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

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended June 30, 2016

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

For the transition period from _____ to _____.

Commission File No. 001-13869

TONNER-ONE WORLD HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada		87-0429198
(State or Other Jurisdiction Of Incorporation or Organization)		(I.R.S. Employer Identification Number)

14515 Briarhills Parkway, Suite 105, Houston, Texas		77077
(Address of Principal Executive Offices)		(Zip Code)

Registrant's telephone number, including area code (281) 940-8534

Formerly One World Holdings, Inc.

(Former Name)

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 ☒ No ☐

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-3 of the Exchange Act. (Check one):

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of August 19, 2016 there were 506,117,010 shares of the registrant's common stock outstanding.

TONNER-ONE WORLD HOLDINGS, INC.

(Formerly One World Holdings, Inc.)

FORM 10-Q INDEX

QUARTER ENDED JUNE 30, 2016

	Page Number

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2016 (Unaudited) and December 31, 2015	3
Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2016 and 2015 (Unaudited)	4
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015 (Unaudited)	5
Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosures About Market Risk	26
Item 4. Controls and Procedures	26

PART II – OTHER INFORMATION
Item 1. Legal Proceedings	26
Item 1A. Risk Factors	27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3. Defaults Upon Senior Securities	28
Item 4. Mine Safety Disclosures	28
Item 5. Other Information	28
Item 6. Exhibits	28
Signature Page

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

TONNER-ONE WORLD HOLDINGS, INC.

(Formerly One World Holdings, Inc.)

Condensed Consolidated Balance Sheets

	June 30, 2016
	(Unaudited)			December 31, 2015
ASSETS

Current assets:
Cash	$	2,664		$	5,932
Accounts receivable		6,012			3,022
Inventories, net		-			20,785
Prepaid expenses and other current assets		-			13,666
Prepaid consulting services		-			22,500
Total current assets		8,676			65,905

Property and equipment, net		46,608			55,458
Other assets		2,701			2,701

Total	$	57,985		$	124,064

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Accounts payable and accrued expenses	$	2,085,576		$	2,187,475
Accrued interest and penalties payable		2,142,928			1,265,270
Convertible debentures, net of discount		2,748,116			2,387,981
Derivative liability		4,394,475			10,852,906
Notes payable		540,328			459,801
Current portion of long-term debt, net of discount		29,977			29,409
Stockholder advances		505,548			456,376
Total current liabilities		12,446,948			17,639,218

Long-term debt, net of current portion and discount		216,550			62,361

Total liabilities		12,663,498			17,701,579

Commitments and contingencies

Stockholders' deficit:
Preferred stock, $0.001 par value, 10,000,000 shares authorized: Series AA, 60,000 and 80,000 shares issued and outstanding, respectively		60			80
Series BB, 186,000 shares issued and outstanding		186			186
Common stock; $0.0025 par value, 2,000,000,000 shares authorized, 487,753,010 and 422,125,005 shares issued and outstanding, respectively		1,219,383			1,055,313
Additional paid-in capital		11,317,926			11,299,059
Accumulated deficit		(25,143,068	)		(29,932,153	)
Total stockholders' deficit		(12,605,513	)		(17,577,515	)

Total	$	57,985		$	124,064

See accompanying notes to condensed consolidated financial statements

TONNER-ONE WORLD HOLDINGS, INC.

(Formerly One World Holdings, Inc.)

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015

Sales	$	3,424		$	833		$	60,092		$	1,572

Cost of sales		6,827			836			26,669			1,904

Gross margin (deficit)		(3,403	)		(3	)		33,423			(332	)

Operating expenses:
Selling, general and administrative		503,710			451,550			995,761			943,373
Research and development		4,210			3,981			21,432			6,393
Depreciation		4,425			3,500			8,850			7,000

Total operating expenses		512,345			459,031			1,026,043			956,766

Loss from operations		(515,748	)		(459,034	)		(992,620	)		(957,098	)

Other income (expense):
Interest expense		(712,795	)		(451,566	)		(1,477,282	)		(1,118,515	)
Gain (loss) on derivative liability		2,828,704			(7,126,383	)		6,694,891			(17,068,588	)
Gain on debt payable in shares		222,416			-			577,265			-
Gain (loss) on debt settlement		1,951			31,616			(13,169	)		11,855

Total other income (expense)		2,340,276			(7,546,333	)		5,781,705			(18,175,248	)

Income (loss) before income taxes		1,824,528			(8,005,367	)		4,789,085			(19,132,346	)
Provision for income taxes		-			-			-			-

Net income (loss)	$	1,824,528		$	(8,005,367	)	$	4,789,085		$	(19,132,346	)

Net income (loss) per common share:
Basic	$	0.00		$	(0.03	)	$	0.01		$	(0.08	)
Diluted	$	0.00		$	(0.03	)	$	0.00		$	(0.08	)

Weighted average number of common shares outstanding:
Basic		460,164,835			279,277,078			448,365,845			253,103,538
Diluted		1,656,720,994			279,277,078			1,346,154,565			253,103,538

See accompanying notes to condensed consolidated financial statements

TONNER-ONE WORLD HOLDINGS, INC.

(Formerly One World Holdings, Inc.)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended June 30,
	2016			2015
Cash flows from operating activities:
Net income (loss)	$	4,789,085		$	(19,132,346	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation expense		8,850			7,000
Amortization of debt discount to interest expense		580,171			808,293
(Gain) loss on derivative liability		(6,694,891	)		17,068,588
(Gain) on debt payable in shares		(577,265	)		-
(Gain) on debt settlement		(7,831	)		(11,855	)
Interest expense added to stockholder advances		-			28,460
Common stock issued for services		-			2,400
Changes in operating assets and liabilities:
Accounts receivable		(2,990	)		7,949
Inventories		20,785			(4,852	)
Prepaid expenses and other current assets		22,500			(238,600	)
Accounts payable and accrued expenses		475,366			215,532
Accrued interest and penalties payable		880,753			165,585

Net cash used in operating activities		(505,467	)		(1,083,846	)

Cash flows from investing activities:
Increase in note receivable		(70,000	)		-
Repayment of note receivable		70,000			-

Net cash provided by investing activities		-			-

Cash flows from financing activities:
Proceeds from convertible debentures		375,000			853,547
Proceeds from notes payable		128,722			468,500
Proceeds from stockholder advances		44,199			15,000
Payment of debt issuance costs		(2,500	)		-
Payments on notes payable		(43,222	)		(25,000	)
Payments on convertible debentures		-			(214,850	)
Payments on stockholder advances		-			(13,955	)

Net cash provided by financing activities		502,199			1,083,242

Net decrease in cash		(3,268	)		(604	)
Cash, beginning of the period		5,932			604

Cash, end of the period	$	2,664		$	-

See accompanying notes to condensed consolidated financial statements

TONNER-ONE WORLD HOLDINGS, INC.

(Formerly One World Holdings, Inc.)

