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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, 2013

o 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
 
52-2348956
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

7512 Dr. Phillips Blvd
Suite 50-302
Orlando, Florida 32819
(Address of principal executive offices)

(407) 203-7032
(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, 2013 was approximately $230,556 (based on 115,278 shares of common stock outstanding held by non-affiliates on such date, at $2.00 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 December 31, 2013 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 February 19, 2014, there were 295,278 shares of common stock, par value $.001, outstanding.
 


 
 

 
 
INDEX

Item Number    
Page
Number
 
PART I
 
Item 1
Business
    3  
Item 1A
Risk Factors
    3  
Item 1B
Unresolved Staff Comments
    3  
Item 2
Properties
    3  
Item 3
Legal Proceedings
    3  
Item 4
Mine Safety Disclosures
    3  
           
PART II
           
Item 5
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities
    4  
Item 6
Selected Financial Data
    5  
Item 7
Management’s Discussion and Analysis of Financial Condition and Results of Operations
    5  
Item 7A
Quantitative and Qualitative Disclosures about Market Risk
    6  
Item 8
Financial Statements and Supplementary Data
    6  
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    6  
Item 9A
Controls and Procedures
    7  
Item 9B
Other Information
    7  
           
PART III
           
Item 10
Directors, Executive Officers, Promoters and Corporate Governance
    8  
Item 11
Executive Compensation
    9  
Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    10  
Item 13
Certain Relationships and Related Transactions, and Director Independence
    10  
Item 14
Principal Accounting Fees and Services
    10  
   
PART IV
   
Item 15
Exhibits, Financial Statement Schedules
    11  
Signatures
    13  

 
2

 

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, upon conclusion of the sale of the stock of Laika, Inc. to AstroChimp, Inc., the Company amended its Articles of Incorporation to change the name of Sputnik, Inc. to Sputnik Enterprises, Inc. AstroChimp, Inc. is 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. 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.

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

Not applicable as we are neither an accelerated filer nor a large accelerated filer.

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. Mine Safety Disclosures.
 
Not applicable.
 
 
3

 

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and 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, 2013
 
$
2.00
   
$
1.99
 
September 30, 2013
 
$
2.00
   
$
1.99
 
June 30, 2013
 
$
2.99
   
$
2.99
 
March 31, 2013
 
$
2.00
   
$
2.00
 
December 31, 2012
 
$
8.00
   
$
2.10
 
September 30, 2012
 
$
3.00
   
$
2.00
 
June 30, 2012
 
$
1.60
   
$
1.60
 
March 31, 2012
 
$
1.60
   
$
1.60
 
 
*
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 OTCBB with the symbol SPNI. As of December 31, 2013, there were 96 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 issued 5,200 of its preferred stock, series A. 

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.

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.
 
 
4

 

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 Operations
 
Sputnik Enterprises is a “blank check company” in that it is development stage company with an indicated business plan to engage in a merger or acquisition with an unidentified company or companies, or other entity or person
 
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
 
For the year ended December 31, 2013, we had net cash used in operations of $67,435. Net cash provided by financing activities was $62,097 and consisted of loans from its majority shareholders and a note payable to a shareholder.
 
On December 31, 2013 we had total assets of $287 compared to assets of $5,625 at December 31, 2012.
 
We had total liabilities of $106,295 as of December 31, 2013, which consisted of accounts payable of $4,198 and shareholder notes aggregating $102,097. At December 31, 2012 we had accounts payable in the amount of $4,766 and shareholder notes totaling $40,000.
 
Through December 31, 2013, we had an accumulated deficit from prior operations of $1,912,863 and an accumulated deficit since development stage of $229,418.
 
Capital Resources
 
The Company has financed its limited operations through funds advanced from its shareholders to meet minimum operating cash requirements. There is no written agreement for future funding.
 
The Company has a standing agreement with Duchess Capital (“Investor”), for an Equity Line Facility. The Investor shall commit to purchase up to $25 million of the Company’s stock over a 36 month period, after a registration statement of the stock has been declared effective by the US Securities and Exchange Commission.

