Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report contains “forward-looking statements”. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.
Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement. You should, however, consult further disclosures we make in future filings of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Although we believe the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:
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our current lack of working capital;
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inability to raise additional financing;
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the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require our management to make estimates about matters that are inherently uncertain;
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deterioration in general or regional economic conditions;
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adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
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inability to efficiently manage our operations;
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inability to achieve future sales levels or other operating results; and
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the unavailability of funds for capital expenditures.
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For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see “Item 1A. Risk Factors” in this document.
Throughout this Annual Report references to “we”, “our”, “us”, “NOHO”, “the Company”, and similar terms refer to NOHO, Inc.
OVERVIEW AND OUTLOOK
RealEstate Pathways, Inc. was incorporated in the State of Wyoming on September 30, 2011. On March 9, 2012 our registration statement filed on Form S-1 was deemed effective, registering 3,000,000 common shares at a fixed price of $0.04 per share.
On December 17, 2012, Eric K. Lindberg submitted his letter of resignation from his position as President and Director of the Company. The resignation was accepted by the Company on December 17, 2012.
On December 17, 2012, in connection with resignation of Eric K. Linberg, the Board of Directors unanimously appointed Mr. John “Jay” Grdina to serve as the President, CEO, and Director of the Company.
On December 17, 2012, in connection with resignation of Karin du Plooy the Board of Directors unanimously appointed Mr. Sean Stephenson to serve as the Secretary and Treasurer of the Registrant.
On December 17, 2012, Karin du Plooy submitted her letter of resignation from her position as Secretary of the Company. The resignation was accepted by the Company on December 17, 2012.
On December 31, 2012, the Company effectuated a 15.2 to 1 forward split of the Company’s common stock issued and unissued common stock as of January 16, 2013, the record date. Immediately after the forward split, the number of shares issued and outstanding increased to 22,861,676. The number of authorized shares increased from 50,000,000 to 760,000,000 common shares.
On January 4, 2013, the Company entered into a Distributor Agreement (the “Agreement”) with Dolce Bevuto, Inc., a Nevada corporation (formerly Dolce Bevuto, LLC, a California limited liability company). Pursuant to the Agreement, the Company will have a non-exclusive right to distribute a product named “NOHO®” – The Hangover Defense®. The term of the Agreement is for one year and allows the Company to use the NOHO® trademarks solely in connection advertising, distribution, marketing, and sale of the product throughout certain territories.
On January 9, 2013, the Company changed its name from RealEstate Pathways, Inc. to NOHO, Inc. The amendment occurred as a result of our stockholders approving the amendment at the 2012 Annual Meeting of Stockholders and a subsequent vote by the Board of Directors.
On January 31, 2013, the trading symbol for the Company’s common stock, which is quoted on the OTC:QB, was changed from REPW to HANG. Subsequently, on February 21, 2013, the trading symbol for the Company’s common stock was changed from HANG to DRNK.
On March 18, 2013, the Company entered into an Acquisition Agreement and Plan of Merger by and among, Dolce Sub Co, a Nevada corporation and wholly owned subsidiary of Company, (“Sub Co”) and Dolce Bevuto, Inc., a Nevada corporation (“DB”); DB and Sub Co being the constituent entities in the Merger. The Company intends to issue 12,713,763 shares of its Rule 144 restricted common stock in exchange for 100% of DB’s issued and outstanding stock. Pursuant to the terms of the merger, Sub co will be merged with DB and Sub Co will cease to exist; DB will become a wholly owned-subsidiary of the Company. The Merger, upon closing will provide the Company with the ownership of 100% of DB. The closing is anticipated to occur on March 25, 2013.
The Business of the Company
To date, our business activities have been limited to completing the registration of our common stock on Form S-1, maintaining our reporting requirements, and raising capital through our registered offering for the furtherance of our proposed business plan. We must raise additional capital to support our ongoing existence while we attempt to develop our business. We cannot assure you that we will be able to secure adequate financings successfully in order to begin operations and failure to do so would result in business failure and a complete loss of any investment made into the Company.
Pursuant to the Distributor Agreement executed on January 4, 2013 with DB, the company has the non-exclusive right to distribute “NOHO®” – The Hangover Defense® for one year. The company intends to begin generating revenues by marketing and selling the product in certain territories. However, the Company can make no guarantees of such.
Upon Closing the Merger, we anticipate our business to be redirected to the operations of DB, or more specifically distributing the NOHO product. NOHO develops, markets, sells and distributes a functional lifestyle beverage category product named “NOHO®” – The Hangover Defense®.