Notes to Condensed Consolidated Financial Statements

Six Months Ended June 30, 2016

(Unaudited)

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF FINANCIAL STATEMENT PRESENTATION

Organization, Nature of Business

Tonner-One World Holdings, Inc. (the "Company"), a Nevada Corporation, is a Houston-based company focused on doll design and marketing. Substantially all of the Company's operations are conducted through its wholly owned subsidiary, The One World Doll Project, Inc. (a Texas Corporation - "OWDPI"). OWDPI began operations on October 1, 2010. On January 20, 2016, the Company created Tonner-One World, Inc. ("TOW"), another wholly owned subsidiary, for the purpose of taking initial steps to begin production of dolls under the combined Tonner-One World name. Effective April 8, 2016, the name of the Company was changed from One World Holdings, Inc. to Tonner-One World Holdings, Inc.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, OWDPI, TOW and National Fuel and Energy, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.

Interim Financial Information

The interim financial information of the Company as of June 30, 2016 and for the three months and six months ended June 30, 2016 and 2015 is unaudited, and the balance sheet as of December 31, 2015 is derived from audited financial statements. The accompanying condensed consolidated financial statements have been prepared in accordance with U. S. generally accepted accounting principles for interim financial statements. Accordingly, they omit or condense notes and certain other information normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles. The accounting policies followed for quarterly financial reporting conform with the accounting policies disclosed in Note 2 to the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2015. In the opinion of management, all adjustments necessary for a fair presentation of the financial information for the interim periods reported have been made. All such adjustments are of a normal recurring nature. The results of operations for any interim period are not necessarily indicative of the results that can be expected for a full fiscal year. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015.

Certain amounts in the condensed consolidated financial statements for the three months and six months ended June 30, 2015 have been reclassified to conform to the current year presentation.

NOTE 2 – GOING CONCERN

The Company has incurred operating losses since inception, has limited financial resources and a working capital deficit of $12,438,272 at June 30, 2016. These factors raise substantial doubt about the Company's ability to continue as a going concern. The Company's condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In addition, the Company had an accumulated deficit of $25,143,068, and a total stockholders' deficit of $12,605,513 at June 30, 2016. The working capital deficit, accumulated deficit and total stockholders' deficit were negatively impacted by a significant derivative liability and debt recorded through June 30, 2016. The Company's ability to continue as a going concern is dependent upon its ability to develop additional sources of capital and, ultimately, achieve profitable operations. Management's plans to address the Company's continuing existence include obtaining debt or equity funding from private or institutional sources or obtaining loans from financial institutions and individuals, where possible. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 3 – FAIR VALUE OF FINANCIAL INSTRUMENTS

Disclosures about fair value of financial instruments require disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of June 30, 2016 and December 31, 2015, we believe the amounts reported for cash, accounts payable and accrued expenses, accrued interest and penalties payable, notes payable and stockholder advances approximate fair value because of the short-term nature of these financial instruments.

We adopted ASC Topic 820 (originally issued as SFAS 157, "Fair Value Measurements") for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring 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). These tiers include:

Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Liabilities measured at fair value on a recurring basis were as follows at June 30, 2016:

	Total		Level 1		Level 2		Level 3

Derivative liability	$	4,394,475	$	-	$	-	$	4,394,475
Convertible debentures, net of discount		2,748,116		-		-		2,748,116
Current portion of long-term debt, net of discount		29,977		-		-		29,977
Long-term debt, net of current portion and discount		216,550		-		-		216,550

Total liabilities measured at fair value	$	7,389,118	$	-	$	-	$	7,389,118

NOTE 4 – INCOME (LOSS) PER SHARE

The computation of basic income (loss) per common share is based on the weighted average number of shares outstanding during each period.

The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the period plus the common stock equivalents that would arise from the exercise of stock options and warrants outstanding and conversion of debt, using the treasury stock method and the average market price per share during the period. Common stock equivalents are not included in the diluted loss per share calculation when their effect is anti-dilutive.

The common shares used in the computation of our basic and diluted net income (loss) per share are reconciled as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015

Weighted average number of shares outstanding - basic		460,164,835		279,277,078		448,365,845		253,103,538
Dilutive effect of shares issuable for convertible debt		1,196,556,159		-		897,788,720		-

Weighted average number of shares outstanding - dilutive		1,656,720,994		279,277,078		1,346,154,565		253,103,538

NOTE 5 – CONVERTIBLE DEBENTURES

Through June 30, 2016, we have financed our operations primarily through the issuance of various convertible debentures. For the six months ended June 30, 2016, we received cash proceeds of $375,000 from the issuance of new convertible debentures. Convertible debentures, net of discount, included in current liabilities totaled $2,760,088 and $2,387,981 as of June 30, 2016 and December 31, 2015, respectively.

The following is a schedule of short-term convertible debentures outstanding as of June 30, 2016:

Description	Date	Conversion Price	Original Principal Amount	Unpaid Principal Balance	Term	Interest Rate

Debenture 1	10/10/11	$30.00	$ 25,000	$ 25,000	12 months	14%
Debenture 3	2/17/12	$30.00	10,000	10,000	12 months	14%
Debenture 4	3/9/12	$30.00	5,000	5,000	12 months	14%
Debenture 5	3/19/12	$30.00	5,000	5,000	12 months	14%
Debenture 6	4/29/12	$30.00	5,000	5,000	12 months	14%
Debenture 7	4/25/12	$30.00	10,000	10,000	12 months	14%
Debenture 8	10/9/12	$30.00	5,000	5,000	12 months	14%
Debenture 10	11/15/12	$30.00	5,000	5,000	12 months	14%
Debenture 11	11/20/12	$30.00	2,000	2,000	12 months	14%
Debenture 12	12/11/12	$30.00	2,500	2,500	12 months	14%
Debenture 14	1/5/13	$30.00	2,500	2,500	12 months	14%
Debenture 15	2/5/13	$30.00	2,500	2,500	12 months	14%
Debenture 17	7/23/13	Variable	62,000	62,000	9 months	8%
Debenture 19	7/29/13	$30.00	10,000	10,000	12 months	14%
Debenture 22	9/4/13	Variable	50,000	50,000	12 months	8%
Debenture 31	10/3/13	Variable	3,750	3,750	12 months	8%
Debenture 33	10/25/13	Variable	52,000	52,000	9 months	8%
Debenture 34	10/25/13	Variable	30,000	47,455	9 months	8%
Debenture 36	11/29/13	Variable	30,000	22,800	6 months	15%
Debenture 37	11/29/13	Variable	25,000	25,000	6 months	15%
Debenture 39	12/2/13	Variable	25,000	15,000	6 months	15%
Debenture 47	6/23/13	Variable	35,000	17,500	7 months	10%
Debenture 48	6/23/13	Variable	12,500	12,500	7 months	10%
Debenture 49	1/12/14	Variable	26,000	26,000	12 months	22%
Debenture 50	1/12/14	Variable	60,000	60,000	12 months	12%
Debenture 51	2/3/14	$0.06	50,000	46,600	2 months	14%
Debenture 52	2/18/14	$0.06	5,000	5,000	12 months	14%
Debenture 53	3/17/14	Variable	25,000	23,500	12 months	18%
Debenture 54	3/20/14	Variable	10,000	10,000	12 months	18%
Debenture 55	3/25/14	Variable	10,000	10,000	12 months	18%
Debenture 56	3/28/14	Variable	55,000	55,000	12 months	18%
Debenture 57	4/1/14	$0.0025	50,000	800	6 months	14%
Debenture 58	4/9/14	Variable	75,000	75,000	11 months	18%
Debenture 59	4/10/14	Variable	60,000	60,000	11 months	18%
Debenture 60	4/11/14	Variable	2,272	2,272	11 months	18%
Debenture 61	4/11/14	Variable	40,000	19,475	12 months	15%
Debenture 62	4/16/14	Variable	30,000	8,503	24 months	12%
Debenture 63	4/23/14	$0.04	10,500	10,500	12 months	14%
Debenture 64	5/8/14	$0.06	4,000	4,000	12 months	14%
Debenture 65	5/21/14	Variable	50,000	50,000	12 months	15%
Debenture 68	7/11/14	$0.01	25,000	7,500	12 months	14%
Debenture 70	7/24/14	$0.06	48,360	48,360	12 months	14%