Results of Operations

Our net loss for the year ended December 31, 2013 was $121,460 which was an increase of $49,072 over our net loss for the year ended December 31, 2012, which was $25,813. The increase was primarily attributable to stock based compensation of $52,000.
 
 
5

 

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
 
We prepare our financial statements in conformity with GAAP, which requires management to make certain estimates and assumptions and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the financial statements are prepared and actual results could differ from our estimates and such differences could be material. We have identified below the critical accounting policies which are assumptions made by management about matters that are highly uncertain and that are of critical importance in the presentation of our financial position, results of operations and cash flows. On a regular basis, we review our accounting policies and how they are applied and disclosed in our financial statements.

Use of Estimates

The preparation of financial statements in conformity with GAAP in the United States of America 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

Financial Instruments
 
The Company’s balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.

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 and Supplementary Data.

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.
 
On February 20, 2013, M&K CPAs, PLLC was disengaged as the Company’s independent registered audit firm and we engaged DKM Certified Public Accountants (“DKM”). On May 5, 2013 the audit partner at DKM terminated his arrangements and on that date we dismissed DKM and engaged Messineo & Co., CPAs, LLC.

The reports of DKM as of and for the fiscal years ended December 31, 2012 contained no adverse opinion or disclaimerf o opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle except to indicate that there was substantial doubt about the Company’s ability to continue as a going concern.
 
 
6

 
 
During the fiscal years ended December 31, 2011 and 2010, and through each subsequent period, there have been no disagreements with M&K CPAs, PLLC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements if not resolved to the satisfaction of M&K CPAs, PLLC would have caused them to make reference thereto in connection with their report on the financial statements for such years.

During the fiscal years ended December 31, 2012, and through each subsequent period, there have been no disagreements with DKM on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements if not resolved to the satisfaction of DKM would have caused them to make reference thereto in connection with their report on the financial statements for such years.

Item 9A. 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 Annual 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, 2013. 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, 2013, 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, 2013, 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.

3.
As of December 31, 2013 our management is dominated by a single individual serving as both our CEO and CFO, resulting in inadequate segregation of duties consistent with control objectives and ineffective oversight of the entity’s financial reporting and internal control by those charged with governance.

Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2013, 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.
 
 
7

 
 
PART III

Item 10. Directors, Executive Officers, and Corporate Governance

(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
         
Anthony Gebbia
 
44
 
Director, Chief Executive Officer, President, Chief Financial Officer and Secretary

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

Mr. Gebbia, age 44, is now and will continue to be our sole officer and director. On August 15, 2011 he joined Armada Sports and Entertainment as Chief Operating Officer and currently holds the position of Chairman & CEO. From May 2009 to March 2010, he was General Manager of T&B Equipment Company, a company in the business of Bleachers, Scaffolding, and Tent Flooring. From February 1988 to May 2009, he was Event Manager/Event Director for Walt Disney Company. Mr. Gebbia brings to the board a diverse career, most notably, gaining 21 years of experience at The Walt Disney Company, a world leader in family and sports entertainment. During his tenure at Disney, Mr. Gebbia was immersed in the Disney culture of Guest service, creativity and innovation and his experience includes transportation operations, theme park operations, administration, merchandise operations, finance, business development, international marketing, program development, telecast operations, domestic marketing and alliance marketing. Mr. Gebbia created the Logistics Operation for Disney’s Wide World of Sports (now ESPN Wide World of Sports) and led the logistics teams for such events as the Walt Disney World Golf Classic and The Walt Disney World Marathon. For eight years of his Disney career, Mr. Gebbia developed and oversaw signature events with multi-million dollar operating budgets, leading the project team of members from Finance, Entertainment, Operations, Talent Relations, Security, Legal, Business Development, Merchandise and Food and Beverage. Mr. Gebbia’s other career experience includes convention sales and operations, restaurant operations and project management on such projects as the Doha Tribeca Film Festival, Doha, Qatar and on the build-out of several PGA Tour events. Mr. Gebbia is currently on the Board of Directors of the non-profit Kids Beating Cancer and has been a member of the Board of Directors of the Woman’s Professional Billiards Association.
 
