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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-K
 
(Mark One)
 
x   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011
 
¨   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number 000-52366
 
Sputnik Enterprises Inc.
 (Exact name of registrant as specified in its charter)
 
Nevada
 
52-234-8956
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)

3020 BRIDGEWAY SUITE 400, SAUSALITO CA 94965
(Address of principal executive offices)

(415) 355-9500
(Registrant’s telephone number, including area code)
 
___________________________________________________
Securities registered under Section 12(b) of the Exchange Act:

None.

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.001 par value per share
(Title of Class)
 
Check whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ¨  No x

Check whether the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. ¨
 
 

 
Check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 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 x    No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive  Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x     No o
 
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K (§229.405 of this chapter) contained herein, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Check whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer
o
Accelerated Filer
¨
Non-accelerated Filer
o
Smaller Reporting Company
x
(Do not check if a smaller reporting company.)
     

Check whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes x  No o

The aggregate market value of the Registrant’s Common Stock held by non-affiliates of the Registrant (based upon the closing price of the Registrant’s Common Stock as of June 30, 2011 was approximately $676,430 (based on 135,286 shares of common stock outstanding held by non-affiliates on such date, $5 per share).  Shares of the Registrant’s Common Stock held by each executive officer and director and by each entity or person that, to the Registrant’s knowledge, owned 5% or more of the Registrant’s outstanding Common Stock as of June 30, 2011 have been excluded in that such persons may be deemed to be affiliates of the Registrant.  This determination of affiliate status is not necessarily a conclusive determination for other purposes.
 
APPLICABLE ONLY TO CORPORATE REGISTRANTS

As of March 23, 2012, there were 295,278 shares of common stock, par value $.001, outstanding.
 


 
 

 
INDEX

     
Page Number
 
PART I
Item Number
     
Item 1
Description of Business
    4  
Item 1A
Risk Factors
    4  
Item 1B
Unresolved Staff Comments
    4  
Item 2
Description of Property
    4  
Item 3
Legal Proceedings
    4  
Item 4
Removed and Reserved
    4  
           
PART II
           
Item 5
Market for Common Equity and Related Stockholder Matters
    5  
Item 6
Management's Discussion and Analysis or Plan of Operation
    6  
Item 7
Quantitative and Qualitative Disclosures About Market Risk
    6  
Item 7A
Quantitative and Qualitative Disclosures about Market Risk.
    7  
Item 8
Financial Statements
    7  
Item 9  
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    7  
Item 9A  
Controls and Procedures
    8  
Item 9B
Other Information
    8  
           
PART III
           
Item 10
Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
    9  
Item 11  
Executive Compensation
    10  
Item 12  
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    11  
Item 13  
Certain Relationships and Related Transactions, and Director Independence
    11  
Item 14  
Principal Accountant Fees and Services
    12  
Item 15  
Exhibits
    13  
Signatures  
    15  

 
3

 
 
PART I

Item 1. Description of Business.

Sputnik Enterprises Inc. (“we”, “us”, “our”, the "Company") was incorporated in the State of Delaware on September 27, 2001 under the name Sputnik, Inc. On February 10, 2005, we filed Articles of Conversion and new articles of incorporation in Nevada and became a Nevada corporation. From that time until February 29, 2008 the Company developed and marketed Wi-Fi software, services, and hardware for the public access wireless networking market.

On November 13, 2007 we formed a wholly owned subsidiary, Laika, Inc., and transferred all of our assets and liabilities to Laika.

On February 6, 2008, the Company amended its Articles of Incorporation to change the name of Sputnik, Inc. to Sputnik Enterprises, Inc. upon conclusion of the sale of the stock of Laika, Inc. to AstroChimp, Inc., a Nevada corporation wholly owned by David LaDuke, Sputnik’s President and Director.

On February 29, 2008, we closed the sale of the stock of our wholly owned subsidiary, Laika, Inc. to AstroChimp, Inc. for cancellation of a loan of $65,000 from David LaDuke to us, leaving us as a shell company.  AstroChimp is wholly-owned by Mr. LaDuke. Subsequently AstroChimp, Inc. changed its name to Sputnik, Inc. and continues to own and operate its business as a private entity.