Debenture 73	8/29/14	Variable	67,595	19,966	6 months	5%
Debenture 74	9/3/14	Variable	37,520	37,520	24 months	12%
Debenture 75	9/8/14	$0.01	25,000	25,000	12 months	14%
Debenture 76	9/9/14	$0.01	36,359	36,359	12 months	14%
Debenture 77	9/9/14	$0.0025	8,641	811	12 months	14%
Debenture 78	9/9/14	$0.0025	10,000	10,000	12 months	14%
Debenture 79	9/9/14	$0.0025	10,000	10,000	12 months	14%
Debenture 80	9/9/14	$0.0025	10,000	10,000	12 months	14%
Debenture 81	9/9/14	$0.0025	77,595	73,845	12 months	14%
Debenture 82	9/10/14	$0.01	8,000	8,000	12 months	14%
Debenture 83	9/10/14	$0.01	15,000	15,000	12 months	14%
Debenture 85	9/17/14	Variable	5,000	5,000	6 months	5%
Debenture 87	9/24/14	Variable	140,995	140,995	6 months	5%
Debenture 88	10/1/14	$0.00025	16,378	13,878	12 months	14%
Debenture 90	10/27/14	$0.01	50,000	50,000	12 months	14%
Debenture 92	10/31/14	$0.0025	63,097	63,097	12 months	16%
Debenture 96	3/27/15	Variable	128,460	111,670	12 months	8%
Debenture 97	1/18/15	Variable	7,500	7,500	12 months	14%
Debenture 98	2/12/15	$0.0145	12,500	12,500	12 months	14%
Debenture 99	3/31/15	$0.01	112,972	112,972	12 months	14%
Debenture 100	2/2/15	Variable	79,115	79,115	12 months	12%
Debenture 101	2/2/15	Variable	45,000	45,000	12 months	12%
Debenture 102	2/24/15	$0.0025	10,000	9,000	12 months	14%
Debenture 104	3/12/15	Variable	25,000	25,000	12 months	14%
Debenture 105	3/21/15	$0.0025	30,000	30,000	12 months	14%
Debenture 106	1/5/15	Variable	15,000	15,000	6 months	15%
Debenture 107	1/5/15	Variable	15,000	5,300	6 months	15%
Debenture 109	2/11/15	Variable	25,000	25,000	12 months	8%
Debenture 110	2/26/15	Variable	16,000	16,000	12 months	8%
Debenture 111	3/4/15	Variable	27,500	27,500	12 months	8%
Debenture 112	3/1/15	$0.0015	10,000	10,000	12 months	14%
Debenture 114	4/2/15	Variable	26,947	24,447	12 months	8%
Debenture 115	4/2/15	$0.001	23,660	23,660	12 months	14%
Debenture 116	3/31/15	Variable	14,000	14,000	6 months	15%
Debenture 117	4/14/15	Variable	20,000	20,000	6 months	15%
Debenture 118	4/27/15	Variable	25,000	25,000	12 months	14%
Debenture 119	3/31/15	Variable	14,000	14,000	6 months	15%
Debenture 120	5/27/15	$0.0025	7,500	7,500	12 months	14%
Debenture 121	7/2/15	$0.0025	175,000	175,000	12 months	14%
Debenture 122	7/3/15	Variable	238,894	221,894	12 months	8%
Debenture 126	9/8/15	$0.0025	112,663	112,663	12 months	14%
Debenture 128	9/15/15	$0.0025	10,000	10,000	12 months	14%
Debenture 129	9/8/15	$0.0050	2,000	2,000	12 months	14%
Debenture 130	10/12/15	$0.0050	15,000	15,000	12 months	14%
Debenture 131	10/12/15	$0.0050	20,000	20,000	12 months	14%
Debenture 132	10/15/15	$0.0025	10,750	10,750	12 months	14%
Debenture 134	10/20/15	$0.0050	10,000	10,000	12 months	14%
Debenture 135	12/5/15	$0.0050	10,000	10,000	12 months	14%
Debenture 137	12/18/15	$0.0050	20,000	20,000	12 months	14%
Debenture 138	1/7/16	Variable	50,000	50,000	12 months	14%
Debenture 139	1/11/16	Variable	25,000	25,000	12 months	14%
Debenture 140	1/25/16	Variable	10,000	10,000	12 months	14%
Debenture 141	1/29/16	Variable	125,000	125,000	12 months	16%
Debenture 146	5/10/16	Variable	50,000	50,000	12 months	14%

Total			$ 3,206,523	2,966,957
Less discount				(218,841)

Net				$ 2,748,116

The following is a schedule of long-term convertible debentures outstanding as of June 30, 2016:

Description	Date	Conversion Price	Original Principal Amount	Unpaid Principal Balance	Term	Interest Rate

Debenture 123	8/24/15	Variable	$ 34,650	$ 24,650	24 months	8%
Debenture 125	9/4/15	Variable	105,000	105,000	24 months	8%
Debenture 127	9/25/15	Variable	50,000	50,000	24 months	8%
Debenture 133	10/20/15	Variable	100,000	100,000	24 months	8%
Debenture 136	12/4/15	Variable	160,000	160,000	24 months	8%
Debenture 142	1/29/16	Variable	20,000	20,000	20 months	8%
Debenture 143	3/3/16	Variable	30,000	30,000	18 months	8%
Debenture 144	4/15/16	Variable	15,000	15,000	17 months	8%
Debenture 145	4/18/16	Variable	50,000	50,000	17 months	8%

Total			$ 564,650	554,650
Less discount				(338,100)

Net				$ 216,550

The convertible debentures are generally unsecured and bear interest ranging from 5% to 22% per annum, with maturities ranging from six months to two years. The outstanding principal and accrued interest of the debentures are convertible into shares of the Company's common stock at a fixed conversion price ranging from $0.00025 to $30.00 per share or variable discounted pricing based on the market price of the Company's common stock as defined in the debt agreement.

We evaluated the convertible debentures in accordance with ASC Topic 815, "Derivatives and Hedging," and determined that the conversion feature of the convertible promissory notes with variable conversion prices were not afforded the exemption for conventional convertible instruments due to their variable conversion rates. The notes have no explicit limit on the number of shares issuable so they did not meet the conditions set forth in current accounting standards for equity classification. We elected to recognize the notes under paragraph 815-15-25-4, whereby there would be a separation into a host contract and derivative instrument. We elected to initially and subsequently measure the notes in their entirety at fair value, with changes in fair value recognized in earnings. We recorded a derivative liability and debt discount representing the imputed interest associated with the embedded derivative.

For those convertible debentures with fixed conversion prices, we recorded a beneficial conversion feature at the inception of the debt to additional paid-in capital and to debt discount where the conversion price was less that the market price of the stock.