(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, 2013 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.
 
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

 
8

 
 
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 named executive officers received the following compensation from the Company during the fiscal year ended December 31, 2013 and December 31, 2012.
 
Name and
principal
position
 
Year
   
Salary
($)
   
Bonus
($)
   
Stock
awards
($)
   
Option
awards
($)
   
Non-equity
incentive plan compensation
($)
   
Change in pension value and nonqualified deferred compensation earnings
($)
   
All other compensation
($)
   
Total
($)
 
R. Thomas Kidd
    2013        0       0       50,000       0        0        0       0     $ 50,000  
CEO and CFO*      2012       0       0       0       0       0       0       0       0  
Anthony Gebbia,
    2013       43,000       0       2,000       0        0        0       0     $ 45,000  
COO     2012       0       0       0       0       0       0     $  5,000     $  5,000  
 
*
R. Thomas Kidd terminated employment agreement on January 20, 2014

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

On May 23, 2013 the Company entered into an employment agreement with R. Thomas Kidd, to serve as the Chief Executive Officer and Principal Financial Officer of the Company, on a month to month basis. No annual compensation has been assigned to the agreement and future merit bonus is at the discretion of the Board of Directors. Upon signing, 5,000 shares of Preferred Stock, Series A were issued. On January 20, 2014, the employment agreement was terminated, upon notification of retirement.

On May 23, 2013 the Company entered into an employment agreement with Anthony Gebbia, to serve as the Chief Operating Officer of the Company, and shall continue until 15 days advance written notice of termination, by either party. Monthly compensation of $10,000 and is to be paid bimonthly. Future merit bonus is at the discretion of the Board of Directors. Upon signing, 200 shares of Preferred Stock, Series A were issued. In July of 2013, Mr. Gebbia terminated his employment agreement. On January 20, 2014, coinciding with Mr. Kidd’s retirement, Mr. Gebbia re-assumed the role as Chief Executive Officer and Director. Mr. Gebbia is acting without employment agreement or compensation for his current services.

 
9

 
 
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, 2013, 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 *
 
                 
R. Thomas Kidd (1)
   
5,180,000
     
94.3
%
                 
Anthony Gebbia (2)
   
200,000
     
3.6
%
                 
All Directors and Officers as a Group (2 Individuals)
   
5,380,000
     
97.7
%
 
_________________
 
*
Percentage of class based on 5,495,278 common stock equivalents (295,278 common issued and outstanding and 5,200,000 preferred shares, at if converted common stock equivalent)

(1)  
R. Thomas Kidd, beneficially holds shares in joint with spouse.
(2)  
Anthony Gebbia is an officer and director.

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

Item 13. Certain Relationships and Related Transactions and Director Independence.

During 2013, we have not entered into and as of December 31, 2013 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.

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, 2013, 2012, and 2012 are as follows:
 
Name
 
Audit Fees (1)
   
Audit Related Fees
   
Tax Fees (2)
   
All Other Fees
 
Messineo & Co., CPAs, LLC
For fiscal year ended:
December 31, 2013
  $ 7,500     $ 0     $ 0     $ 0  
                                 
DKM Certified Public Accountants
for fiscal year ended:
December 31, 2012
  $ 3,500     $ 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.

 
10

 
 
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.
 
 
11

 
 
SPUTNIK ENTERPRISES INC.
(A Development Stage Company)
 
INDEX TO FINANCIAL STATEMENTS
 
 
 
Page
 
 
     
Report of Independent Registered Public Accounting Firm
    F-2  
 
       
Financial Statements:
       
 
       
Balance Sheets
    F-3  
 
       
Statements of Operations
    F-4  
 
       
Statement of Changes in Stockholders' (Deficit)
    F-5  
 
       
Statements of Cash Flows     F-6  
 
       
Notes to Financial Statements
    F-7 F-12  

 
12

 
 
