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(2) Summary of Significant Accounting Policies (Policies)
 12 Months Ended
Dec. 31, 2012
Policies  
Basis of Accounting

Basis of Accounting

 

The consolidated financial statements of the Company have been prepared on the accrual basis of accounting, in accordance with accounting principles generally accepted in the United States of America ("US GAAP").

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

Use of Estimates

 

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.  Actual results could differ from those estimates.
Cash and Cash Equivalents

Cash and Cash Equivalents

 

Cash and cash equivalents consist of cash held in banks and on hand and highly liquid investments which are unrestricted as to withdrawal or use, and which have remaining maturities of three months or less when purchased. Cash balances may periodically exceed the federal depository insurance limit, however, the Company believes that risk of loss is minimal due to the strength of the financial institution in which funds are held.
Reverse Merger and Recapitalization

Reverse Merger and Recapitalization

 

On July 21, 2011, OWDPI entered into a reverse merger with the Company. The reverse merger which resulted in a recapitalization of OWDPI was achieved through a Share Exchange Agreement (the "Share Exchange") with OWDPI's stockholders. The Company is the acquiring legal entity in the transaction, but OWDPI is the reporting entity for accounting purposes because its former shareholders emerged from the transaction with a controlling interest in the Company. The acquisition is treated as a recapitalization of OWDPI because, prior to the transaction, the Company had no significant assets, liabilities or operations.

 

The recapitalization of OWDPI was achieved by exchanging each share of OWDPI for 15.2856 shares of the Company (taking into consideration a 38.214 for 1 exchange ratio followed by a 1 for 2.5 reverse split of the Company's shares). OWDPI's shareholders received a total of 130,013,584 shares under the Share Exchange, resulting in 143,577,560 outstanding shares (after the reverse split there were 57,431,029 outstanding shares). Accordingly, OWDPI's shareholders control approximately 90% of the Company after the Share Exchange. The share exchange and reverse stock split have been given retroactive effect in these consolidated financial statements. 

Fair Value of Financial Instruments

Fair Value of Financial Instruments

 

The Company includes fair value information in the notes to financial statements when the fair value of its financial instruments is different from the book value.  When the book value approximates fair value, no additional disclosure is made.

 

Accounting Standards Codification ("ASC") 820-10 establishes a framework for measuring fair value.  That framework provides 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 the fair value hierarchy under ASC 820-10 are described below:

 

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; and

·                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.

 

An asset's 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 Company currently has no assets or liabilities that are reported under ASC 820-10.
Advertising Costs

Advertising Costs

 

The Company expenses advertising costs as incurred. For the years ended December 31, 2012 and 2011, the Company’s advertising costs were $42,419 and $52,110. For the period from inception, October 1, 2010, to December 31, 2012, the Company's advertising costs were $94,529.
Manufacturing and Production

Manufacturing and Production

 

The Company’s manufacturing and production costs are consistent with customary industry practices that will include three main costing phases: pre-production, production and post-production.  The pre-production phase is a setup process that involves development of all tools and equipment needed to produce the dolls and their accessories including clothes, shoes, jewelry as well as face painting masks.  This setup phase bears the greatest amount of up-front costs but will give us everything needed to produce multiple dolls and accessories from the same set of tools.  To date, Early Light Industrial Company LTD (“Early Light”) has fabricated molds for us to manufacture both the bodies and accessories of our current doll lines.  Our molds and other tooling are developed from high yield metals and synthetics that we believe will yield hundreds of thousands of units before needing replacement.

 

Mold capacity is based on expected demand considering both annualized and peak monthly demands.  A conservative estimate of actual mold yield and expected mold life is based on experienced estimates generated by One World Doll Project’s retained Engineering Consultant and verified by the supplier, Early Light.

 

The Company acquired molds for manufacturing dolls for $70,000 during the year ended December 31, 2011, paying $42,000 in cash and recording an account payable for $28,000 due at the initiation of production.  The Company did not acquire any molds for manufacturing dolls in the year ended December 31, 2012.
Income Taxes

Income Taxes

 

The Company uses the liability method of accounting for income taxes.  Under this method, deferred income taxes are recorded to reflect the tax consequences on future years of temporary differences between the tax basis of assets and liabilities and their financial amounts at year-end.  The Company provides a valuation allowance to reduce deferred tax assets to their net realizable value.