At June 30, 2016, the convertible debentures and related accrued interest payable were convertible into approximately 6,698,670,000 shares of our common stock. Based on the assumptions used to estimate the fair value of the derivative liability at June 30, 2016 and assuming all lenders convert the notes payable at the June 30, 2016 conversion prices, the Company would have insufficient authorized shares of common stock to complete the debt conversions.

As of June 30, 2016, $2,062,129 of the convertible debentures were delinquent. We believe we have good relationships with the holders of the delinquent debentures, and we continue to have discussions with them regarding the extension of maturity dates or settlement of amounts due. Several of the convertible debentures have default interest rates that apply when the debentures are delinquent, and we have accrued default interest where applicable. In addition, we have been unable to complete certain conversions of convertible debentures during the year ended December 31, 2015, pending an increase in the number of authorized shares of our common stock, and have accrued applicable penalties as of June 30, 2016 and December 31, 2015.

Accrued interest payable for the convertible debentures, including accrued default interest and penalties, where applicable, totaled $1,982,955 and $1,141,478 as of June 30, 2016 and December 31, 2015, respectively.

NOTE 6 – DERIVATIVE LIABILITY

As discussed in Note 5 above, we have recorded a derivative liability and a debt discount representing the imputed interest associated with the embedded derivative associated with our convertible debentures. In addition, we have recorded a derivative liability for the variable conversion feature of certain outstanding warrants to purchase shares of our common stock.

The debt discount is amortized over the life of the note and recognized as interest expense. For the three months ended June 30, 2016 and 2015, we amortized debt discount of $270,128 and $327,955 to interest expense, respectively. For the six months ended June, 2016 and 2015, we amortized debt discount of $580,171 and $808,293 to interest expense, respectively. The derivative liability is adjusted at each reporting date according to stock price fluctuations and other inputs and was $4,394,475 and $10,852,906 at June 30, 2016 and December 31, 2015, respectively.

At June 30, 2016, the convertible debentures and related accrued interest payable were convertible into approximately 6,698,670,000 shares of our common stock. Based on the assumptions used to estimate the fair value of the derivative liability at June 30, 2016, and assuming all lenders converted the notes payable at the June 30, 2016 conversion prices, the Company would have had insufficient authorized shares of common stock to complete the debt conversions.

During the six months ended June 30, 2016, the Company had the following activity in its derivative liability:


Derivative liability at December 31, 2015	$	10,852,906
Addition to liability for new debt issued		375,000
Elimination of liability on conversion		(138,540	)
Change in fair value		(6,694,891	)

Derivative liability at June 30, 2016	$	4,394,475

For purpose of determining the fair market value of the derivative liability, we used the Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuation of the derivative liability at June 30, 2016 are as follows:


Stock price on the valuation date	$	0.0009
Conversion price for the debt	$	0.00025- $0.00068
Dividend yield		0.00	%
Years to maturity		0.186 – 1.43
Risk free rate		0.36% - 0.52	%
Expected volatility		165.21%% - 259.99	%

These assumptions are subject to significant changes and market fluctuations from period to period; therefore, the estimated fair value of the derivative liability will fluctuate from period to period and the fluctuation may be material.

NOTE 7 – NOTES PAYABLE

We had short-term notes payable to certain individuals and companies totaling $540,328 and $459,801 as of June 30, 2016 and December 31, 2015, respectively. As of June 30, 2016, the notes are unsecured and bear interest at rates ranging from 0% to 18%. As of June 30, 2016, several of the notes payable were delinquent. We believe we have good relationships with the note holders, and we continue to have discussions with them regarding the extension of maturity dates or settlement of amounts due. Several of the convertible debentures have default interest rates that apply when the debentures are delinquent.

Accrued interest payable for the short-term notes payable, including accrued default interest where applicable, was $116,231 and $82,144 as of June 30, 2016 and December 31, 2015, respectively.

NOTE 8 – STOCKHOLDER ADVANCES

Since the inception of the Company, we have relied on cash advances from certain stockholders to fund our operations. These advances generally have no specified repayment terms and no stated rate of interest. All advances are considered by us to be due on demand until such time as the advances are converted into notes payable, issuances of shares of our common stock or other formal repayment arrangements. At June 30, 2016 and December 31, 2015, stockholder advances totalled $505,548 and $456,376, respectively.

NOTE 9 – LONG-TERM DEBT

Our long-term debt consisted of the following at June 30, 2016:

Long-term convertible debentures, net of discount of $338,100 (see Note 5)	$	216,550

Long-term note payable, net of discount of $23		29,977

Total		246,527
Current portion		29,977

Long-term debt	$	216,550

The long-term note payable is an unsecured note payable of $30,000 to an individual due July 30, 2016, with interest at 14% per annum. Payment terms for the note payable are $350 per month for six months and $698 per month for sixty months, including interest. We are in default on the note payable at June 30, 2016 due to our failure to make timely payments in accordance with the terms of the note agreement.

Accrued interest payable for long-term debt was $43,742 and $41,648 as of June 30, 2016 and December 31, 2015, respectively.

NOTE 10 – STOCKHOLDERS' DEFICIT

As of June 30, 2016, we had 10,000,000 shares of $0.001 par value preferred stock authorized and 2,000,000,000 shares of $0.0025 par value common stock authorized, retroactively restated for the increase in authorized shares.

On March 3, 2016, the holders with the power to vote more than a majority of the outstanding common stock of the Company approved an amendment to the Company's Articles of Incorporation to effect an authorized share increase in our common stock from 500,000,000 shares to 2,000,000,000 shares of common stock. The amendment became effective on April 8, 2016.

We have authorized the issuance of up to 1,000,000 shares of Series AA Preferred Stock. Among other things, the Series AA Preferred Stock allows holders thereof enhanced voting rights based on ten thousand (10,000) votes per share of the Company's common stock held by such holders of Series AA Preferred Stock. The Series AA Preferred Stock is not convertible into common stock, does not pay dividends, and does not include a liquidation preference. In June 2014, 20,000 shares of Series AA Preferred Stock were issued to each of the four members of the Company's Board of Directors and valued at par value of $80. On January 29, 2016, Robert Hines resigned from the Board of Directors, effective December 31, 2015, at which time he returned the 20,000 shares of Series AA Preferred Stock, which were valued at par value of $20 and canceled.

We have also authorized the issuance of up to 1,000,000 shares of Series BB Preferred Stock. Among other things, the Series BB Preferred Stock allows holders thereof voting rights equal to holders of common stock as a single class with respect to all matters submitted to holders of common stock, quarterly dividends payable in arrears in either cash or in kind, liquidation preferences, and is convertible at the option of the holder into 50 shares of common stock of the Company. As of June 30, 2016, 186,000 shares of Series BB Preferred Stock were issued and outstanding.

During the six months ended June 30, 2016, we issued a total of 65,628,005 shares of our common stock with a total value of $182,917 for conversion of debt.

During the six months ended June 30, 2015, we issued a total of 167,395,050 shares of our common stock with a total value of $711,522 for conversion of debt.

As of June 30, 2016, we had several convertible debentures and related accrued interest payable that were convertible into approximately 6,698,670,000 shares of our common stock. We have 2,000,000,000 common shares authorized and we will be required to again increase the number of authorized shares of common stock in the event all convertible debt is converted into shares of our common stock.