Sputnik Enterprises seeks the consummation of a reverse merger with another operating company but following the sale of the stock of our wholly owned subsidiary, Laika, Inc. to AstroChimp, Inc. has had and will have no active operations until such reverse merger is finalized.

Item 1A. Risk Factors

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
 
Item 1B. Unresolved Staff Comments

None

Item 2. Description of Property.

The Company neither rents nor owns any properties. The Company utilizes the office space and equipment of its management at no cost. Management estimates such amounts to be immaterial.  The Company currently has no policy with respect to investments or interests in real estate, real estate mortgages or securities of, or interests in, persons primarily engaged in real estate activities.

Item 3. Legal Proceedings.

To the best knowledge of our officers and directors, the Company is not a party to any legal proceeding or litigation.

Item 4. Removed and Reserved.
 
 
4

 
 
PART II

Item 5. Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities.

Trading History

Our common stock is quoted on the Over-The-Counter Bulletin Board under the symbol “SPNI.”
 
Bid Information*

Financial Quarter Ended
 
High Bid
   
Low Bid
 
December 31, 2011
 
$
1.60
   
$
1.60
 
September 30, 2011
 
$
1.60
   
$
1.60
 
June 30, 2011
 
$
5.00
   
$
5.00
 
March 31, 2011
 
$
0.01
   
$
0.01
 
December 31, 2010
 
$
0.01
   
$
0.01
 
September 30, 2010
 
$
0.01
   
$
0.01
 
June 30, 2010
 
$
0.15
   
$
0.15
 
March 31, 2010
 
$
0.15
   
$
0.15
 

* The quotation do not reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

Common Stock

Our Certificate of Incorporation authorizes the issuance of up to 50,000,000 shares of common stock, par value $.001 per share (the “Common Stock”).  The Common Stock is listed on the OTC-BB with the symbol SPNI.OB.  As of March 23, 2012, there were 98 shareholders of record of the Common Stock.

Preferred Stock

On February 6, 2008, Sputnik amended our Articles of Incorporation to authorize the issuance of 10,000,000 shares which will be designated “Preferred Stock”. The Company has not yet issued any of its preferred stock. 

Dividend Policy

The Company has not declared or paid any cash dividends on its common stock and does not intend to declare or pay any cash dividend in the foreseeable future. The payment of dividends, if any, is within the discretion of the Board of Directors and will depend on the Company’s earnings, if any, its capital requirements and financial condition and such other factors as the Board of Directors may consider.
 
 
5

 

Securities Authorized for Issuance under Equity Compensation Plans

The Company does not have any equity compensation plans or any individual compensation arrangements with respect to its common stock or preferred stock. The issuance of any of our common or preferred stock is within the discretion of our Board of Directors, which has the power to issue any or all of our authorized but unissued shares without stockholder approval.

Recent Sales of Unregistered Securities

None

Issuer Purchases of Equity Securities

None.

Item 6.  Selected Financial Data

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information. 

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operation

Sputnik Enterprises seeks the consummation of a reverse merger with another operating company. The Company currently does not engage in any business activities that provide cash flow.  During the next twelve months we anticipate incurring costs related to:

 
(i)
filing Exchange Act reports, and

 
(ii)
investigating, analyzing and consummating a reverse merger.

We believe we will be able to meet these costs through use of funds loaned to or invested in us by our stockholders, management or other investors.

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.

On December 31, 2011 we had total assets of $0 compared to assets of $0 at December 31, 2010 as a result of discontinuing our operations.
 
 
6

 

We had total liabilities of $25,000 as of December 31, 2011, which consisted of current liabilities and was comprised solely of a $25,000 note payable. We had an accumulated deficit from prior operations of $1,912,863 and an accumulated deficit from development stage of $82,145, as of December 31, 2011.

We had net cash used of ($11,155) for the year ended December 31, 2011, which consisted of net loss from operations of ($13,155) and imputed interest on note payable of $2,000.

We had $11,155 in net cash provided by financing activities for the year ended December 31, 2011 which consisted of $11,155 donated from a shareholder.
 
Results of Operations

Our net loss for the year ended December 31, 2011 was ($13,155) which was an increase of ($198) over our net loss for the year ended December 31, 2010, which was ($12,957).

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.  

Contractual Obligations

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Critical Accounting Policies
The financial reports for the period contained one additional critical accounting policy which was also an initial adoption of accounting policy that had a material impact.  Below is a brief discussion of events that materially affected our financial statements and the basis in which the transactions were recorded.