Our flagship product “NOHO®” – The Hangover Defense® (“NOHO”) is a dietary supplement, taken before or during the consumption of alcohol that may help to prevent the symptoms associated with a hangover. NOHO was formulated by a Doctor of Pharmacy and comes in a 2 ounce “shot” that can be consumed on a stand-alone basis or as a mixer available in an 8.4 ounce that can be consumed by itself or mixed with an alcoholic drink. It is recommended that the 2 ounce shot be taken as the first and last shot of the night, while the mixer can be consumed alone or mixed with subsequent drinks. NOHO has a refreshing flavor, containing no caffeine or stimulants. Although the method by which NOHO works has not been confirmed through clinical testing, field tests conducted throughout the country have demonstrated NOHO’s effectiveness. NOHO is intended to replenish common electrolytes and trace elements lost by alcohol consumption.
To date, NOHO is in over 20,000 retail outlets in America and available in 6 countries.
Going Concern
The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. As of January 31, 2013 the Company had an accumulated deficit of 43,780. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
The Company is currently contemplating an offering of its equity or debt securities to finance continuing operations. There are no agreements or arrangements currently in place or under negotiation to obtain such financing, and there are no assurances that the Company will be successful and without sufficient financing it would be unlikely for the Company to continue as a going concern.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations.
RESULTS OF OPERATIONS
In the three months ended January 31, 2013 and January 31, 2012 we did not generate any revenues.
Operating expenses during the three months ended January 31, 2013 were $29,336, $28,615 of which was professional fees associated with legal and accounting expenses and the remaining $721 was related to general and administrative costs. In comparison, operating expenses for the three months ended January 31, 2012 were $3,803, of which $3,740 was in professional fees and the remaining $63 was related to general and administrative costs. The increase in professional fees is due to increased legal work.
Liquidity and Capital Resources
As of January 31, 2013, we had $549 in cash and did not have any other cash equivalents. The following table provides detailed information about our net cash flow for all financial statement periods presented in this Quarterly Report. To date, we have financed our operations through the issuance of stock, unsecured lines of credit and limited revenues.
The following table summarizes total current assets, total current liabilities and working capital at January 31, 2013 compared to October 31, 2012.
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Increase / (Decrease)
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January 31, 2013
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October 31, 2012
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$
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%
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Current Assets
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$
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549
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$
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853
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$
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(304)
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35.6
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%
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Current Liabilities
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$
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32,407
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$
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3,375
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$
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29,032
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860.2
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%
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Working Capital (deficit)
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$
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(31,858
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)
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$
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(2,522)
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$
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29,336
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1,163.2
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%
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Liquidity is a measure of a company’s ability to meet potential cash requirements. We have historically met our capital requirements through the issuance of stock and by borrowings. In the future, we anticipate we will be able to provide the necessary liquidity needed from the revenues generated from operations but there is no assurance that this will happen.
Since inception, we have financed our cash flow requirements through issuance of common stock, and lines of credit. As we expand our activities, we may, and most likely will, continue to experience net negative cash flows from operations. Additionally we anticipate obtaining additional financing to fund operations through additional common stock offerings, to the extent available, or to obtain additional financing to the extent necessary to augment our working capital.
We anticipate that we will incur operating losses in the next twelve months. Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets. Such risks for us include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks, we must, among other things, develop a customer base, develop our marketing strategy, continually develop and upgrade our website, provide, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.
Operating activities
Net cash used in operating activities was $7,614 for the period ended January 13, 2013, as compared to $3,770 used in operating activities from for the period ended January 31, 2012. The increase in net cash used in operating activities was primarily due to an increase in professional fees, as a result of increased legal work.
Investing activities
Net cash used in investing activities was $0 for the period ended January 31, 2013 as compared to $0 used in investing activities for the same period in 2012.
On February 8, 2013, the Company executed a revolving line of credit with an entity that is controlled by an officer of the Company. The Company agreed to loan to the related party up to $120,000. The loan is due upon demand and bears interest at 0%. During the month ended February 28, 2013, the Company loaned a total of $61,000 to the related party. During March 2013, the Company loaned an additional $81,200 to the related party. The Company is currently negotiating with the related party to increase the line of credit.
Financing activities
Net cash provided by financing activities for the period ended January 31, 2013 was $ 7,476, as compared to $3,770 for the same period of 2012. The increase of net cash provided by financing activities was mainly attributable to capital provided through previously executed line of credit and related party loans.
During the month ended February 28, 2013, the Company repaid $3,250 of a loan due to a related party.
On March 11, 2013, the Company received a loan for $4,500. The loan is due upon demand and bears 0% interest.
We believe that cash flow from operations will not meet our present and near-term cash needs and thus we will require additional cash resources, including the sale of equity or debt securities, to meet our planned capital expenditures and working capital requirements for the next 12 months. We will require additional cash resources due to changed business conditions, finalization and launch of our website, implementation of our strategy to expand our sales and marketing initiatives, increase brand and services awareness. If our own financial resources and then current cash-flows from operations are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities will result in dilution to our stockholders. The incurrence of indebtedness will result in increased debt service obligations and could require us to agree to operating and financial covenants that could restrict our operations or modify our plans to grow the business. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, will limit our ability to expand our business operations and could harm our overall business prospects.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