As of June 30, 2016, we had certain penalties on delinquent convertible debentures and pending debenture conversions that are payable in shares of our common stock. We record these obligations at the current market value of our common stock, marking the obligations to market at each reporting date. We recognize the change in the market value as gain or loss on debt payable in shares in other income (expense) in our consolidated statements of operations. For the three months and six months ended June 30, 2016, we recognized a gain on debt payable in shares of $222,416 and $577,265, respectively.

NOTE 11 – STOCK OPTIONS AND WARRANTS

During the six months ended June 30, 2016, we did not issue any new stock options or warrants.

The following table summarizes the stock option and warrant activity during the six months ended June 30, 2016:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contract Term

Outstanding at December 31, 2015		4,977,267	$	0.03		3.25
Granted		-
Exercised		-
Expired or cancelled		-

Outstanding, vested and exercisable at June 30, 2016		4,977,267	$	0.03		2.75

In May 2014, the Board of Directors of the Company adopted and approved the One World Holdings Inc. 2014 Stock Option and Stock Award Plan (the "Plan"). Also, the holders of a majority of the Company's outstanding common stock voted to approve and authorize adoption of the Plan. A total of 2,000,000 shares of our common stock are available for issuance under the Plan. Under the Plan, we may issue options, including incentive stock options and non-statutory stock options, restricted stock grants, or stock appreciation rights. Awards under the Plan may be granted to employees, consultants, directors and individuals who meet the requirements defined in the Plan.

NOTE 12 – CONSULTING AGREEMENTS

We have entered into various consulting agreements for financial and business development services to the Company. Certain of these consulting agreements provide for cash compensation to the consultants; however, several are based on issuances of shares of our common stock in exchange for services.

Under the consulting agreements that provide for share issuances, shares were generally issued at the inception of the agreements for services provided. There generally are no specified performance requirements and no provision in the agreements for return of the shares. Compensation expense is calculated based on the market price of the stock on the effective date of agreement and amortized over the period over which the services are provided to the Company. During the three months ended June 30, 2016 and 2015, total compensation expense included in selling, general and administrative expense was $0 and $22,500, respectively. During the six months ended June 30, 2016 and 2015, total compensation expense included in selling, general and administrative expense was $22,500 and $48,442, respectively. As of June 30, 2016, we had no unamortized compensation paid in common shares.

NOTE 13 – RELATED PARTY TRANSACTIONS

Certain of the consulting agreements discussed in Note 12 are with related parties. Related parties consist primarily of our executive officers, directors, significant shareholders and individuals affiliated through family relationships with these individuals. There was no compensation expense paid in common shares to related parties during the three months and six months ended June 30, 2016 and 2015.

We paid consulting and other fees to related parties totaling $45,902 and $38,672 during the three months ended June 30, 2016 and 2015, respectively, and $125,178 and $134,847 during the six months ended June 30, 2016 and 2015, respectively.

As of June 30, 2016 and December 31, 2015, we had convertible debentures of $5,000 and $46,600 payable to related parties. The outstanding principal and interest are convertible into shares of our common stock at a conversion prices ranging from $0.06 to $30 per share.

Accrued interest payable to these related parties totaled $30,766 and $24,341 at June 30, 2016 and December 31, 2015, respectively.

As of June 30, 2016 and December 31, 2015, we had stockholder advances payable to related parties totaling $83,023.

NOTE 14 – SUPPLEMENTAL STATEMENT OF CASH FLOWS INFORMATION

During the six months ended June 30, 2016 and 2015, we made no cash payments for income taxes.

During the six months ended June 30, 2016 and 2015, we made cash payments for interest totaling $17,480 and $78,552.

During the six months ended June 30, 2016, we had the following non-cash financing and investing activities:

Increased debt discount and derivative liability by $375,000.

Decreased accrued interest payable by $3,095, decreased convertible debentures by $68,289, decreased debt discount by $19,176, decreased derivative liability by $138,540, increased common stock by $164,070 and increased additional paid-in capital by $18,847 for common shares issued in conversion of debt.

Increased stockholder advances and decreased notes payable by $4,973.

Decreased Series AA preferred stock and increased additional paid-in capital by $20.

·	Decreased prepaid expenses and other current assets and increased debt discount by $13,666.

During the six months ended June 30, 2015, we had the following non-cash financing and investing activities:

Increased additional paid-in capital and debt discount by $71,760 for beneficial conversion feature of convertible notes payable.

Increased debt discount and derivative liability by $812,321.

Decreased stockholder advances and increased convertible debentures by $128,460.

Decreased accrued interest payable by $11,547, decreased convertible debentures by $127,085, decreased debt discount by $47,839, decreased derivative liability by $630,184, increased common stock by $418,487 and increased additional paid-in capital by $293,035 for common shares issued in conversion of debt.

Decreased accrued interest payable by $1,947 and increased convertible debentures by $1,947.

NOTE 15 – RECENT ACCOUNTING PRONOUNCEMENTS

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, "Leases (Topic 842)". The amendments in this ASU revise the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018 and are to be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. We are currently unable to determine the impact on our consolidated financial statements of the adoption of this new accounting pronouncement.

In March 2016, the FASB issued ASU No. 2016-09, "Stock Compensation (Topic 718)", which is intended to simplify several aspects of the accounting for share-based payment award transactions, including the income tax impacts, the classification on the statement of cash flows, and forfeitures. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods. We are currently unable to determine the impact on our consolidated financial statements of the adoption of this new accounting pronouncement.

In April 2015, the FASB issued ASU No. 2015-03, "Interest – Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs." To simplify presentation of debt issuance costs, the amendments in this Update require 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. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this Update. For public companies, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. We adopted the new guidance effective January 1, 2016. Our prior period consolidated financial statements were not impacted by the adoption of this Update.

Although there are several other new accounting pronouncements issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, we do not believe any of these accounting pronouncements has had or will have a material impact on our consolidated financial position or results of operations.

NOTE 16 – CONTINGENCIES

From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. Management, along with the assistance of counsel, will determine the ultimate disposition and potential impact of these matters on our financial condition, liquidity or results of operations.

On November 4, 2014, we were named as a defendant in a civil lawsuit filed by Darling Capital, LLC, ("Darling") a creditor of the Company, in the New York Supreme Court, County of New York. The plaintiff filed a Motion For Summary Judgment in Lieu of Complaint the same day. The plaintiff alleges, among other things, that we defaulted on our obligations under a Convertible Promissory Note held by Darling. The complaint sought, among other relief, judgment against us in the amount of $57,627. A settlement was reached on September 3, 2015 for the sum of $70,000 consisting of four payments with the final payment due on November 20, 2015. The first payment of $10,000 was made on September 9, 2015. No other payments have been made.

On December 3, 2014, WHC Capital, LLC filed a complaint against the Company, demanding $416,000 and alleging the Company's breach of contract and failure to deliver 22,545,900 shares of common stock pursuant to requested conversions of two promissory notes totaling $65,403. On September 9, 2015, both parties agreed to a settlement of $130,000 in the form of seven payments. There are currently two remaining payments due under the agreement.

NOTE 17 – SUBSEQUENT EVENTS

To fund our operations subsequent to June 30, 2016, we incurred additional indebtedness totaling $6,500, consisting of proceeds from short-term notes payable

Subsequent to June 30, 2016, we issued a total of 18,364,000 shares of our common stock for conversion of debt principal of $6,000 and accrued interest payable of $427.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

As used in this Quarterly Report on Form 10-Q, references to the "Company," "Tonner-One World," "TOW," "we," "our" or "us" refer to Tonner-One World Holdings, Inc., unless the context otherwise indicates.