Messineo & Co., CPAs LLC
2471 N McMullen Booth Road, Suite. 302
Clearwater, FL 33759-1362
T: (518) 530-1122
F: (727) 674-0511
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of:
Sputnik Enterprises, Inc.
Orlando, Florida

We have audited the accompanying balance sheets of Sputnik Enterprises, Inc. (a development stage entity) as of December 31, 2013 and the related statements of operations, stockholders' deficit and cash flows for the year then ended and the period from re-entering the development stage (February 29, 2008) to December 31, 2013. 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 audit 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 provide 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, 2013, and the results of its operations and its cash flows for the year then ended and the period from re-entering the development stage (February 29, 2008) to December 31, 2013 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 3 to the financial statements, the Company has recurring losses, negative cash flows from operating activities and working capital deficiencies. . These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
Messineo & Co., CPAs, LLC
Clearwater, Florida
February 17, 2014
 
 
F-1

 
 
2451 N McMullen Booth Rd Ste. 308
Clearwater, FL 33759-1352
Main: (727) 444-1901
Cell: (727) 452-4803

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of:
Sputnik Enterprises, Inc.
Orlando, Florida

We have audited the accompanying balance sheets of Sputnik Enterprises, Inc. as of December 31, 2012 and the related statements of operations, stockholders' deficit and cash flows for the year then ended and the period from re-entering the development stage (February 29, 2008) to December 31, 2012. 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 audit 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 provide 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, 2012, and the results of its operations and its cash flows for the year then ended and the period from re-entering the development stage (February 29, 2008) to December 31, 2012 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 3 to the financial statements, the Company has recurring losses, negative cash flows from operating activities and working capital deficiencies. . These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

DKM Certified Public Accountants
Clearwater, Florida
March 26, 2013

 
F-2

 
 
SPUTNIK ENTERPRISES, INC.
(A Development Stage Entity)
Balance Sheets
As of December 31, 2013 and 2012
 
   
December 31
   
December 31
 
   
2013
   
2012
 
             
ASSETS
           
 Current assets:
           
 Cash
    287       5,625  
 Total current assets
    287       5,625  
                 
 Total assets
  $ 287     $ 5,625  
                 
LIABILITIES
               
 Current liabilities:
               
 Accounts payable and accrued expenses
    4,198       4,766  
 Advances from shareholders
    102,097       40,000  
 Total current liabilities
    106,295       44,766  
                 
 Total long-term liabilities
    106,295       44,766  
                 
STOCKHOLDERS' DEFICIT
               
 Preferred stock, $.001 par value, $10.00 stated value, 10,000,000 authorized; 5,200 and 0 shares issued and outstanding
    52,000       -  
 Common stock, $.001 par value, 50,000,000 authorized; 295,278 shares issued and outstanding in both periods
    295       295  
 Additional paid in capital
    1,983,978       1,981,385  
 Deficit accumulated from prior operations
    (1,912,863 )     (1,912,863 )
 Deficit accumulated during the development stage
    (229,418 )     (107,958 )
 Total stockholders' deficit
    (106,008 )     (39,141 )
 Total liabilities and stockholders' deficit
  $ 287     $ 5,625  
 
The accompanying notes are an integral part of these financial statements.
 
 
F-3

 
 
SPUTNIK ENTERPRISES, INC.
(A Development Stage Entity)
Statements of Operations
Years Ended December 31, 2013 and 2012 and the Period From
Re-entering Development Stage (February 29, 2008) to December 31, 2013
 
   
Twelve Months
   
Twelve Months
   
Re-entering
Development Stage
(February 29,
2008) to
 
   
December 31
   
December 31
   
December 31
 
   
2013
   
2012
   
2013
 
                   
Sales
  $  -     $ -     $ -  
                         
General and administrative expenses:
                       
 Compensation
    95,340       -       95,340  
 Legal and professional fees
    8,500       -       8,500  
 Other general and administrative
    10,652       24,381       111,178  
 Total operating expenses
    114,492       24,381       215,018  
 (Loss) from operations
    (114,492 )     (24,381 )     (215,018 )
                         
Other income (expense):
                       
 Interest (expense)
    (6,968 )     (1,432 )     (14,400 )
 (Loss) before taxes
    (121,460 )     (25,813 )     (229,418 )
                         
Provision (credit) for taxes on income
    -       -       -  
 Net (loss)
  $ (121,460 )   $ (25,813 )   $ (229,418 )
                         
Basic earnings (loss) per common share
    (0.416 )     (0.09 )        
                         
Weighted average number of shares outstanding
    295,278       295,278          
 
The accompanying notes are an integral part of these financial statements.
 
