordechai Bignitz	Chairman	August 17, 2015
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: August 17, 2015

/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: August 17, 2015

/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 June 30, 2015 (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: August 17, 2015

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 32.2

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 June 30, 2015 (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: August 17, 2015

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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1. The Company and Significant Accounting Policies: Recent Accounting Pronouncements, Policy (Policies)

6 Months Ended

Jun. 30, 2015

Policies

Recent Accounting Pronouncements, Policy

Recent Accounting Pronouncements

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 Financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our December 31, 2014 Annual Report and should be read in conjunction with the Notes to Financial Statements which appear in that report.

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.

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 six-month periods ended June 30, 2015 and 2014. 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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4. Notes Payable

6 Months Ended

Jun. 30, 2015

Notes

4. Notes Payable

4. Notes Payable

Unsecured Notes Payable Without Conversion Rights

During 2014 the Company signed a series of three new unsecured promissory notes with unrelated parties for an aggregate of $14,500. The notes bear interest at 1% per annum and are due one year from the date of issuance. The notes were paid in full in 2014.

Unsecured Notes Payable With Conversion Rights

On February 28, 2014 eleven holders of convertible notes with an aggregate principal balance of $114,414 and accrued interest of $16,435 converted their notes and accrued interest into 13,084,000 shares of common stock. Upon conversion, $34,034 of unamortized discount arising from the previously recorded beneficial conversion feature was recognized as additional interest expense. The conversion occurred within the terms of the promissory note and no gain or loss resulted.

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3. Related Party Transactions Not Disclosed Elsewhere

6 Months Ended

Jun. 30, 2015

Notes

3. Related Party Transactions Not Disclosed Elsewhere

3. Related Party Transactions Not Disclosed Elsewhere

Due Related Parties: Amounts due related parties totaled $0 at June 30, 2015 and $138 at December 31, 2014, respectively. Accounts receivable from related parties was $15,919 at June 30, 2015 and $0 at December 31, 2014.

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OWC Pharmaceutical Research Corp. - Consolidated Balance Sheets - USD ($)		Jun. 30, 2015	Dec. 31, 2014
Current Assets:
Cash		$ 799,374	$ 1,469,267
Other assets		12,903	24,091
Total current assets		812,277	1,493,358
Property and equipment, net		28,109	29,454
Total assets		840,386	1,522,812
Current Liabilities:
Accounts payable - trade		52,559	16,523
Accrued expenses		2,947	43,643
Advances and account payable to related parties		0	138
Total current liabilities		55,506	60,304
Total liabilities		55,506	60,304
Stockholders' equity:
Preferred stock	[1]	0	0
Common stock	[2]	803	784
Additional paid-in capital		8,292,838	8,000,847
Common stock subscriptions receivable		(651,730)	(651,730)
Subscription payable		50,000	0
Accumulated deficit		(6,907,908)	(5,893,878)
Accumulated other comprehensive income		877	6,485
Total stockholders' equity (deficit)		784,880	1,462,508
Total liabilities and stockholders' equity		$ 840,386	$ 1,522,812

[1] $0.00001 par value. Authorized 20,000,000 shares: none issued and outstanding at June 30, 2015 and December 31, 2014, respectively.

[2] $0.00001 par value. Authorized 500,000,000 shares: 80,320,843 and 78,429,241 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively.

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1. The Company and Significant Accounting Policies

6 Months Ended

Jun. 30, 2015

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. 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 June 30, 2015 and December 31, 2014.

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 June 30, 2015 and December 31, 2014, 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 June 30, 2015 and December 31, 2014 and the year then ended on a recurring basis:

Fair Value Measurements at June 30, 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 at fair value	$	-	$	-	$	-	$	-

Fair Value Measurements at December 31, 2014
				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 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 June 30, 2015 and December 31, 2014, 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 June 30, 2015 we had no material unrecognized tax benefits and no adjustments to liabilities or operations were required under FASB ASC 740-10.

Recent Accounting Pronouncements

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 Financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our December 31, 2014 Annual Report and should be read in conjunction with the Notes to Financial Statements which appear in that report.

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.

