Attached files

file filename
EX-31 - CERTIFICATION - Sputnik Enterprises, Incspni_ex31.htm
EXCEL - IDEA: XBRL DOCUMENT - Sputnik Enterprises, IncFinancial_Report.xls
EX-32 - CERTIFICATION - Sputnik Enterprises, Incspni_ex32.htm


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

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2014
 
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 
For the transition period from _________ to _________.
 
Commission file number 000-52366
 
SPUTNIK ENTERPRISES, INC.
(Exact name of small business issuer as specified in its charter)
 
Nevada
 
52-2348956
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)

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

407.203.7032
(Issuer’s telephone number)

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

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

As of May 15, 2014, there were 295,278 shares issued and outstanding of the registrant’s common stock. 



 
 

 
INDEX
 
     
Page
 
PART I. FINANCIAL INFORMATION
     
         
Item 1.
Unaudited Financial Statements
    F-1  
 
Balance Sheets as of March 31, 2014 (unaudited) and December 31 , 2013 (audited)
    F-1  
 
Statements of Operations (unaudited) for the Three and Nine Months Ended March 31, 2014 and 2013, and from re-entering the development stage, February 29, 2008 to March 31, 2014 (unaudited)
    F-2  
 
Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2014 and 2013, and from re-entering the development stage, February 29, 2008 to March 31, 2014 (unaudited)
    F-3  
 
Notes to Unaudited Financial Statements
    F-4  
           
Item 2.
Management’s Discussion and Analysis or Plan of Operation
    3  
           
Item 3.
Quantitative and Qualitative Disclosure about Market Risk
    5  
           
Item 4.
Controls and Procedures
    5  
           
PART II. OTHER INFORMATION
       
           
Item 1.
Legal Proceedings
    6  
           
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
    6  
           
Item 3.
Defaults Upon Senior Securities
    6  
           
Item 4.
Mine Safety Disclosures
    6  
           
Item 5.
Other Information
    6  
           
Item 6.
Exhibits
    7  
           
Signatures
    8  

 
2

 
 
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.
 
SPUTNIK ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
 
   
March 31,
2014
   
December 31,
2013
 
   
(unaudited)
   
(audited)
 
Assets
           
Current Assets
           
Cash
  $ 72     $ 287  
Prepaid expenses
    318,841       ---  
Total Current Assets
    318,913       287  
                 
Total Assets
    318,913       287  
                 
Liabilities and Stockholders' Deficit
               
Current Liabilities
               
Accounts payable and accrued expenses
    2,302       4,198  
Deferred Interest
    5,187       --  
Note Payable
    400,000       --  
Total Current Liabilities
    407,489       4,198  
                 
Long-term Liabilities:
               
Loans Payable
    125,000       102,097  
Total long-term liabilities
    125,000       102,097  
                 
Total Liabilities
    532,489       106,295  
                 
Stockholders' Deficit
               
Preferred Stock, Series A, $.001 par value;
               
100,000,000 shares authorized;
               
52,000 and 52,000 shares outstanding, respectively
    52,000       52,000  
                 
Common Stock, $.001 par value;
               
50,000,000 shares authorized;
               
295,278 and 295,278 shares outstanding, respectively
    295       295  
                 
Additional Paid In Capital
    1,984,653       1,983,978  
Deficit accumulated from prior operations
    (1,912,863 )     (1,912,863 )
Accumulated Deficit during the Development Stage
    (337,661 )     (229,418 )
                 
Total Stockholders' Deficit
    (213,576 )     (106,008 )
                 
Total Liabilities and Stockholders' Deficit
  $ 318,913     $ 287  
 
See notes to financial statements.
 
