News Column

OURNETT HOLDINGS, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations

August 19, 2014

The following discussion and analysis summarizes the significant factors affecting our condensed consolidated results of operations, financial condition and liquidity position for the three and nine months ended June 30, 2014. This discussion and analysis should be read in conjunction with our audited financial statements and notes for the period from August 26, 2013 (inception) through June 30, 2014 thereto included in our recently filed Form S-1 Registration Statement and the condensed consolidated unaudited financial statements and related notes included elsewhere in this filing. The following discussion and analysis contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.

Forward Looking Statements



Some of the statements contained in this prospectus that are not historical facts are "forward-looking statements" which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this prospectus, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:

? Our ability to attract and retain management; ? Our ability to raise capital when needed and on acceptable terms and conditions; ? The intensity of competition; and ? General economic conditions.



All written and oral forward-looking statements made in connection with this prospectus that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.

Plan of Operation



To date, we have been focused on forming our company and other administrative matters in addition to developing our website and negotiating agreements with merchants and marketing partners or bloggers. In addition, we have also begun our evaluation of outside web designs, software developers and other service providers.

From August 2013 through the date hereof, we have incurred approximately $49,650 in expenses associated with the development of our ecommerce solution representing approximately3,500 work hours. We have a team divided into three departments ((i) Management and Design, (ii) Development and (iii) Computer Programming) and a multidisciplinary group has worked to develop the design, the applications, the software and server. The work that has been done to date has been in connection with design of the website, the backend solution, the development of APPS and development of 3D APPS.

With respect to the web architecture, we have elected to not utilize open sources but have instead elected to develop the web architecture from the ground up providing us with additional security.

The applications that have been developed are available for IOS and are being adapted for Android platforms. These include geolocator for businesses, shows and events, amusement games for children and travel notebooks.

Ournett has also negotiated with Best Buy and Softlayer to handle purchases for future bloggers and users. We have also engaged a musician and artist.

Our specific goal is to: - continue to engage consultants for the design and development of our web site and e-commerce platform; and - negotiate and finalize agreements with bloggers to assist in the marketing and advertizing of our e-commerce marketplace. 11



Until our website is fully operational, our network infrastructure and transaction processing systems are in place we will not be able to provide our services. We believe that we will have to spend approximately $10,000 in order to ensure that our website is fully operational and our network infrastructure and transaction processing systems are in place. We expect that our website will be fully functional no later than August 31, 2014. While developing our website, we expect to concurrently finalize our agreements with our bloggers. If we are unable to negotiate suitable terms with service providers to develop and maintain our website and software and to attract customers to our website, we may have to suspend or cease operations.

If we cannot generate sufficient revenues to continue operations, we will suspend or cease operations. If we cease operations, we do not know what we will do and we do not have any plans to do anything else. Once the website goes live, we expect that we will need to spend at minimum $25,000 per year to maintain our website. Further, following the effective date of this prospectus, we will be a reporting company and in order to comply with such reporting requirements, we will incur additional administrative expenses including substantial legal and accounting expenses. We expect such fees to be approximately $75,000 per year. As a result of our expected expenses, we will be required to raise additional debt or equity financing of which there is no guarantee that such financing will be available or available on acceptable terms.

Limited Operating History; Need for Additional Capital

There is no historical financial information about us upon which to base an evaluation of our performance. We are in development stage operations and have not generated any revenues. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns.

To become profitable and competitive, we have to develop our website, network infrastructure, and transaction processing systems; and secure third parties to create the website, services and software to be offered on our website. We are seeking equity financing to provide for the capital required to implement our operations. We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.

Results of Operations



For the three months and nine months ended June 30, 2014, the Company incurred net losses from operations in the amount of $62,793 and $224,649, respectively, and has an accumulated deficit in the amount of $304,532 for the period from Inception to June 30, 2014. For the three months and nine months ended June 30, 2014, the Company incurred general and administrative expenses in the amount of $62,614 and $224,154, respectively. We anticipate our operating expenses will increase as we undertake our plan of operations. The increase will be attributed to costs associated with setting up and maintaining our website, and the professional fees to be incurred in connection with the filing of a registration statement with the Securities Exchange Commission under the Securities Act of 1933. We anticipate our ongoing operating expenses will also increase once we become a reporting company under the Securities Exchange Act of 1934.

Liquidity and Capital Resources

Our future capital requirements and the adequacy of available funds will depend on numerous factors, including the successful commercialization of our marketplace, competing technological and market developments, and the development of strategic alliances for the development and marketing of our products. Our company intends to try to obtain additional funds through equity or debt financing, strategic alliances with corporate partners and others, or through other sources.