DEVELOPMENT STAGE ENTERPRISE - As a result of the Company’s sale of the operations of Sputnik, Inc., the Company is now considered a development stage enterprise pursuant to FASB Standards. Users of the financial statements should be familiar with this statement and its effect on the financial statements.
 
Item 7A.  Quantitative and Qualitative Disclosures about Market Risk.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Item 8.  Financial Statements.

The financial statements required by this Item 8 begin with the Index to the Financial Statements which is located prior to the signature page.
 
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None
 
 
7

 
 
Item 9A(T). 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 Exchange Act Rules 13a-15(e) and 15d-15(e)).  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 not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 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. To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. 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.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act, as amended.  Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2011. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.  A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.  We have identified the following material weaknesses.

 
1.
As of December 31, 2011, we did not maintain effective controls over the control environment.  Specifically we have not developed and effectively communicated to our employees its accounting policies and procedures.  This has resulted in inconsistent practices.  Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K.  Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

 
2.
As of December 31, 2011, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements.   Accordingly, management has determined that this control deficiency constitutes a material weakness.

Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2011, based on the criteria established in "Internal Control-Integrated Framework" issued by the COSO.

Change In Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our last fiscal year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
Item 9B. Other Information.

None.
 
 
8

 
 
PART III

Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act.

(a)  Identification of Directors and Executive Officers. The following table sets forth certain information regarding the Company’s directors and executive officers:

Name
 
Age
 
Position
David LaDuke
 
51
 
Director, Chief Executive Officer, President, Chief Financial Officer and Secretary

The following is information on the business experience of each director and officer.

Mr. LaDuke has served as President and Chief Executive Officer of Sputnik since February 2002. Since April 12, 2005, Mr. LaDuke has served as our Treasurer. Since November 2003, he has served as Secretary of Sputnik. In November 1998, he co-founded Linuxcare Inc. a provider of enterprise services for open-source software. He served as Vice President of Marketing there until April 2001. From June 2001 to July 2003 and March 1993 to November 1998, Mr. LaDuke was an independent consultant in technology, marketing and business strategy for various companies including Apple Computer, Crystal Decisions, Netscape Communications, Oracle Corporation, Pinnacle Systems, Silicon Graphics, and others. From November 1989 to February 1993, Mr. LaDuke worked as the manager of publishing industry marketing at NeXT Computer, Inc., a computer manufacturing company acquired by Apple Computer in 1996.  From September 1986 to October 1989, Mr. LaDuke worked in marketing positions at Apple Computer, Inc. Mr. LaDuke earned an M.B.A. from the Tuck School of Business Administration at Dartmouth College in 1985, an M.F.A. from Columbia University in 1983 and an A.B. from Columbia College, Columbia University in 1982.
 
(b)  Significant Employees.

As of the date hereof, the Company has no significant employees.

(c)  Family Relationships.

There are no family relationships among directors, executive officers, or persons nominated or chosen by the issuer to become directors or executive officers.
 
(d)   Involvement in Certain Legal Proceedings.
 
There have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any director, executive officer, promoter or control person of Registrant during the past five years.
 
Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires the Company’s directors and officers, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of beneficial ownership and changes in beneficial ownership of the Company’s securities with the SEC on Forms 3, 4 and 5. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
 
Based solely on the Company’s review of the copies of the forms received by it during the fiscal year ended December 31, 2011 and written representations that no other reports were required, the Company believes that no person(s) who, at any time during such fiscal year, was a director, officer or beneficial owner of more than 10% of the Company’s common stock failed to comply with all Section 16(a) filing requirements during such fiscal years.
 
 
9

 
 
Code of Ethics
 
The Company does not have a code of ethics for our principal executive and financial officers. The Company's management intends to promote honest and ethical conduct, full and fair disclosure in our reports to the SEC, and compliance with applicable governmental laws and regulations

Nominating Committee

We have not adopted any procedures by which security holders may recommend nominees to our Board of Directors.

Audit Committee

The Board of Directors acts as the audit committee. The Company does not have a qualified financial expert at this time because it has not been able to hire a qualified candidate. Further, the Company believes that it has inadequate financial resources at this time to hire such an expert.  The Company intends to continue to search for a qualified individual for hire.