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 six-month periods ended June 30, 2015 and 2014. 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: Earnings Per Common Stock, Policy (Policies)

6 Months Ended

Jun. 30, 2015

Policies

Earnings Per Common Stock, Policy

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: Uncertaint Tax Positions, Policy (Policies)

6 Months Ended

Jun. 30, 2015

Policies

Uncertaint Tax Positions, Policy

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 June 30, 2015 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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2. Stockholders' Equity

6 Months Ended

Jun. 30, 2015

Notes

2. Stockholders' Equity

2.  Stockholders' Equity

Common Stock

Recent Issuances of Common Stock-for Cash:

In connection with a private placement of 10,000,000 shares of common stock 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. We are obligated to issue 333,333 shares to one investor of this offering. The $50,000 received through the unit offering is carried as subscription payable in stockholders’ equity at June 30, 2015. The related warrants are exercisable at $0.25 and expire on December 31, 2016. During the period ended June 30, 2015, the Company cancelled 500,000 of common stock previously issued share for services.

Stock Issued for Services:

During the interim period ended June 30, 2015 we issued 1,091,602 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 $241,170 in consulting services expense.

Historical Activity in 2014:

Stock Issued upon conversion of debt- On July 1, 2014 we issued 179,300 shares of our common stock in settlement of $1,500 in convertible note payable plus associated accrued interest of $293. The conversion occurred within the terms of the promissory note and no gain or loss resulted. On February 28, 2014 we issued 13,084,000 shares of our common stock in settlement of $114,414 in convertible note payable plus associated accrued interest of $16,435. The conversion occurred within the terms of the promissory note and no gain or loss resulted.

Stock Issued for Services:

During the interim period ended September 30, 2014 we issued 300,000 shares of our common stock to an unrelated party as payment for services. We also issued 400,000 shares to two former officers and directors of the company as part of a severance agreement. The shares were valued at the closing price as of the date of the agreements ($0.25 and $0.28, respectively) and resulted in full recognition of $187,000 in consulting services expense. During the interim periods ended on or before June 30, 2014 we issued 9,208,600 shares of our common stock to seven unrelated parties as payment for services. The shares were valued at the closing price as of the date of the agreement ($0.05) and resulted in full recognition of $481,430 in consulting services expense. In June we cancelled 3,108,600 of these shares valued at $155,430 resulting in $305,000 in consulting expense through September 30, 2014.

Options Issued for services:

During the interim period ended September 30, 2014 we issued 14,350,000 common stock options. 350,000 of those options valued at $82,640 were granted to former related parties while 14,000,000 options valued at $3,774,496 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 0.47% to 0.49%; expected volatility of 241%, and warrant term of two years.

Stock Issued for cash-In connection with a private placement of 10,000,000 shares of common stock in March and April of 2014 we sold 4,700,000 shares to six investors for the offering price of $0.005 per share that resulted in total proceeds of $23,500. During 2014 we received $1,164,300 through a placement of common stock units. Those units were sold at $0.09 per unit. Each unit consisted of one share of common stock and one warrant to purchase common stock. We issued 12,936,662 shares through September 30th to 22 investors of this offering. The warrants are exercisable at $0.16 and expire in June, 2015. During 2014 we received $554,200 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. We issued 3,694,666 shares through September 30th to 4 investors of this offering. The warrants are exercisable at $0.16 and expire in June 2015.

Warrants

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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OWC Pharmaceutical Research Corp. - Consolidated Statements of Operations	3 Months Ended		6 Months Ended
	Jun. 30, 2015 USD ($) $ / shares shares	Jun. 30, 2014 USD ($) $ / shares shares	Jun. 30, 2015 USD ($) $ / shares shares	Jun. 30, 2014 USD ($) $ / shares shares
Consolidated Statements of Operations
Revenues	$ 0	$ 0	$ 0	$ 0
Expenses:
General and administrative expenses	532,815	(106,930)	824,090	365,212
Research and development	76,612	0	189,940	0
Loss from operations	(609,427)	106,930	(1,014,030)	(365,212)
Other income (expenses):
Interest expense	0	(86)	0	(2,923)
Amortization of debt discount	$ 0	$ 0	$ 0	$ (34,034)
Total other income (expense)	0	(86)	0	(36,957)
Total costs and expenses	$ (609,427)	$ 106,844	$ (1,014,030)	$ (402,169)
Loss loss before income taxes	(609,427)	106,844	(1,014,030)	(402,169)
Income tax	$ 0	$ 0	$ 0	$ 0
Net loss	(609,427)	106,844	(1,014,030)	(402,169)
Basic and diluted per share amounts:
Basic and diluted net loss | $ / shares	$ (0.02)	$ 0.00	$ (0.02)	$ (0.01)
Weighted average shares outstanding (basic and diluted) | shares	40,129,063	47,666,243	58,799,819	38,562,849