As of June 30, 2014, we had $840 of cash on hand. As of August 12, 2014, we currently have $25,167. We expect that we will be able to continue in operations until September 2014

On September 19, 2013, we executed an unsecured, non-interest bearing, due on September 18, 2023 promissory note payable to Alfonso Lloret Garcia, a shareholder of our company, in the amount of $1,896. Pursuant to the terms of the note, the loan is interest bearing at 1% per year, on the outstanding balance, due on the maturity date.

On September 19, 2013, we executed an unsecured, non-interest bearing, due on September 18, 2023 promissory note payable to Acisclo Perez Moral, a shareholder of our company, in the amount of $23,024. Pursuant to the terms of the note, the loan is interest bearing at 1% per year, on the outstanding balance, due on the maturity date.

On September 19, 2013, we executed an unsecured, non-interest bearing, due on September 18, 2023 promissory note payable to Jose Corominas Soler, a shareholder of our company, in the amount of $24,980. Pursuant to the terms of the note, the loan is interest bearing at 1% per year, on the outstanding balance, due on the maturity date.

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On September 19, 2013, we executed an unsecured, non-interest bearing, due on September 18, 2023 promissory note payable to Ruperto Serra Roldos, a shareholder of our company, in the amount of $12,092. Pursuant to the terms of the note, the loan is interest bearing at 1% per year, on the outstanding balance, due on the maturity date.

On March 6, 2014, a shareholder loaned our company $6,425 in consideration of a promissory note with a ten year term due and payable in March 2024 with interest that accrues at 1% per annum. In addition, during the quarter ended June 30, 2014, the shareholder purchased 287,500 shares of common stock at a per share purchase price of $0.014 for consideration of $4,025. The investor had a pre-existing relationship with the Company and had previously invested in the Company during the quarter ended September 30, 2013.

On June 3, 2014 the Company executed an unsecured, interest bearing, due on June 3, 2024 promissory note payable to its stockholder in the amount of $10,000. Pursuant to the terms of the note, the loans are interest bearing at 1% per year, on the outstanding balance, due on the maturity date.

On August 4, 2014 the Company executed an unsecured, interest bearing, due on August 4, 2024 promissory note payable to an unrelated party in the amount of $25,000 . Pursuant to the terms of the note, the loans are interest bearing at 1% per year, on the outstanding balance, due on the maturity date.

As a result of the above financings, we have promissory notes outstanding in the aggregate principal amount of $78,417 as of June 30, 2014.

In the event Ournett's plans change or its assumptions change or prove to be inaccurate or the funds available prove to be insufficient to fund operations at the planned level (due to further unanticipated expenses, delays, problems or otherwise), Ournett could be required to obtain additional funds earlier than expected. Ournett does not have any committed sources of additional financing, and there can be no assurance that additional funding, if necessary, will be available on acceptable terms, if at all. If adequate funds are not available, we may be required to further delay, scale-back, or eliminate certain aspects of our operations or attempt to obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to certain of our technologies, product candidates, products, or potential markets. If adequate funds are not available, Ournett 's business, financial condition, and results of operations will be materially and adversely affected.

Until required for operations, Ournett's policy will be to invest its cash reserves in bank deposits. Ournett expects that its operating results will fluctuate significantly from quarter to quarter in the future and will depend on a number of factors, most of which are outside Ournett's control.

Off-Balance Sheet Arrangements

We have no significant 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 stockholders.

Going Concern



As reflected in the accompanying condensed consolidated unaudited financial statements, the Company has no revenues, used cash in operations of $217,847 from inception and has an accumulated deficit of $304,532 through June 30, 2014. This raises substantial doubt about its ability to continue as a going concern. Management has yet to decide what type of offering we will use or how much capital we will attempt to obtain. There is no guarantee that we will be able to raise any capital through any type of offerings.

Critical Accounting Policies

Our unaudited condensed financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company has adopted Accounting Standards Update (ASU) No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The amendments in this ASU remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, including the removal of Topic 915, Development Stage Entities, from the FASB Accounting Standards Codification™. Other than the elimination of the inception to date information, there were no other changes to the financial statements.

A development stage entity is one that devotes substantially all of its efforts to establishing a new business and for which: (a) planned principal operations have not commenced; or (b) planned principal operations have commenced, but have produced no significant revenue. For example, many start-ups or even long-lived organizations that have not yet begun their principal operations or do not have significant revenue would be identified as development stage entities.

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For public business entities, the presentation and disclosure requirements in Topic 915 will no longer be required for the first annual period beginning after December 15, 2014. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. Early adoption is permitted.

There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's financial position, results of operations or cash flows

On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that ASU No. 2014-09 will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method or determined the effect of the standard on our ongoing financial reporting.


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Source: Edgar Glimpses


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