Item 11. Executive Compensation.

Summary of Cash and Certain Other Compensation

The following sets forth the compensation of the Company's executive officers for the two fiscal years ended December 31, 2011.

Executive Officer Compensation Table
 
The named executive officers received the following compensation from Sputnik Enterprises during the fiscal year ended December 31, 2011 and December 31, 2010.

Name and Position
 
Year
   
Cash Compensation
 
Other Compensation
David LaDuke, current President and Director
    2011     $ 0  
None
      2010     $ 0   None

Director Compensation

We do not currently pay any cash fees to our directors, nor do we pay directors’ expenses in attending board meetings.

Employment Agreements

The Company is not a party to any employment agreements.
 
 
10

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

(a)           The following tables set forth certain information as of December 31, 2011, regarding (i) each person known by the Company to be the beneficial owner of more than 5% of the outstanding shares of Common Stock, (ii) each director, nominee and executive officer of the Company and (iii) all officers and directors as a group
 
Name and Address
 
Amount and Nature of
Beneficial Ownership
   
Percentage 
of Class
 
Sputnik, Inc.(1)
    160,000       54.2 %
                 
All Directors and Officers as a Group
(1 company)
    160,000       54.2 %
____________
(1)           David LaDuke is sole officer and director of Sputnik, Inc.

(b)           The Company currently has not authorized any compensation plans or individual compensation arrangements.

Item 13. Certain Relationships and Related Transactions.

During 2011, we have not entered into and as of December 31, 2011 we do not have any agreements to enter into any material transactions with any director, executive officer, and promoter, beneficial owner of five percent or more of our common stock, or family members of such persons.

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. for cancellation of $65,000 of David LaDuke to us, leaving us as a shell company. AstroChimp is wholly-owned by Mr. LaDuke.  The purchase price was not determined as a result of arms’-length negotiations.

Sputnik’s financial condition has continued to deteriorate since September 30, 2007. Sputnik’s liabilities now exceed its assets and it has negative shareholder equity and net worth.  Unless its business plan succeeds, it will cease operations. Sputnik has explored all other transaction structures which will allow Sputnik to implement its business plan and avoid ceasing operations and has determined that no other viable alternative exists.
 
 
11

 
 
Item 14.  Principal Accounting Fees and Services

The aggregate fees billed by our principal accounting firm, for fees billed for fiscal years ended December 31, 2011, and 2010 are as follows:

Name
 
Audit Fees(1)
   
Audit Related Fees
   
Tax Fees (2)
   
All Other Fees
 
M&K CPAS, PLLC
                       
for fiscal year ended:
                       
December 31, 2011 
  $ 7,850     $ 0     $ 0     $ 0  
December 31, 2010
  $ 8,100     $ 0     $ 0     $ 0  
___________
(1)
Includes audit fees for the annual financial statements of the Company, and review of financial statements included in the Company's Form 10-Q quarterly reports and Form 10-K annual reports, and fees normally provided in connection with statutory and regulatory filings for those fiscal years

The Company does not currently have an audit committee. As a result, our board of directors performs the duties and functions of an audit committee. The Company's Board of Directors will evaluate and approve in advance, the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. We do not rely on pre-approval policies and procedures.
 
 
12

 
 
Part IV

Item 15. Exhibits, Financial Statement Schedules

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-B.

Exhibit
 
Description
     
31
 
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
     
32
 
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002
 
101.INS **
 
XBRL Instance Document
     
101.SCH **
 
XBRL Taxonomy Extension Schema Document
     
101.CAL **
 
XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF **
 
XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB **
 
XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE **
 
XBRL Taxonomy Extension Presentation Linkbase Document

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 
13

 
 
SPUTNIK ENTERPRISES INC.
(A Development Stage Company)
 
INDEX TO FINANCIAL STATEMENTS
 
   
Page
 
       
Report of Independent Registered Public Accounting Firm
    F-1  
         
Financial Statements:
       
         
Balance Sheets
    F-2  
         
Statements of Operations
    F-3  
         
Statements of Cash Flows
    F-4  
         
Statement of Changes in Stockholders' Equity (Deficit)
    F-5  
         
Notes to Financial Statements
    F-6 to F-9  

 
14

 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors
Sputnik Enterprises Inc.
(A Development Stage Company)
 