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

6 Months Ended

Jun. 30, 2015

Policies

Foreign Currency, Policy

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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Document and Entity Information - Jun. 30, 2015 - USD ($)	Total
Document and Entity Information:
Entity Registrant Name	OWC Pharmaceutical Research Corp.
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Trading Symbol	owcp
Amendment Flag	false
Entity Central Index Key	0001431934
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding	80,654,208
Entity Public Float	$ 3,800,000
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	2015
Document Fiscal Period Focus	Q2

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1. The Company and Significant Accounting Policies: Share-Based Compensation, Policy (Policies)

6 Months Ended

Jun. 30, 2015

Policies

Share-Based Compensation, Policy

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.

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OWC Pharmaceutical Research Corp. - Consolidated Statements Comprehensive Income (Loss)	3 Months Ended		6 Months Ended
	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)
Consolidated Statements Comprehensive Income (Loss)
Net loss	(609,427)	106,844	(1,014,030)	(402,169)
Other comprehensive income, net of tax:
Foreign currency translation adjustments	(650)	0	(5,608)	0
Total other comprehensive income, net of tax	$ (650)	$ 0	$ (5,608)	$ 0
Comprehensive income (loss)	$ (610,077)	$ 106,844	$ (1,019,638)	$ (402,169)

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7. Subsequent Events

6 Months Ended

Jun. 30, 2015

Notes

7. Subsequent Events

7. Subsequent Events

In July 2015, the Company issued the previously subscribed to 333,333 shares, which were recorded as stock payable a of June 30, 2015. There were no other subsequent events following the period ended June 30, 2015 and throughout the date of the filing of Form 10-Q..

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6. Going Concern

6 Months Ended

Jun. 30, 2015

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 June 30, 2015, 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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1. The Company and Significant Accounting Policies: Income Tax, Policy (Policies)

6 Months Ended

Jun. 30, 2015

Policies

Income Tax, Policy

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.

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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, Policy (Policies)

6 Months Ended

Jun. 30, 2015

Policies

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

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: Property, Plant and Equipment, Policy (Policies)

6 Months Ended

Jun. 30, 2015

Policies

Property, Plant and Equipment, Policy

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: Use of Estimates, Policy (Policies)

6 Months Ended

Jun. 30, 2015

Policies

Use of Estimates, Policy

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, Policy (Policies)

6 Months Ended

Jun. 30, 2015

Policies

Cash and Cash Equivalents, Policy

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 June 30, 2015 and December 31, 2014.

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1. The Company and Significant Accounting Policies: Valuation Long-Lived Assets, Policy (Policies)

6 Months Ended

Jun. 30, 2015

Policies

Valuation Long-Lived Assets, Policy

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: Fair Value Measurement, Policy (Policies)

6 Months Ended

Jun. 30, 2015

Policies

Fair Value Measurement, Policy

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 June 30, 2015 and December 31, 2014 and the year then ended on a recurring basis:

Fair Value Measurements at June 30, 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 at fair value	$	-	$	-	$	-	$	-

Fair Value Measurements at December 31, 2014
				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 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 June 30, 2015 and December 31, 2014, 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: Fair Value Measurement, Policy: Fair Value, Assets Measured on Recurring Basis (Tables)

6 Months Ended

Jun. 30, 2015

Tables/Schedules

Fair Value, Assets Measured on Recurring Basis

Fair Value Measurements at June 30, 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 at fair value	$	-	$	-	$	-	$	-

Fair Value Measurements at December 31, 2014
				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 at fair value	$	-	$	-	$	-	$	-

