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EX-31.1 - Sputnik Enterprises, Incv184737_ex31-1.htm
EX-32.1 - Sputnik Enterprises, Incv184737_ex32-1.htm

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

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2010
 
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________________ to ______________

Commission file number 333-126158

SPUTNIK ENTERPRISES, INC.

(Exact name of small business issuer as specified in its charter)

Nevada
52-2348956
(State or other jurisdiction of incorporation or
organization)
(IRS Employer Identification No.)

650 5th Street, Suite 301
San Francisco, CA 94107

  (Address of principal executive offices)

(415) 355-9500

  (Issuer’s telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 check mark 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-2 of the Exchange Act.

Large accelerated filer
¨
 
Accelerated filer
¨
Non-accelerated filer
¨
 
Smaller Reporting Company
x

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 May 11, 2010 there were 295,286 shares issued and outstanding of the registrant’s common stock.


 
 

 

INDEX
 
   
Page
PART I.
FINANCIAL INFORMATION
 
     
Item 1.
Unaudited Financial Statements
3
     
 
Balance Sheets as of March 31, 2010 and December 31, 2009 (unaudited)
3
     
 
Statements of Operations for the Three Months Ended March 31, 2010 and 2009, and from re-entering the development stage, February 29, 2008 to March 31, 2010 (unaudited)
4
     
 
Statements of Cash Flows for the Three Ended March 31, 2010 and 2009, and from re-entering the development stage, February 29, 2008 to March 31, 2010 (unaudited)
5
     
 
Notes to Unaudited Financial Statements
6
     
Item 2.
Management’s Discussion and Analysis or Plan of Operation
8
     
Item 3.
Quantitative and Qualitative Disclosure about Market Risk
9
     
Item 4.
Controls and Procedures
9
     
PART II.
OTHER INFORMATION
 
     
Item 1.
Legal Proceedings
9
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
9
     
Item 3.
Defaults Upon Senior Securities
11
     
Item 4.
Submission of Matters to a Vote of Security Holders
11
     
Item 5.
Other Information
11
     
Item 6.
Exhibits
11
     
Signatures
 
11
 
 
2

 

PART I — FINANCIAL INFORMATION
 
Item 1.
Financial Statements.

SPUTNIK ENTERPRISES, INC.
 (A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
 (unaudited)

   
March 31,
2010
   
December 31,
2009
 
ASSETS
           
Current Assets
           
Cash
  $ -     $ -  
Total Current Assets
    -       -  
                 
TOTAL ASSETS
  $ -     $ -  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
                 
Current Liabilities
               
Accrued liabilities
  $ -     $ -  
Note payable
    25,000       25,000  
Total Current Liabilities
    25,000       25,000  
                 
Stockholders' Deficit
               
Common stock, $.001 par value, 50,000,000 shares authorized, 295,278  shares issued and outstanding in both periods
    295       295  
Paid-in capital
    1,948,168       1,943,601  
Accumulated deficit from development stage
    (60,600 )     (56,033 )
Accumulated deficit from prior operations
    (1,912,863 )     (1,912,863 )
Total Stockholders' Deficit
    (25,000 )     (25,000 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  $ -     $ -  

 
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SPUTNIK ENTERPRISES, INC.
 (A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(unaudited)

   
Three Months Ended
   
Re-entering
Development Stage
 
   
March 31,
   
to
 
   
2010
   
2009
   
March 31, 2010
 
                   
Revenue
  $ -     $ -     $ -  
Cost of goods sold
    -       -       -  
Gross profit
    -       -       -  
                         
Expenses:
                       
General and administrative costs
    4,067       2,064       58,100  
Total operating expense
    4,067       2,064       58,100  
Operating Loss
    (4,067 )     (2,064 )     (58,100 )
                         
Interest expense
    500       500       2,500  
                         
NET LOSS
  $ (4,567 )   $ (2,564 )   $ (60,600 )
                         
Basic and diluted loss per share
  $ ( 0.02 )   $ ( 0.00 )        
Weighted average shares outstanding
    295,286       295,286          

See notes to financial statements.

 
4

 
 
SPUTNIK ENTERPRISES, INC.
 (A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
 (unaudited)

   
Three Months Ended
March 31,
   
Re-entering
Development Stage
 
   
2010
   
2009
   
to March 31, 2010
 
Cash Flows from Operating Activities
                 
Net loss from operations
  $ (4,567 )   $ (2,564 )   $ (60,600 )
Adjustments to reconcile net loss to cash used in operating activities:
                       
Imputed interest on note payable
    500       500       3,499  
Note payable issued for legal expenses
            -       25,000  
Net cash used in operating activities
    (4,067 )     (2,064 )     (32,101 )
                         
Cash Flows from Investing Activities
                       
Cash distributed in spin off
    -       -       -  
Net cash used in investing activities
    -       -       -  
                         