 
We have audited the accompanying balance sheets of Sputnik Enterprises Inc. (a development stage company) as of December 31, 2011 and 2010, and the related statements of operations, changes in stockholders' equity (deficit), and cash flows for the years then ended and the period from re-entering the development stage (February 29, 2008) to December 31, 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sputnik Enterprises Inc. as of December 31, 2011 and 2010, and the results of its operations and cash flows for the periods described above in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
/s/ M&K CPAS, PLLC
 
www.mkacpas.com
Houston, Texas
March 23, 2012
 
 
F-1

 
 
SPUTNIK ENTERPRISES, INC.
(A Development Stage Company)
 
Balance Sheets
As of December 31, 2011 and 2010
 
   
December 31,
2011
   
December 31,
2010
 
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  
                 
Total  Liabilities
    25,000       25,000  
                 
Common stock, $.001 par value, 50,000,000 shares authorized, 295,278 shares issued and outstanding in both periods
    295       295  
   Paid-in capital
    1,969,713       1,956,558  
   Accumulated deficit from development stage
    (82,145 )     (68,990 )
   Accumulated deficit from prior operations
    (1,912,863 )     (1,912,863 )
Total Stockholders' Deficit
    (25,000 )     (25,000 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  $ -     $ -  

The accompanying notes are an integral part of these financial statements.
 
 
F-2

 
 
SPUTNIK ENTERPRISES, INC.
(A Development Stage Company)
 
Statements of Operations
Years Ended December 31, 2011 and 2010 and the Period From
Re-entering Development Stage (February 29, 2008)  to December 31, 2011
 
   
Years Ended December 31,
   
Re-entering Development Stage (February 29, 2008) to
December 31,
 
   
2011
   
2010
   
2011
 
Revenue
  $ -     $ -     $ -  
Cost of goods sold
    -       -       -  
                         
Gross profit
    -       -       -  
                         
Expenses
                       
General and administrative costs
    11,155       10,957       76,145  
  Total operating expense
    11,155       10,957       76,145  
                         
Operating Loss
    (11,155 )     (10,957 )     (76,145 )
                         
Interest expense
    2,000       2,000       6,000  
NET LOSS
  $ (13,155 )   $ (12,957 )   $ (82,145 )
                         
                         
Loss per common share – basic and diluted
  $ (0.04 )   $ (0.04 )        
                         
Weighted average shares outstanding
    295,278       295,278          

The accompanying notes are an integral part of these financial statements.
 
 
F-3

 

SPUTNIK ENTERPRISES, INC.
(A Development Stage Company)
 
Statements of Cash Flows
Years Ended December 31, 2011 and 2010 and the Period From
Re-entering Development Stage (February 29, 2008)  to December 31, 2011

   
2011
   
2010
   
Re-entering Development Stage (February 29, 2008) to December 31, 2011
 
Cash Flows from Operating Activities
                 
Net loss from operations
  $ (13,155 )   $ (12,957 )   $ (82,145 )
Adjustments to reconcile net loss to net
                       
           cash used in operating activities:
                       
Imputed interest on note payable
    2,000       2,000       6,999  
Note payable issued for legal expenses
    -       -       25,000  
Changes in working capital:
                       
  Accounts payable and accrued liabilities
    -       -       -  
Net cash used in operating activities
    (11,155 )     (10,957 )     (50,146 )
                         
Cash Flows from Investing Activities
                       
Net cash used in investing activities
            -          
                         
Cash Flows from Financing Activities
                       
Donated capital from shareholder
    11,155       10,957       50,146  
Net cash provided by financing activities
    11,155       10,957       50,146  
                         
Net change in cash
    -       -       -  
Cash at beginning of year
    -       -       -  
Cash at end of year
  $ -     $ -     $ -  
                         
Supplemental Disclosures of Cash Flow Information
                       
Cash paid for interest
  $ -     $ -     $ -  
Cash paid for income taxes
    -       -       -  
                         
 
 
 
F-4

 
 
SPUTNIK ENTERPRISES, INC.
(A Development Stage Company)
 
Statement of Changes in Stockholders’ Equity (Deficit)
Years Ended December 31, 2011 and 2010
 
          Additional    
Accumulated
(Deficit)
    Total  
 
 
Common Stock
   
Paid-in
   
Development
   
Prior
   
Stockholders'
 