 
F-4

 
 
SPUTNIK ENTERPRISES, INC.
(A Development Stage Entity)
Statement of Changes in Stockholders’ (Deficit)
Years Ended December 31, 2013 and 2012
 
                            Additional    
Accumulated Deficit
       
   
Preferred Stock
   
Common Stock
   
Paid in
Capital
   
Develop
Stage
   
Prior Operations
   
TOTAL
 EQUITY
 
   
Shares
   
Amt
   
Shares
   
Amt
 
                                                 
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 income (loss)
                                            (13,155 )             (13,155 )
                                                                 
Balance, December 31, 2011
    -       -       295,278       295       1,969,713       (82,145 )     (1,912,863 )     (25,000 )
Imputed interest
                                    1,432                       1,432  
Donated capital from shareholder
                                    10,240                       10,240  
Net income (loss)
                                            (25,813 )             (25,813 )
                                                                 
Balance, December 31, 2012
    -       -       295,278       295       1,981,385       (107,958 )     (1,912,863 )     (39,141 )
                                                                 
Preferred stock, Series A, issued as compensation
    5,200       52,000                                               52,000  
                                                                 
Imputed interest
                                    2,593                       2,593  
                                                                 
Net income (loss)
                                            (121,460 )             (121,460 )
                                                                 
Balance, December 31, 2013
    5,200       52,000       295,278       295       1,983,978       (229,418 )     (1,912,863 )   $ (106,008 )

The accompanying notes are an integral part of these financial statements.
 
 
F-5

 
 
SPUTNIK ENTERPRISES, INC.
(A Development Stage Entity)
Statements of Cash Flows
Years Ended December 31, 2013 and 2012 and the Period From
Re-entering Development Stage (February 29, 2008) to December 31, 2013
 
   
Twelve Months Ended
December 31
   
Twelve Months Ended
December 31
   
Re-entering
Development Stage
(February 29, 2008) to
December 31
 
   
2013
   
2012
   
2013
 
                   
Cash flows from operating activities:
                 
Net (loss)
  $ (121,460 )   $ (25,813 )   $ (229,418 )
                         
Adjustments to reconcile net (loss) to cash provided (used) by developmental stage activities:
                       
Imputed interest on note payable
    2,593       1,432       11,024  
Stock compensation
    52,000               52,000  
Note payable issued for legal services
                    25,000  
Change in current assets and liabilities:
                       
Accounts payable and accrued expenses
    (568 )     4,766       4,198  
Net cash flows from operating activities
    (67,435 )     (19,615 )     (137,196 )
                         
Cash flows from investing activities:
                       
Net cash flows from investing activities
    -       -       -  
                         
Cash flows from financing activities:
                       
Advances from shareholders and related party's
    62,097       10,240       122,483  
Proceeds/(Payment) of notes payable
    -       15,000       15,000  
Net cash flows from financing activities
    62,097       25,240       137,483  
                         
Net cash flows
    (5,338 )     5,626       287  
Cash and equivalents, beginning of period
    5,625       -       -  
Cash and equivalents, end of period
  $ 287     $ 5,626     $ 287  
                         
Supplemental cash flow disclosures:
                       
Cash paid for interest
  $ -     $ -     $ -  
Cash paid for income taxes
  $ -     $ -     $ -  
 
The accompanying notes are an integral part of these financial statements.

 
F-6

 
 
SPUTNIK ENTERPRISES, INC.
(A Development Stage Entity)
NOTES TO FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION

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.