Cash Flows from Financing Activities
                       
Line of credit
    -       -       -  
Donated capital
    4,067     - 2,064       32,101  
Proceeds from advance from shareholder
    -       -       -  
Net cash provided by financing activities
    4,067       2,064       32,101  
                         
Net change in cash
    -       -       -  
Cash at beginning of period
    -       -       -  
Cash at end of period
  $ -     $ -     $ -  
                         
Supplemental Disclosures of Cash Flow Information
                       
Cash paid for interest
  $ -     $ -     $ -  
Cash paid for income taxes
    -       -       -  
 
 
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SPUTNIK ENTERPRISES, INC.
 (A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
(unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Sputnik Enterprises, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with Sputnik’s audited 2009 annual financial statements and notes thereto filed with the SEC on form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the result of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements, which would substantially duplicate the disclosure required in Sputnik’s 2009 annual financial statements have been omitted.

Recently Adopted Accounting Pronouncements

Effective June 30, 2009, the Company adopted a new accounting standard issued by the FASB related to the disclosure requirements of the fair value of the financial instruments. This standard expands the disclosure requirements of fair value (including the methods and significant assumptions used to estimate fair value) of certain financial instruments to interim period financial statements that were previously only required to be disclosed in financial statements for annual periods. In accordance with this standard, the disclosure requirements have been applied on a prospective basis and did not have a material impact on the Company’s financial statements.

On September 30, 2009, Sputnik adopted changes issued by the Financial Accounting Standards Board (FASB) to the authoritative hierarchy of GAAP.  These changes establish the FASB Accounting Standards Codification (Codification) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP.  Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants.  The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates.  Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the Codification.  These changes and the Codification itself do not change GAAP.  Other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on the Financial Statements.

Recently Issued Accounting Standards

In August 2009, the FASB issued an amendment to the accounting standards related to the measurement of liabilities that are recognized or disclosed at fair value on a recurring basis. This standard clarifies how a company should measure the fair value of liabilities and that restrictions preventing the transfer of a liability should not be considered as a factor in the measurement of liabilities within the scope of this standard. This standard is effective for the Company on October 1, 2009. The Company does not expect the impact of its adoption to be material to its financial statements.

In October 2009, the FASB issued an amendment to the accounting standards related to the accounting for revenue in arrangements with multiple deliverables including how the arrangement consideration is allocated among delivered and undelivered items of the arrangement. Among the amendments, this standard eliminated the use of the residual method for allocating arrangement considerations and requires an entity to allocate the overall consideration to each deliverable based on an estimated selling price of each individual deliverable in the arrangement in the absence of having vendor-specific objective evidence or other third party evidence of fair value of the undelivered items. This standard also provides further guidance on how to determine a separate unit of accounting in a multiple-deliverable revenue arrangement and expands the disclosure requirements about the judgments made in applying the estimated selling price method and how those judgments affect the timing or amount of revenue recognition. This standard, for which the Company is currently assessing the impact, will become effective for the Company on January 1, 2011.

 
6

 

In October 2009, the FASB issued an amendment to the accounting standards related to certain revenue arrangements that include software elements. This standard clarifies the existing accounting guidance such that tangible products that contain both software and non-software components that function together to deliver the product’s essential functionality, shall be excluded from the scope of the software revenue recognition accounting standards. Accordingly, sales of these products may fall within the scope of other revenue recognition standards or may now be within the scope of this standard and may require an allocation of the arrangement consideration for each element of the arrangement. This standard, for which the Company is currently assessing the impact, will become effective for the Company on January 1, 2011.

NOTE 2 - GOING CONCERN

The accompanying financial statements have been prepared assuming that Sputnik will continue as a going concern. As shown in the accompanying financial statements, Sputnik suffered losses of $4,567 for the three months ended March 31, 2010 and has an accumulated deficit of $1,973,463 at March 31, 2010. These conditions raise substantial doubt as to Sputnik's ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if Sputnik is unable to continue as a going concern.

NOTE 3 – ACCOUNTING POLICIES

The Company is now considered a development stage enterprise pursuant to FASB Literature, which focuses on development stage companies. Users of the financial statements should be familiar with this Literature and its effect on the financial statements.

NOTE 4 – NOTE PAYABLE

On July 1, 2008, the Company issued a note in the amount of $25,000 to legal counsel, Michael T. Williams, for legal expenses. The note is due on demand and has no stated interest rate. Imputed interest in the amount of $500 is reflected as an increase to additional paid in capital for the three months ended March 31, 2010.

As of January 1, 2010, for additional consideration consisting of further legal services, we agreed that the promissory note in the amount of $25,000 dated July 1, 2008 from us to Michael T. Williams can be converted on or after July 1, 2010 into common stock with such conversion terms and rights as may be agreed by the parties in the future; provided, however, that the number of shares of common stock to be issued upon conversion shall not exceed the total authorized but unissued shares of common stock at the date of conversion and the conversion price will not be below market price at the date of conversion.