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OWC Pharmaceutical Research Corp. - Consolidated Statements of Cash Flow	6 Months Ended
	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)
Cash flows from operating activities:
Net loss	(1,014,030)	(402,169)
Adjustments to reconcile net loss to net cash used in operating activites:
Amortization of debt discount	0	34,034
Depreciation	$ 4,524	$ 0
Common stock issued for services	241,170	326,000
Fair value of warrants issued for services	10,839	0
Changes in net assets and liabilities:
(Increase) decrease in accounts receivable	$ 11,188	$ 0
Advances and accounts payable - related parties	138	0
Increase (decrease) in accounts payable	$ 35,762	$ 0
Increase (decrease) in accrued expenses	(40,697)	2,950
Net cash provided by (used in) operating activities	$ 751,106	$ (39,185)
Cash flows from investing activities:
Purchase of equipment	(3,179)	0
Net cash used in investing activities	(3,179)	23,250
Cash flows from financing activities:
Proceeds from issuance of common stock	$ 90,000	$ 868,800
Proceeds of debt borrowings	0	14,500
Net cash provided by financing activities	$ 90,000	$ 883,300
Foreign currency translation	$ (5,608)	$ 0
Change in cash	(699,893)	844,088
Cash at beginning of period	1,469,267	2,469
Cash at end of period	769,374	846,557
Non cash transactions:
Debt and accrued interest converted to equity	0	130,849

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5. Future Commitment and Issuance of Warrants

6 Months Ended

Jun. 30, 2015

Notes

5. Future Commitment and Issuance of Warrants

5. Future Commitment and Issuance of Warrants

On March 5, 2013, the Company and GUMI Tel Aviv Ltd, a major, privately-held Israeli technology company ("GUMI"), entered into development/manufacturing/marketing agreement ("GUMI Agreement"). GUMI is engaged in the manufacture, import/export, marketing and install industrial equipment and designing technical solutions.

Pursuant to the GUMI Agreement, GUMI agreed to: (i) complete the development of the Prototype of the Patented Device; (ii) manufacture the commercial model(s) of the Patented device; and (iii) market the commercial model(s) of the Patented Device.

In consideration for developing the Prototype and manufacturing and marketing/distributing commercial models of the Patented Device as well as incurring all related costs and expenses in connection therewith, the Company shall compensate GUMI as follows: (i) upon the execution of the GUMI Agreement, the Company granted GUMI warrants (the "Warrants") exercisable to purchase 200,000 shares of the Company's common stock ("Warrant Shares") at an exercise price of USD$0.05 per share (the "Exercise Price"); (ii) upon completion of the Prototype, granting GUMI additional Warrants to purchase 200,000 additional Warrant Shares at the Exercise Price; and (iii) upon completion of a Commercial Device ready for manufacture and sale, granting GUMI additional Warrants to purchase 200,000 additional Warrant Shares at the Exercise Price. The Warrants shall expire 3 years from the date of each grant and shall be subject to adjustment in the event of any recapitalization of the Company's capital stock.

In addition to the consideration represented by the grant of Warrants, the Agreement further provides that following commencement of sale of the Commercial Device and until such time that GUMI has recouped all costs and expenses that it has incurred and paid in connection with the completion of development of the Prototype and the manufacture of the Commercial Device ("Date of Recoupment"), one hundred (100%) percent of the net sales revenues shall be paid and distributed to GUMI. On and after the Date of Recoupment, net sales revenues shall be paid sixty-five (65%) percent to GUMI and thirty-five (35%) percent to the Company.

The Company recorded $107,074 in fiscal year 2013 in expenses related to 600,000 vested warrants previously granted to GUMI Tel Aviv Ltd. The warrants were valued using the Black-Scholes option pricing model. The inputs for the valuation analysis of the warrants include the market value of the Company's common stock were as follows: the estimated volatility of the Company's common stock used in the Black-Scholes option pricing model was 318%, the exercise price and the risk free interest rate used were $0.05 and 0.36%, respectively. All warrants are fully vested.

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

6 Months Ended

Jun. 30, 2015

Policies

Fair Value of Financial Instruments, Policy

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 June 30, 2015 and December 31, 2014, 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.