   
Number of Shares
   
Amount
   
Capital
   
Stage
   
Operations
   
Deficit
 
Balance - December 31, 2009
    295,278       295       1,943,601       (56,033 )     (1,912,863 )     (25,000 )
                                                 
Imputed interest
    -       -       2,000       -       -       2,000  
                                                 
Donated capital from shareholder
    -       -       10,957       -       -       10,957  
                                                 
Net loss
    -       -       -       (12,957 )     -       (12,957 )
                                                 
Balance – December 31, 2010
    295,278       295       1,956,558       (68,990 )     (1,912,863 )     (25,000 )
                                                 
Imputed interest
    -       -       2,000       -       -       2,000  
                                                 
Donated capital from shareholder
    -       -       11,155       -       -       11,155  
                                                 
Net loss
    -       -       -       (13,155 )     -       (13,155 )
                                                 
Balance – December 31, 2011
    295,278     $ 295     $ 1,969,713     $ (82,145 )   $ (1,912,863 )   $ (25,000 )
 
The accompanying notes are an integral part of these financial statements.
 
 
F-5

 
 
SPUTNIK ENTERPRISES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
 
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

History

Sputnik Enterprises Inc. was incorporated in the State of Delaware on September 27, 2001 under the name Sputnik, Inc. On February 10, 2005, we filed Articles of Conversion and new articles of incorporation in Nevada and became a Nevada corporation. From that time until February 29, 2008 the Company developed and marketed Wi-Fi software, services, and hardware for the public access wireless networking market.

On November 13, 2007 we formed a wholly owned subsidiary, Laika, Inc., and transferred all of our assets and liabilities to Laika.

On February 6, 2008, the Company amended its Articles of Incorporation to change the name of Sputnik, Inc. to Sputnik Enterprises, Inc. upon conclusion of the sale of the stock of Laika, Inc. to AstroChimp, Inc., a Nevada corporation wholly owned by David LaDuke, Sputnik’s President and Director.

On February 29, 2008, we closed the sale of the stock of our wholly owned subsidiary, Laika, Inc. to AstroChimp, Inc. for cancellation of a loan of $65,000 from David LaDuke to us, leaving us as a shell company.  AstroChimp is wholly-owned by Mr. LaDuke. Subsequently AstroChimp, Inc. changed its name to Sputnik, Inc. and continues to own and operate its business as a private entity. The Company was considered to have re-entered the development stage at this time.

Sputnik Enterprises seeks the consummation of a reverse merger with another operating company but has had and will have no active operations until such reverse merger is finalized.

Basis of Presentation

The Company follows accounting principles generally accepted in the United States of America.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions.

Cash and Cash Equivalents

For purposes of the statements of cash flows, Sputnik Enterprises considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of December 31, 2011 and 2010, there were no cash equivalents.

Development Stage Company

The Company complies with Accounting Codification Standard 915-10 for its characterization of the Company as development stage.

Revenue Recognition

Sputnik Enterprises recognizes revenue when persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured.
 
 
F-6

 

Income Taxes

The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered.  The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets likely.

Basic and Diluted Net Loss per Share

Basic earnings per common share is computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share consists of the weighted average number of common shares outstanding plus the dilutive effects of options and warrants calculated using the treasury stock method. In loss periods, dilutive common equivalent shares are excluded as the effect would be anti-dilutive. At December 31, 2011 and 2010, no equivalents existed because the effect would be anti-dilutive.

Fair Value of Financial Instruments

Pursuant to ASC No. 820, “Fair Value Measurements and Disclosures”, the Company is required to estimate the fair value of all financial instruments included on its balance sheet as of December 31, 2011. The Company’s financial instruments consist of cash.  The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to the short-term nature of these financial instruments.

Recent Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. The guidance in ASU 2011-08 is intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Also, the amendments improve the examples of events and circumstances that an entity having a reporting unit with a zero or negative carrying amount should consider in determining whether to measure an impairment loss, if any, under the second step of the goodwill impairment test. The amendments in this ASU are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. The adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.