NOTE 5 – EQUITY

We have agreed to issue 10,000,000 shares to Sputnik Enterprises, Inc., an affiliate.  We have not yet agreed upon the issue date or the price and terms of this issuance.  However, we have agreed that these shares will not be issued at a value less than the fair market value on the date of issuance and will not be issued unless there are sufficient authorized and unissued shares to permit this issuance.

NOTE 6 – SUBSEQUENT EVENT

There were no subsequent events from the end of the quarter to the date of issuance of this filing.

 
7

 

Item 2.
Management’s Discussion and Analysis or Plan of Operation.
 
This 10−Q contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the audited consolidated financial statements and accompanying notes and the other financial information appearing else where in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events. Refer also to "Cautionary Note Regarding Forward Looking Statements" and “Risk Factors” below.
 

Overview

Sputnik, Inc. was incorporated in Delaware on September 27, 2001.  On February 10, 2005, we filed Articles of Conversion and new Articles of Incorporation in Nevada and became a Nevada corporation due to lower corporate filing fees.

On November 13, 2007, we formed a wholly owned subsidiary, Laika, Inc., and transferred all of our assets and liabilities to Laika. On February 29, 2008, we closed the sale of the stock of our wholly owned subsidiary, Laika, Inc. to AstroChimp, Inc., leaving us as a shell company. We also changed our name to Sputnik Enterprises on February 29, 2008.

Results of Operations for the Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009

Due to the fact that we were a shell company in both periods, we had revenues of $0 for the three months ended March 31, 2010, which was unchanged from our revenue of $0 for the three months ended March 31, 2009. Also related to our continuing status as a shell company, our cost of goods sold and gross profits were $0 in both periods.

Our net loss for the three months ended March 31, 2010 was $4,567, which was an increase of $2,003 from our net loss of $2,564 in the three-month period ended March 31, 2009. The increase is due to a difference in accounting expense and is immaterial.

Liquidity and Capital Resources

On February 29, 2008, we closed the sale of the stock of our wholly owned subsidiary, Laika, Inc. to AstroChimp, Inc., leaving us as a shell company.  All expenses will be funded as an advance by our officers as we have no assets, liabilities or source of revenues.
 
Cautionary Note About Forward-Looking Statements
 
The information contained in this Report includes some statements that are not purely historical and are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and as such, may involve risks and uncertainties. These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, perceived opportunities in the market and statements regarding our mission and vision. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. You can generally identify forward-looking statements as statements containing the words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, but the absence of these words does not mean that a statement is not forward-looking. For example, our forward-looking statements may include statements regarding:

 
8

 

 
·
Our projected sales and profitability,
 
 
·
Our growth strategies,
 
 
·
Anticipated trends in our industry,
 
 
·
Our future financing plans, and
 
 
·
Our anticipated needs for working capital.
 
In light of these risks, uncertainties and assumptions, the future events, developments or results described by our forward-looking statements herein could turn to be materially different from those we discuss or imply.
  
Item 3.  Quantitative and Qualitative Disclosure about Market Risk

Not applicable.

Item 4.
Controls and Procedures.
 
Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act (defined below)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud.  A control system, no matter how well conceived and   operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.  Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

Changes in Internal Control Over Financial Reporting
  
In addition, our management with the participation of our Principal Executive Officer and Principal Financial Officer have determined that no change in our internal control over financial reporting occurred during or subsequent to the quarter ended March 31, 2010 that has materially affected, or is (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Securities Exchange Act of 1934) reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
 
Item 1.
Legal Proceedings.
 
None.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
 
(a)
Unregistered Sales of Equity Securities.

 
9

 

The Registrant did not sell any unregistered securities during the three months ended March 31, 2010.
 
(b)
Use of Proceeds.
 
The Registrant did not sell any unregistered securities during the three months ended March 31, 2010.

 
10

 

Item 3.
Defaults Upon Senior Securities
 
None.

Item 4.
Submission of Matters to a Vote of Security Holders.
 
The Registrant did not submit any matters to a vote of its security holders during the three-months ended March 31, 2010.

Item 5.
Other Information.
 
Not applicable.

Item 6.
Exhibits.
 
(a) Exhibits.

Exhibit
 
Item
31.1
 
Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
32.1*
 
Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002

*  This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
SPUTNIK ENTERPRISES,INC.
     
Date: May 12, 2010
By:  
/s/ David LaDuke
     
   
(Authorized Officer and Principal Executive Officer)

 
11

 

EXHIBIT INDEX
 
Exhibit
 
Item
31.1
 
Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
32.1*
 
Certification of Principal Executive and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 

*  This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general

 
12