 
F-1

 
 
SPUTNIK ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(unaudited)
 
   
For the Three Months Ended
March 31,
2014
   
For the Three Months Ended
March 31,
2013
   
Re-entering Development
Stage
(2/29/2008) to March 31,
2014
 
                   
Revenue
  $ ---     $ ---     $ ---  
                         
Cost of sales
    ---       ---       ---  
                         
Gross Profit
    ---       ---       ---  
                         
General and administrative expenses
                       
Salaries
    18,706       15,000       18,706  
Legal and professional fees
    ---       7,875       8,500  
Stock compensation
    ---       ---       95,340  
Other general and administrative
    81,373       7,009       192,551  
Total operating expenses
    100,079       29,884       315,097  
                         
Operating Loss
    (100,079 )     (29,884 )     (315,097 )
                         
Other Income
                       
Interest (expense)
    (8,164 )     ---       (22,564 )
                         
(Loss) before taxes
    (108,243 )     (29,884 )     (337,661 )
                         
Provision (credit) for taxes on income
    ---       ---       ---  
                         
Net (loss)
  $ (108,243 )   $ (29,884 )   $ (337,661 )
                         
Loss per share on continuing operations, basic and diluted
    (0.37 )     (0.10 )        
                         
Weighted average common shares outstanding
    295,278       295,278          
 
See notes to financial statements.
 
 
F-2

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

   
For the Three Months
Ended
March 31,
2014
   
For the Three Months
Ended
March 31,
2013
   
Re-entering Development
Stage
(2/29/2008) to
March 31,
2014
 
CASH FLOWS FROM OPERATING ACTIVITIES
                 
                   
Net gain(loss) from continuing operations
  $ (108,243 )   $ (29,884 )   $ (337,661 )
                         
Adjustments to reconcile net (loss) to cash provided (used) by development stage activities:
                       
Imputed interest on note payable
    675       ---       11,699  
Preferred stock issued as compensation
    ---       ---       52,000  
Amortization of deferred contract agreement
    81,159       ---       81,159  
Note payable issued for legal expenses
    ---       ---       25,000  
                         
Changes in operating assets and liabilities:
                       
Accounts payable and accrued expenses
    3,291       (3,266 )     7,489  
Net cash flows from operating activities
    (23,118 )     (33,150 )     (160,314 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES
                       
Purchase of fixed assets
    ---       ---       ---  
Net cash flows from investing activities
    ---       ---       ---  
                         
CASH FLOWS FROM FINANCING ACTIVITIES
                       
Loans from shareholders
    22,903       27,625       145,386  
Proceeds/(Payment) of notes payable
    ---       ---       15,000  
Net cash flows from financing activities
    22,903       27,625       160,386  
                         
Net increase (decrease) in cash and cash equivalents
    (215 )     (5,525 )     72  
Cash and cash equivalents - beginning balance
    287       5,625       ---  
                         
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 72     $ 100     $ 72  
 
See notes to financial statements.
 
 
F-3

 
 
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”).

In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year.

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.
 
 
F-4

 
 
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 $73 and $287 at March 31, 2014 and 2013, respectively. 
 
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 March 31, 2014. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.

 
F-5

 
 
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 March 31, 2014, 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 March 31, 2014 and 2013, 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 March 31, 2014 and 2013, 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 March 31, 2014 and 2013. 
 
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 6 for related party transactions.

 
F-6

 
 
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 March 31, 2014 and 2013 was $0 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.
 
 
F-7

 
 
NOTE 3 – GOING CONCERN

The Company incurred a net loss of $108,243 during the three months ended March 31, 2014 and had net cash used in operating activities of $23,118 for the same period. Additionally, the Company had a deficit accumulated during the development stage of $337,661 and negative working capital of $88,576 as of March 31, 2014. 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.

NOTE 4 – PREPAID EXPENSES

On January 20, 2014, the Company entered into a Promissory Note with R. Thomas Kidd in the amount of $400,000 that is payable upon demand by the note-holder. The Company recorded the consideration for the note as prepaid consulting fees and is ratably expensing the value over the current fiscal period. For the period from January 20, 2014 through March 31, 2014, the Company recognized $81,159 as consulting expense.