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 that time.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the SEC. The Financial Statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States (See Note 3 regarding the assumption that the Company is a “going concern”).

Development Stage Company

The Company is a development stage company as defined by ASC 915, Development Stage Entities. The Company is still devoting substantially all of its efforts on establishing the business and its planned principal operations have not commenced. All losses accumulated since inception are considered part of the Company's development stage activities.

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.

Fiscal year end

The Company elected December 31 as its fiscal year.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents were $287 and $5,625 at December 31, 2013 and 2012, respectively.

 
F-7

 
 
Fair Value of Financial Instruments

The Company’s balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.

ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also 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 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 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.
 
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2013. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.

Income taxes

The Company accounts for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized as of December 31, 2013 or 2012.

Basic and Diluted Net Loss per Share

The Company computes basic and diluted earnings per share amounts in accordance with ASC Topic 260, Earnings per Share. Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.

The Company has incurred a net operating loss for December 31, 2013 and 2012, and dilutive earnings per share would be anti-dilutive, therefore, dilutive earnings per share have not been presented. There are no options or warrants outstanding. The Company has common stock equivalents, in the form or convertible preferred stock, series A. Common stock equivalents were 5,200,000 and 0 for the years ending December 31, 2013 and 2012, respectively.

Commitments and contingencies

The Company follows ASC 450, Loss Contingencies, to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. There were no commitments or contingencies as of December 31, 2013 and 2012.

 
F-8

 
 
Related parties

The Company follows subtopic ASC 850, Related Party Disclosure, for the identification of related parties and disclosure of related party transactions. See Note 5 for related party transactions.

Cash flows reporting

The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period.

Share-based Expense

ASC 718, Compensation – Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity – Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.

Share-based expense for the periods ending December 31, 2013 and 2012 were $52,000 and $0, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.
 
NOTE 3 – GOING CONCERN

The Company incurred a net loss of $121,460 during the year ended December 31, 2013 and had net cash used in operating activities of $67,435 for the same period. Additionally, the Company had a deficit accumulated during the development stage of $229,418 at December 31, 2013. In view of these matters, the Company's ability to continue as a going concern is dependent upon the Company's ability to achieve a level of profitability or to obtain adequate financing through the issuance of debt or equity in order to finance its operations. Upon securing an operating entity, through merger, Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

While the Company is attempting to commence operations and produce revenues, the Company’s cash position may not be significant enough to support the Company’s daily operations. While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate revenues.

 
F-9

 
 
NOTE 4 – NOTES PAYABLE

On July 1, 2008, the Company issued a note in the amount of $25,000 to legal counsel, for legal expenses. The note is due on demand and has no stated interest rate. Pursuant to a Notice of Assignment dated November 23, 2012, the Company was notified that the promissory note had been assigned and that all future note payments will be payable to Roy Thomas Kidd and Joan L. Kidd, The interest rate is 0% and is payable on demand.

On December 28, 2012 the Company issued a note in the amount of $15,000 to Roy Thomas and Joan L. Kidd, in exchange for cash. The interest rate is 0% and is payable on demand.

During the year ending December 31, 2013, cash advances and expenses paid on behalf of the company, totaling $62,097, were made by Mr. Kidd. There is no formal note or terms and is payable on demand.

Notes payable totaled $102,097 and $40,000 at December 31, 2013 and 2012, respectively. The Company is imputing an interest rate on the above debts, at a rate of 3.65%, to reflect the economic benefit of non-interest bearing loans. Interest expense on these loans amounted to $2,593 and $0, for the years ending December 31, 2013 and 2012, respectively.

NOTE 5 – RELATED PARTY TRANSACTIONS

Notes payable

On July 1, 2012, the Company agreed to assign to Anthony Gebbia, the Company’s sole officer and director, a $25,000 promissory note previously issued to Michael Williams in exchange for legal services. to Pursuant to a Notice of Assignment dated November 23, 2012, the Company was notified that the promissory note had been assigned and that all future note payments will be payable to Roy Thomas Kidd and Joan L. Kidd, both shareholders as of December 31, 2012.