In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, which is effective for annual reporting periods beginning after December 15, 2011. ASU 2011-05 will become effective for the Company on January 1, 2012. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. In addition, items of other comprehensive income that are reclassified to profit or loss are required to be presented separately on the face of the financial statements. This guidance is intended to increase the prominence of other comprehensive income in financial statements by requiring that such amounts be presented either in a single continuous statement of income and comprehensive income or separately in consecutive statements of income and comprehensive income. The adoption of ASU 2011-05 is not expected to have a material impact on the Company’s financial position or results of operations.

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which is effective for annual reporting periods beginning after December 15, 2011. This guidance amends certain accounting and disclosure requirements related to fair value measurements. Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entity’s use of a nonfinancial asset that is different from the asset’s highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2011-04 will become effective for the Company on January 1, 2012.  The adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.
 
 
F-7

 

In April 2011, the FASB issued ASU 2011-02, “Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring”. This amendment explains which modifications constitute troubled debt restructurings (“TDR”). Under the new guidance, the definition of a troubled debt restructuring remains essentially unchanged, and for a loan modification to be considered a TDR, certain basic criteria must still be met. For public companies, the new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructuring occurring on or after the beginning of the fiscal year of adoption. The Company does not expect that the guidance effective in future periods will have a material impact on its financial statements.

NOTE 2 - GOING CONCERN

The accompanying financial statements have been prepared assuming that Sputnik Enterprises will continue as a going concern. As shown in the accompanying financial statements, Sputnik suffered losses of $13,155 for the year ended December 31, 2011  and has an accumulated deficit of $1,995,008 at December 31, 2011. 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 - RELATED PARTY TRANSACTIONS

During the years ended December 31, 2011 and 2010, the Company’s President paid expenses on behalf of the Company in the amounts of $11,155 and $10,957, respectively. These amounts are included in additional paid in capital.

NOTE 4 - INCOME TAXES

Sputnik uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. During fiscal 2011 and 2010, Sputnik incurred a net loss and therefore has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is $1,580,451 and $1,567,296 at December 31, 2011 and 2010, respectively, and will begin to expire in the year 2023.

At December 31, 2011 and 2010, deferred tax assets consisted of the following:
 
Deferred tax assets
 
2011
   
2010
 
   Net operating losses
  $ 537,353     $ 532,881  
   Less:  valuation allowance
    (537,353 )     (532,881 )
   Net deferred tax asset
  $ -     $ -  
 
 
F-8

 
 
NOTE 5 – NOTE PAYABLE

On July 1, 2008, the Company issued a note in the amount of $25,000 to legal counsel for legal expenses to be incurred. The note is due on demand and has no stated interest rate. Imputed interest in the amount of $2,000 calculated at 8% interest is reflected as an increase to additional paid in capital.
 
NOTE 6 – CAPITAL STOCK

On October 27, 2008, Sputnik Enterprises, Inc. executed a 50:1 reverse split of its stock, with fractional shares rounded up. All share information presented has been adjusted to reflect the reverse split.

NOTE 7 – FAIR VALUE ACCOUNTING
 
Fair Value Measurements

On January 1, 2008, the Company adopted ASC No. 820-10 (ASC 820-10), Fair Value Measurements.  ASC 820-10 relates to financial assets and financial liabilities.

ASC 820-10 defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (GAAP), and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively with limited exceptions.

ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This standard is now the single source in GAAP for the definition of fair value, except for the fair value of leased property as defined in SFAS 13. ASC 820-10 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions, about market participant assumptions, that are developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC 820-10 are described below:
 
Level 1
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
     
Level 2
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
     
Level 3
Inputs that are both significant to the fair value measurement and   unobservable. These inputs rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability. (The unobservable inputs are developed based on the best information available in the circumstances and may include the Company's own data.)
 
The following presents the Company's fair value hierarchy for those assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2011 and 2010:

Level 1: None
 
Level 2: None
 
Level 3: None
 
Total Gain (Losses): None
 
NOTE 8 - SUBSEQUENT EVENTS
 
The Company has evaluated subsequent events through the date these financial statements were issued. There are no reporting subsequent events requiring disclosure.
 
 
F-9

 
 
SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
 
  SPUTNIK ENTERPRISES INC.  
       
Dated: March 23, 2012
By:
/s/ David LaDuke  
    David LaDuke  
    Chief Executive Officer and President  
       
 
Dated: March 23, 2012
By:
/s/ David LaDuke  
    David LaDuke  
    Director  
 
 
15