Introduction

Management's discussion and analysis of financial condition and results of operations is provided as a supplement to the accompanying condensed consolidated financial statements and related notes to help provide an understanding of our financial condition, the changes in our financial condition and the results of our operations.

Some of the key factors that could cause our future financial results and performance to vary from our expectations include:

·	our ability to meet production and sales goals;

·	our ability to raise adequate capital to fund operations;

·	market developments affecting, and other changes in, the demand for our products or the introduction of competing products;

·	increases in the price of raw materials used in the production of our dolls;

·	our ability to develop and market our businesses at a level necessary to implement our business strategy and our ability to finance our development;

·	the condition of the capital markets generally, which will be affected by interest rates, foreign currency fluctuations and general economic conditions;

·	the political and economic climate in the foreign or domestic jurisdictions in which we conduct business; and

·	other United States or foreign regulatory or legislative developments which affect the demand for our products generally or increase the cost for our products.

The information contained in this Quarterly Report identifies additional factors that could cause our results or performance to differ materially from those we express in our forward-looking statements. Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions and, therefore, the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements that are included in this Quarterly Report and the exhibits and other documents incorporated herein by reference, our inclusion of this information is not a representation by us or any other person that our objectives and plans will be achieved.

General

Tonner-One World Holdings, Inc. ("Holdings"), a Nevada Corporation, formerly known as One World Holdings, Inc.), is a Houston-based company that recently released a line of mainstream multicultural dolls aimed at high-end collectors and young pre-teen girls. Our operations are conducted through our wholly owned subsidiary, The One World Doll Project, Inc., a Texas Corporation ("OWDPI"). In this discussion Holdings and OWDPI are collectively referred to as "One World" or the "Company." We commenced sales in October 2013. Through the year ended December 31, 2015, we focused on direct sales and Internet sales and did not require a storefront for operations. Manufacturing of our dolls is outsourced to physical plant facilities in the People's Republic of China owned by a third-party manufacturers we have selected. We have purchased the requisite molds and equipment to manufacture our dolls and their accessories. Warehousing of our merchandise inventories and fulfillment of orders here in the United States will be handled by a third-party center in Houston, Texas. We also may have our manufacturers ship dolls directly to our major retail customers.

The Company had previously announced a proposed merger transaction whereby OWDPI would merge with Tonner Doll Company, Inc. ("Tonner"), a New York corporation with a successful history of marketing and sales of collectible dolls. The Company formed TOW for the purpose of taking initial steps to begin production of dolls under the combined Tonner-One World banner. Following the formation of TOW, and prior to the closing of the proposed merger transaction, management of the Company and of Tonner determined it to be in the best interests of the parties to terminate the merger and explore other opportunities. Through the formation of TOW, the Company and Tonner have increasing opportunities to work together, and the Board of Directors of the Company has determined it to be in the best interest of the Company to change its name to Tonner-One World Holdings, Inc. to better reflect the combined focuses and prior historical successes of the two companies.

Going Concern Uncertainty

The Company has incurred operating losses since inception, has limited financial resources and a working capital deficit of $12,438,272 at June 30, 2016. These factors raise substantial doubt about the Company's ability to continue as a going concern. The Company's condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In addition, the Company had an accumulated deficit of $25,143,068 and a total stockholders' deficit of $12,605,513 at June 30, 2016. The working capital deficit, accumulated deficit and total stockholders' deficit were negatively impacted by a significant derivative liability and debt recorded at June 30, 2016. The Company's ability to continue as a going concern is dependent upon its ability to develop additional sources of capital and, ultimately, achieve profitable operations. Management's plans to address the Company's continuing existence include obtaining debt or equity funding from private or institutional sources or obtaining loans from financial institutions and individuals, where possible. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Results of Operations

Sales

We had total sales of $3,424 and $833 for the three months ended June 30, 2016 and 2015 and $60,092 and $1,572 for the six months ended June 30, 2016 and 2015, respectively. The sales of our dolls are seasonal, with lower sales levels expected for the first few months of each calendar year. The increase in sales in the current year is due to the successful 2015 introduction of our new line of Tween Scene dolls, with significant orders from a major retailer during the latter part of 2015. We believe sales in the current year will continue to increase for seasonal buying and for our new line of Tween Scene dolls.

Cost of Sales

Our cost of sales includes the cost to manufacture our dolls, inbound shipping costs to the United States and handling, fulfillment and outbound shipping costs incurred by our warehouse and fulfillment center. Low levels of sales or promotional pricing of our dolls can result in these costs exceeding our sales in any particular period. Cost of sales were $6,827 and $836 for the three months ended June 30, 2016 and 2015 and $26,669 and $1,904 for the six months ended June 30, 2016 and 2015, respectively. The increase in cost of sales in the current year is due to the increase in sales of dolls discussed above. Because of the lower levels of sales, we reported a gross deficit on sales for the three months ended June 30, 2016 and 2015 and the six months ended June 30, 2015.

Operating Expenses

Our selling, general and administrative expenses increased $52,161, or approximately 12%, to $503,711 for the three months ended June 30, 2016 from $451,550 for the three months ended June 30, 2015, and increased $52,388, or approximately 6%, to $995,761 for the six months ended June 30, 2016 from $943,373 for the six months ended June 30, 2015. We continue to incur substantial sales and marketing expenses related to our new line of Tween Scene dolls. In addition, we have hired several consultants to help us establish and market the Company and our products and incurred increased levels of professional fees in the first six months of 2016.

The services of a variety of consultants have been integral in developing our business model, furthering our business and ensuring the successful pursuit of our goals. Our consultants have contributed a wide variety of different services to us. These services can be classified into several different categories, as follows:

·	Business model development and implementation, which consists of advice, counsel and services in the areas of fund raising strategy, corporate structure, hiring needs, office space acquisition and corporate governance;

·	Financial and accounting which consists of advice, counsel and services in the areas of developing financial models and corporate accounting systems, corporate structure, quarterly reviews, various day to day accounting and bookkeeping;

·	Product development which consists of advice and counsel in the areas of manufacturer selections, development process, engineering reviews, prototype development and testing, quality control, logistical support, safety standards compliance and physical packaging design; and

·	Marketing and promotions which consists of advice, counsel and services in the areas of videography, photography, graphic design, printing, marketing and public relations activities, strategic market research and planning, website development and IT support.

Our research and development expenses were $4,210 and $3,981 for the three months ended June 30, 2016 and 2015 and $21,432 and $6,393 for the six months ended June 30, 2016 and 2015, respectively. Research and development expenses have increased in the current year as we work to complete the design and manufacturing processes for our current lines of dolls and explore opportunities to develop new lines.

Depreciation expense is currently not material to our operations. Currently, our only depreciable assets are our molds and equipment to manufacture our dolls and their accessories. Depreciation expense was $4,425 and $3,500 for the three months ended June 30, 2016 and 2015 and $8,850 and $7,000 for the six months ended June 30, 2016 and 2015, respectively.

