NOHO, Inc.

The Company adopted ASC 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities From Equity” and ASC 815, “Derivatives and Hedging.” Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. In addition, the fair values of freestanding derivative instruments such as warrant and option derivatives are valued using the Black-Scholes model.

The Company’s derivative liabilities are carried at fair value totaling $710,316 and $0, as of September 30, 2014 and 2013, respectively. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as change to fair value of derivative liability.

Interest expense record in connection with the for the Company’s convertible notes payable for the nine months ended September 30, 2014 and the year ended December 31, 2013 totaled $71,927and $13,381, respectively. Amortization expense related to debt discounts totaled $120,751 for the nine months ended September 30, 2013. Additionally, the Company recognized a derivative liability arising from variable conversion rates of its convertible debt with a fair value of $710,316 at September 30, 2013 and an unrealized loss on the adjustment to fair value of the derivatives in the amount of $283,066.

Operating expenses during the three months ended September 30, 2014 were $720,956, of which $352,890 was for consulting fees, $73,097 was for compensation expense, $253,064 was for general and administrative costs, $24,571 was for professional fees, $4,737 was for promotional and marketing, and the remaining $12,597 was related to selling expense. In comparison, operating expenses during the three months ended September 30, 2013 were $733,672, of which $43,227 was for consulting fees, $386,803 was for compensation expense, $176,665 was for general and administrative costs, $37,926 was for professional fees, $19,926 was for promotional and marketing, and the remaining $69,125 was related to selling expense