 

The Financial Accounting Standards Board (“FASB”) prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company recognizes a tax benefit associated with an uncertain tax position when, in the judgment of management, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently measures the tax benefit as the largest amount that the Company judges to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. The Company's effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management. The Company has not incurred any interest or penalties related to potential underpaid income taxes and has recognized no assets or liabilities associated with uncertain tax positions as of and for the years ended December 31, 2012, and 2011, or for the period from inception, October 1, 2010, to December 31, 2012. The Company files a separate federal income tax return in the United States and state tax returns where applicable.
Reclassifications

Reclassifications

 

Certain items in the 2011 consolidated financial statements have been reclassified to conform to the 2012 consolidated financial statements’ presentation. The reclassifications have no impact on net loss or stockholders’ deficit as previously reported[MK1] .
Loss Per Share

Loss Per Share

 

Basic loss per share is calculated based on the weighted average number of common shares outstanding during each period.  Diluted loss per share include shares issuable upon exercise of outstanding stock options, warrants or conversion rights that have exercise or conversion prices below the market value of the Company's common stock.  At December 31, 2010, warrants pertaining to 2,292,840 shares of common stock have been excluded from the computation of diluted earnings per share because the Company is in a net loss position and their effect would be anti-dilutive.  During the year ended December 31, 2011, all warrants were exercised and converted to common shares and no other common stock equivalents were issued or outstanding.  [MK2] For the years ended December 31, 2012 and 2011, the Company’s basic and diluted net loss per share was $            and $0.03.
New Accounting Pronouncements

New Accounting Pronouncements

 

In December 2011, the FASB issued an Accounting Standard Update “ASU” to the Balance Sheet, Topic 210 of the FASB ASC.  This update was issued to provide enhanced disclosures that will enable users of the financial statements to evaluate the effect or potential effect of netting arrangements on an entity's financial position. The amendments under this ASU, require enhanced disclosures by requiring entities to disclose both gross information and net information about both instruments and transactions subject to an agreement similar to a master netting arrangement. This scope would include derivatives, sale and repurchase agreements, reverse sale and repurchase agreements, and securities borrowing and lending arrangements. The ASU is effective retrospectively for annual periods beginning on or after January 1, 2013, and interim periods within those periods. The Company is evaluating the potential impact of the adoption of this new guidance on its consolidated financial statements.

 

In June 2011, the FASB issued an ASU to the Comprehensive Income, Topic 220 of the FASB ASC.  This update requires the components of net income and the components of other comprehensive income to be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. This update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. In the two-statement approach, the first statement should present total net income and its components in the statement of net income followed consecutively by a second statement of other comprehensive income that should present total other comprehensive income, the components of other comprehensive income, and a total of comprehensive income. The updated guidance does not change the items that must be reported in comprehensive income. This updated guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, and should be applied retrospectively. Early adoption is permitted. The Company currently has no elements of other comprehensive income and accordingly, the adoption of this guidance had no impact on its consolidated financial statements.

 

In May 2011, the FASB issued an ASU to the Fair Value Measurement Topic 820 of the FASB ASC. This update was issued in order to achieve common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards. The update clarifies that (i) the highest and best use concept applies only to the fair value measurement of nonfinancial assets, (ii) specific requirements pertain to measuring the fair value of instruments classified in a reporting entity’s stockholders’ equity and, (iii) a reporting entity should disclose quantitative information about unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy. The update changes requirements with regard to the fair value of financial instruments that are managed within a portfolio and with regard to the application of premiums or discounts in a fair value measurement. In addition, the update increased disclosure requirements regarding Level 3 fair value measurements to include the valuation processes used by the reporting entity and the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between the unobservable inputs, if any. This amendment is effective during interim and annual periods beginning after December 15, 2011. Early adoption is not permitted. The Company’s adoption of this ASU did not have a material impact on its disclosures, consolidated results of operations or financial position.