Other Income (Expense)

Our other expense is comprised of interest expense, gains or losses for the change in fair value of our derivative liability associated with our convertible debentures, gains or losses on recording certain obligations payable in shares of our common stock and for the loss on debt settlement calculated upon conversion of debt to shares of our common stock. Our interest expense also includes the amortization of debt discount calculated at the inception of the convertible debentures and recorded with the related derivative liability.

Interest expense increased to $712,795 in the three months ended June 30, 2016 from $451,566 in the three months ended June 30, 2015 and increased to $1,477,282 in the six months ended June 30, 2016 from $1,118,515 in the six months ended June 30, 2015. This increase is due primarily to the amortization of debt discount, additional interest expense on new indebtedness and default interest and penalties calculated on several delinquent convertible debentures.

Gain on derivative liability was $2,828,705 for the three months ended June 30, 2016 compared to a loss of $7,126,383 for the three months ended June 30, 2015. Similarly, gain on derivative liability was $6,694,891 for the six months ended June 30, 2016 compared to a loss of $17,068,588 for the six months ended June 30, 2015. The gain or loss on derivative liability will fluctuate each period depending on the market price of our common stock, volatility, conversion prices, and other valuation inputs, and the fluctuation may be material.

We reported a gain on debt payable in shares of $222,416 and $577,265 during the three months and six months ended June 30, 2016, respectively. Certain obligations payable in our common stock for consulting services and debt conversions not completed are recorded at the market value of the shares of our common stock to be issued. At each report date, we re-measure the market value of the common stock to be issued, recording a gain or loss on debt payable in shares.

We reported a gain on debt settlement of $1,951 and $31,616 for the three months ended June 30, 2016 and 2015, respectively. We reported a loss on debt settlement of $13,169 and a gain on debt settlement of $11,855 for the six months ended June 30, 2016 and 2015, respectively. The gain or loss on debt settlement results from issuing our common shares in conversion of debt and eliminating corresponding derivative liabilities and debt discount. The gain or loss on debt settlement will fluctuate each period depending on the amount of debt settled through conversion to common stock, the market price of our common stock, volatility, conversion prices, and other valuation inputs, and the fluctuation may be material.

Net Income (Loss)

As a result of the factors discussed above, we reported net income of $1,824,528 and $4,789,085 for the three months and six months ended June 30, 2016, respectively, and a net loss of $8,005,367 and $19,132,346 for the three months and six months ended June 30, 2015, respectively.

Liquidity and Capital Resources

As of June 30, 2016, we had total current assets of $8,676, including cash of $2,664 and accounts receivable of $6,012.

We had total current liabilities of $12,446,948 and a working capital deficit of $12,438,272 at June 30, 2016. In addition, we had accumulated losses from inception of $25,143,068 and had a total stockholders' deficit of $12,605,513 at June 30, 2016. Our working capital deficit, accumulated deficit and total stockholders' deficit as of June 30, 2016 were materially impacted by our non-cash derivative liability of $4,394,475.

We did not have sufficient cash at June 30, 2016 to fund future operations. Until our sales increase and stabilize, we will continue to rely on cash provided by financing activities, primarily in the form of convertible debentures, and notes and advances from our stockholders. We also have paid substantial consulting fees through the issuance of shares of our common stock, reducing the need for cash to pay these obligations. We believe, however, that we will be required to pay our consultants more in cash as we move forward with our operating plan.

Net cash used in operating activities was $505,467 for the six months ended June 30, 2016 as a result of our net income of $4,789,085, non-cash expenses totaling $589,021, decreases in inventories of $20,785 and prepaid expenses and other current assets of $22,500, and increases in accounts payable and accrued expenses of $475,366 and accrued interest and penalties payable of $880,753, offset by non cash gains totaling $7,279,987 and an increase in accounts receivable of $2,990.

Net cash used in operating activities was $1,083,846 for the six months ended June 30, 2015 as a result of our net loss of $19,132,346, non-cash gain of $11,855, increases in inventories of $4,852 and prepaid expenses and other current assets of $238,600, partially offset by non-cash expenses totaling $17,914,741, decrease in accounts receivable of $7,949 and an increases in accounts payable and accrued expenses of $215,532 and accrued interest and penalties payable of $165,585.

Net cash used in investing activities during the six months ended June 30, 2016 was $0 comprised of the increase in note receivable of $70,000, offset by the repayment of note receivable of $70,000. During the six months ended June 30, 2015, we had no net cash provided by or used in investing activities.

During the six months ended June 30, 2016, net cash provided by financing activities was $502,199, comprised of proceeds from convertible debentures of $375,000, proceeds from notes payable of $128,722, and proceeds from stockholder advances of $44,199, partially offset by payment of debt issuance costs of $2,500 and payments on notes payable of $43,222.

During the six months ended June 30, 2015, net cash provided by financing activities was $1,083,242, comprised of proceeds from convertible debentures of $853,547, proceeds from notes payable of $468,500 and proceeds from stockholder advances of $15,000, partially offset by payments on notes payable of $25,000, payments on convertible debentures of $214,850 and payments on stockholder advances of $13,955.

We have incurred losses from operations since inception, have limited financial resources, and at June 30, 2016, had a negative working capital position and a total stockholders' deficit of $12,605,513. The losses to date represent costs incurred primarily to pay the management team and individuals engaged by us to design and develop our dolls, to negotiate and coordinate the production of the dolls, secure financing, and to develop the marketing strategy to promote the doll line to doll collectors and public markets. We have also incurred significant administrative expenses, consisting primarily of professional fees and management and consulting services. While professional fees have been paid substantially in cash, a significant portion of our management and consulting costs have been paid through the issuance of shares of our common stock.

We believe that our operating expenses may increase over the next 12 months and estimate that our capital requirements for the next 12 months may approximate $2.0 million. Our estimated capital requirements include manufacturing costs, marketing, public relations, and general and administrative expenses. We anticipate meeting our capital requirements by raising funds through a combination of private placements of our common stock and/or issuances of convertible notes payable to private investors. We currently depend primarily on in-kind arrangements and proceeds from the sale of convertible debentures for our month-to-month capital needs.

Since inception, we have been significantly dependent on third party funding and capital raised through private placements and through the issuance of convertible debt. We secured contracts with several large retailers; however, we will continue to be dependent on third party funders until our operations generate sufficient revenue to support our operating expenses.

Should we be unable to obtain the capital necessary to fund our expected future working capital needs, we would scale back on marketing, operational and administrative requirements, resulting in slower growth. The amount that we would have to scale back spending would correlate to any deficiency in funding. Such a funding shortage would likely result in an extremely limited budget for advertising and non-essential staff and consultants; however, we would still anticipate meeting our production and product launch deadlines, but we would produce less product initially.

Since inception we have primarily relied upon in-kind arrangements with various consultants pursuant to which we agreed to issue such consultants shares of common stock in lieu of payment of cash consideration. Services provided by such consultants include media and public relations, business development, product fulfillment, television advertising production, financial, management, corporate compliance, business advisory and employment recruitment consulting services. We also previously issued certain of our officers and Directors shares of common stock in lieu of the payment of cash consideration.

As of June 30, 2016, we had several convertible debentures and related accrued interest payable that were convertible into approximately 6,698,670,000 shares of our common stock. Notwithstanding the recent increase in the number of authorized common shares, based on the assumptions used to estimate the fair value of our derivative liability at June 30, 2016 and assuming all lenders convert the notes payable at the June 30, 2016 conversion prices, the Company would have had insufficient authorized shares of common stock to complete the debt conversions. This factor has hampered our fund raising efforts.