As of November 5, 2012, pursuant to a private Securities Purchase Agreement, Mr. Tony Gebbia held approximately 60.96 percent of the issued and outstanding common stock of the Company. As provided in the Agreement, Mr. LaDuke resigned as sole officer and director and was replaced by Mr. Gebbia as sole Officer and Director of the Company.

On December 28, 2012 the Company issued a note in the amount of $15,000 to Roy Thomas and Joan L. Kidd, in exchange for cash. The interest rate is 0% and is payable on demand.

During the year ending December 31, 2013, cash advances and expenses paid on behalf of the company, totaling $62,097, were made by Mr. Kidd. There is no formal note or terms and is payable on demand.

Contributed capital

During the years ended December 31, 2013, 2012 and 2011, shareholders contributed $0, $10,240 and $11,155, respectively, as additional capital contributed to fund operating expenses of the Company.

Employment agreements

On May 23, 2013 the Company entered into an employment agreement with R. Thomas Kidd, to serve as the Chief Executive Officer and Principal Financial Officer of the Company, on a month to month basis. No annual compensation has been assigned to the agreement and future merit bonus is at the discretion of the Board of Directors. Upon signing, 5,000 shares of Preferred Stock, Series A were issued. This agreement was terminated on January 20, 2014.

On May 23, 2013 the Company entered into an employment agreement with Anthony Gebbia, to serve as the Chief Operating Officer of the Company, and shall continue until 15 days advance written notice of termination, by either party. Monthly compensation of $10,000 and is to be paid bimonthly. Future merit bonus is at the discretion of the Board of Directors. Upon signing, 200 shares of Preferred Stock, Series A were issued. On July 20, 2013 this agreement was terminated.
 
 
F-10

 
 
Other

The Company does not own or lease property or lease office space. The office space used by the Company was arranged by the Officers of the Company to use at no charge.

The amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.
 
NOTE 6 – EQUITY

On February 14, 2013, the Company and Dutchess Opportunity Fund, II, LP entered into an Investment Agreement and a Registration Rights Agreement, which provides for the investment by Dutchess of up to $25 million over a period of 36 months. Under the terms of the Investment Agreement and Registration Rights Agreement, Dutchess will purchase common stock of the Company, subject to and wholly conditioned upon the Company filing an S-1 registration statement to register the shares acquired by Dutchess and the registration statement of the shares being declared effective by the Securities and Exchange Commission. The Investment Agreement sets forth the terms and conditions under which Dutchess will purchase the common stock of the Issuer and other material conditions to the agreement between the parties. As of December 31, 2013 there has been no funding under the agreement.

Common Stock

The Company has authority to issue fifty million (50,000,000) common with a par value of $.001of which 295,278 have been issued. The Company intends to issue additional shares in an effort to capital to find its operations.

No holder of shares of stock of any class is entitled, as a matter of right, to subscribe for or purchase or receive any part of any new or additional issue of shares of stock of any class, or of securities convertible into shares of stock of any class, whether now hereafter authorized or whether issued for money, for consideration other than money, or by way of dividend.

Total common shares issued and outstanding at December 31, 2013 and 2012 were 295,278.

Preferred stock

The Company amended its Articles of Incorporation in May 2013 and subsequently has authority to issue ten million (10,000,000) Series A Convertible Preferred with a par value of $10.00, of which 5,200 shares have been issued as of June 30, 2013. This class of stock may be convertible into common shares at the rate of one share of Series A Convertible Preferred for 1,000 shares of common. There are no liquidation preferences over common shares, but the Series A Convertible Preferred may be voted as if converted and are entitled to dividend treatment as if converted to common. Series A Convertible Preferred may be converted to common shares at any time after one year from the date of issuance at the option of the holder.
 
On May 23, 2013, the Company entered into an Executive Employment Agreement with R. Thomas Kidd for services as CEO and Principle Financial Officer. Pursuant to the Agreement, Mr. Kidd received 5,000 shares of the Company’s Series A preferred stock as compensation for services, for a value of $50,000.

On May 23, 2013, the Company entered into an Executive Employment Agreement with Anthony Gebbia for services as Chief Operating Officer. Pursuant to the Agreement, Mr. Gebbia received 200 shares of the Company’s Series A preferred stock as a signing bonus and for past services as CEO of the Company, valued at $2,000.

Total preferred shares, series A, issued and outstanding at December 31, 2013 and 2012 were 5,200 and 0, respectively.

NOTE 7 – INCOME TAXES

The Company 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 2013 and 2012, the Company 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 approximately $2,217,000 and $2,021,000 at December 31, 2013 and 2012, respectively, and will begin to expire in the year 2024.

 
F-11

 
 
At December 31, 2013 and 2012, deferred tax assets at the statutory rate consisted of the following:

Deferred tax assets
 
2013
   
2012
 
Net operating losses
 
$
34,400
   
$
22,300
 
Less: valuation allowance
   
(34,400
)
   
(22,300
)
Net deferred tax asset
 
$
-
   
$
-
 
 
NOTE 8 – COMMITMENTS AND CONTINGENCIES

Some of the officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities that become available. They may face a conflict in selecting between the Company and other business interests. The Company has not formulated a policy for the resolution of such conflicts.

In the normal course of business, the Company may become a party to litigation matters involving claims against the Company. The Company's management is unaware of any pending or threatened assertions and there are no current matters that would have a material effect on the Company’s financial position or results of operations.

The Company’s operations are subject to significant risks and uncertainties including financial, operational and regulatory risks, including the potential risk of business failure.
 
NOTE 9 – SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date the financial statements were issued. Based on our evaluation the following events have occurred and require disclosure:

On January 20, 2014, our Chief Executive Officer and Director, R. Thomas Kidd, retired from his position. For and as consideration of Kidd’s resignation as CEO and Director and retirement from services to the Company, Company shall agrees to compensate Kidd in the form of a severance package as follows:
 
·
Company shall execute and deliver a demand promissory note in the amount of $400,000, which shall be payable upon the demand of the holder. The promissory note shall be secured by all assets of the Company.
·
Company shall procure and purchase a $500,000 term life policy with a term of at least 10 years and pay the premiums associated therewith no later than March 1, 2014. The policy will name Joan L. Kidd, his spouse, as beneficiary and Kidd named parties as secondary beneficiaries
·
Company shall enter into an indemnification agreement with Kidd, in a form acceptable to Kidd, indemnifying Kidd against any claims of any kind from any third party for a period of 7 years.
·
Company shall enter into an advisor agreement with Kidd which shall provide for the issuance of 2 million common shares of stock as compensation for services rendered.
·
Company shall execute a general release of any and all claims in favor of Kidd relating to Kidd’s tenure as CEO of the Company.
·
Company represents and warrants that within 5 days of the date of closing of a merger transaction and exiting shell status, Company shall file a registration statement on form S-1 to register shares under its equity line with Dutchess Capital. No other shares other than the shelf registration for Dutchess will be included in this S-1 registration statement. Company further agrees that it shall take all steps necessary and required to obtain an effective declaration by the SEC on the registration statement.

Upon execution of the agreement, and receipt of all documentation, Kidd shall immediately do the following:
 
·
Agree to return 5,000 shares of Convertible preferred stock of the Company to Company for cancelation upon closing of merger transaction.
·
Resign all positions, as applicable, with the Company.

On January 20, 2014, The Company consolidated all advances and loans made by R. Thomas Kidd and his wife into one demand promissory note in the amount of $125,000, payable on demand, with monthly installments of $6,944.44 plus interest at the rate of 5% per annum, with interest accrued from June 1, 2013, beginning 10 days after the Company has received funding from any source.

 
F-12

 
 
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: February 20, 2014
By:
/s/ Anthony Gebbia  
   
Anthony Gebbia, Chief Executive Officer and
President
 

Dated: February 20, 2014
By:
/s/ Anthony Gebbia  
   
Anthony Gebbia, Director
 
 
 
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