Critical Accounting Policies

Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. The significant accounting policies that we believe are the most important to aid in fully understanding our financial results are the following:

Inventories

Inventories, consisting primarily of dolls manufactured for resale, are stated at the lower of cost or market, with cost determined using primarily the first-in-first-out (FIFO) method. We maintain a reserve for obsolete inventories to reduce excess and obsolete inventories to their estimated net realizable value. The reserve was $150,000 as of June 30, 2016 and December 31, 2015. We currently purchase all inventories from a limited number of foreign suppliers, and are dependent on those suppliers for substantially all merchandise inventory purchases since we commenced operations.

Revenue Recognition

We record revenue from the sales of dolls and accessories in accordance with the underlying sales agreements when the products are shipped, the selling price is fixed and determinable, and collection is reasonably assured. Our revenues are recorded net of returns and allowances.

Fair Value of Financial Instruments

Disclosures about fair value of financial instruments require disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of June 30, 2016, we believe the amounts reported for cash, accounts payable and accrued expenses, accrued interest payable, and notes payable approximate fair value because of the short-term nature of these financial instruments.

Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

Liabilities measured at fair value on a recurring basis are as follows at June 30, 2016:

	Total		Level 1		Level 2		Level 3

Derivative liability	$	4,394,475	$	-	$	-	$	4,394,475
Convertible debentures, net of discount		2,748,116		-		-		2,748,116
Current portion of long-term debt, net of discount		29,977		-		-		29,977
Long-term debt, net of current portion and discount		216,550		-		-		216,550

Total liabilities measured at fair value	$	7,389,118	$	-	$	-	$	7,389,118

Off Balance Sheet Commitments

We lease approximately 2,882 square feet of office space in one building located at 14515 Briar Hills Parkway, Suite 105, Houston, Texas 77077. The lease currently has a monthly payment of $4,214 and expires in December 2019. Beginning on December 1, 2015, the monthly payment increased to $4,407, and will increase incrementally through the end of the term. We expect that the current leased premises will be satisfactory until the future growth of our business operations necessitates an increase in office space.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our principal executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2016. Based on that evaluation, our principal executive officer and chief financial officer concluded that the disclosure controls and procedures employed at the Company were not effective to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

We continue to operate with a limited number of accounting and financial personnel. Although we added the services of a contract Chief Financial Officer during 2014, we have been unable to implement proper segregation of duties over certain accounting and financial reporting processes, including review procedures for key accounting schedules and timely and proper documentation of material transactions and agreements. We believe these control deficiencies represent material weaknesses in internal control over financial reporting.

Despite the material weaknesses in financial reporting noted above, we believe that our consolidated financial statements included in this report fairly present our financial position, results of operations and cash flows as of and for the periods presented in all material respects.

We are committed to the establishment of effective internal controls over financial reporting and will place emphasis on quarterly and year-end closing procedures, timely documentation and internal review of accounting and financial reporting consequences of material contracts and agreements, and enhanced review of all schedules and account analyses by experienced accounting department personnel or independent consultants.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting during the fiscal quarter ended June 30, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

As of June 30, 2016, we had several convertible debentures and related accrued interest payable that were convertible into approximately 6,698,670,000 shares of our common stock. Therefore, if all holders of convertible debentures elected to convert, we would be unable to honor such conversions and would thus be in default. On March 3, 2016, the holders with the power to vote more than a majority of the outstanding common stock of the Company approved an amendment to the Company's Articles of Incorporation to effect an authorized share increase in our common stock from 500,000,000 shares to 2,000,000,000 shares of common stock. The amendment became effective on April 8, 2016. We will be required to increase the number of authorized shares of common stock in the event all convertible debt is converted into shares of our common stock.

As of the date of this filing, other than discussed above, there have been no material changes to the Risk Factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the SEC on April 14, 2016 (the "2015 Form 10-K"). The Risk Factors set forth in the 2015 Form 10-K should be read carefully in connection with evaluating our business and in connection with the forward-looking statements contained in this Quarterly Report on Form 10-Q. Any of the risks described in the 2015 Form 10-K could materially adversely affect our business, financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. These are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

On April 15 and April 18, 2016, we received proceeds of $15,000 and $50,000, respectively, from an institutional investor pursuant to a convertible back end note (the "Back End Note") dated September 4, 2015. The Back End Note matures in September 2017 and bears interest at 8% per annum. The Back End Note is convertible into shares of the Company's common stock at a Conversion Price equal to 50% of the lowest closing bid price of the Company's common stock for the ten prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer agent (subject to equitable adjustments for capital reorganization or other change, consolidation or merger).

On May 10, 2016, we issued a convertible debenture (the "Debenture") with a principal balance of $50,000 to an individual who is a related party. The Debenture matures in May 2017 and bears interest at 14% per annum. The Debenture is convertible into shares of the Company's common stock at a Variable Conversion Price equal to 50% of the closing market price of the Company's common stock one day prior to the conversion date (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company's securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).

During the three months ended June 30, 2016, we issued a total of 40,342,403 unregistered shares of our common stock to an institutional lender in the conversion of debenture principal of $29,289 and accrued interest payable of $1,740.

The issuances of securities described above were restricted share issuances and deemed to be exempt from registration in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering. Each investor represented that they were accredited investors, as defined in Rule 501 of Regulation D and there was no general solicitation or general advertising used to market the securities. We made available to each investor with disclosure of all aspects of our business, including providing the investor with press releases, access to our auditors, and other financial, business, and corporate information. All securities issued were restricted with an appropriate restrictive legend on certificates for notes and warrants issued stating that the securities (and underlying shares) have not been registered under the Securities Act and cannot be sold or otherwise transferred without an effective registration or an exemption therefrom

Item 3. Defaults Upon Senior Securities

As indicated in Notes 5 and 7 to our condensed consolidated financial statements, several of our convertible debentures and notes payable are delinquent as of June 30, 2016. We believe we have good relationships with most debenture holders, and continue to have discussions with them regarding the extension of maturity dates or settlement of amounts due. Several of the convertible debentures and notes have default interest rates that apply when the debentures are delinquent, and we have accrued default interest where applicable. In addition, we have been unable to complete certain conversions of convertible debentures during the year ended December 31, 2015, pending the increase in the number of authorized shares of our common stock, and have accrued applicable penalties as of June 30, 2016.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit No.	Description

10.1	Form of Convertible Debenture (incorporated by reference to Exhibit 10.7 to our Form 10-K filed on April 14, 2014).

10.2	Form of Convertible Back End Note*

31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14.*

31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14*

32.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.*

101.INS	XBRL Instance**
101.SCH	XBRL Schema**
101.CAL	XBRL Calculations**
101.DEF	XBRL Definitions**
101.LAB	XBRL Label**
101.PRE	XBRL Presentation**

^*Filed herewith.

** The XBRL related information in Exhibit 101 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

SIGNATURES

Pursuant to the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ONE WORLD HOLDINGS, INC.

Date: August 19, 2016	By:	/s/ Corinda Joanne Melton
		Name: Corinda Joanne Melton
		Title: President and Chief Executive Officer

Date: August 19, 2016	By:	/s/ Dennis P. Gauger
		Name: Dennis P. Gauger
		Title: Chief Financial Officer