NOTE 5 – 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.

On January 20, 2014, the Company consolidated all advances and loans made by R. Thomas Kidd and his wife into one 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. (See note 8)

On January 20, 2014, the Company entered into a Promissory Note with R. Thomas Kidd in the amount of $400,000 and is secured by all assets of the Company, including but not limited to shares of all subsidiaries and affiliates of the Company. The Company has agreed to pledge shares by pledge agreement and executed stock powers, medallion guaranteed. Payments will be made in installments equal to 50% of any and all funding, whether debt or equity, received by the Company or any subsidiaries or affiliates of the Company until paid in full.

 
F-8

 
 
NOTE 6 – 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.
 
On January 20, 2014, the Company consolidated all advances and loans made by R. Thomas Kidd and his wife into one 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. (See notes 4 and 8)

Contributed capital

The Company has been imputed interest on all shareholder advances received by the Company. On January 20, 2014, the Company formalized all shareholder advances into a single demand promissory note and therefore imputed interest on the note for the period is for the 20 days ending January 20, 2014. The Company has recorded a like-kind contribution of capital of $675 and $0, respectively, as imputed interest on shareholder loans to the Company.

 
F-9

 
 
Employment and Severance 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 to Mr. Kidd. Effective January 20, 2014, Mr. Kidd retired from his position with the Company, thereby terminating his Employment Agreement. For and as consideration of Kidd’s resignation as CEO and Director and retirement from services to the Company, the Company agreed to compensate Mr. 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.

 
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 7 – 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 March 31, 2014, 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 March 31, 2014 and 2013 was 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.
 
 
F-11

 
 
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 March 31, 2014 and 2013 were 5,200 and 0, respectively.

On January 20, 2014, the Company entered into a severance package with R. Thomas Kidd whereby Mr. Kidd will return 5,000 Series A Preferred shares to the Company upon closing of a merger or acquisition transaction.

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.

Pursuant to a Severance Agreement entered into on January 20, 2013 with R. Thomas Kidd, the Company entered into the following Agreements:

 
F-12

 
 
Consulting Agreement

The Company entered into a Consulting Agreement with R. Thomas Kidd who will provide management consulting and business advisory services to the Company, made effective upon the closing of a merger or acquisition transaction by the Company with one or more private operating entities. In the event of a merger or acquisition, the Company has agreed to the following:

Within 65 days of the effective date, the Company shall compensate Mr. Kidd in the form of two million shares of unrestricted common stock of the Company with issuances to occur in installments of 250,000 shares per month for a period of 8 months. The Company agrees to file a registration statement on form S-8 within 65 days of the effective date of this Agreement and issue the first installment of 250,000 shares within 3 days of an effective S-8 registration statement and then continue the issuances at the rate of 250,000 shares every 30 days thereafter until the total of 2 million shares are issued. The Company agrees that Mr. Kidd shall be entitled to receive the shares as earned and in the event of termination of the Agreement and that the Company shall be obligated to continue the issuance of shares until the entire 2 million shares are issued to Mr. Kidd. In the event that the Company fails to issue the shares when due, the Consultant may seek an injunctive order from a court of competent jurisdiction for purposes of enforcement of this provision. The Company waives any claim for offset or counterclaim against Consultant for any reason and the obligation to Consultant is continuing regardless of the validity of this agreement.
 
Demand Promissory Notes

On January 20, 2014, the Company consolidated all advances and loans made by R. Thomas Kidd and his wife into one 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.

The Company entered into a Promissory Note with R. Thomas Kidd in the amount of $400,000 and is secured by all assets of the Company, including but not limited to shares of all subsidiaries and affiliates of the Company. The Company has agreed to pledge shares by pledge agreement and executed stock powers, medallion guaranteed. Payments will be made in installments equal to 50% of any and all funding, whether debt or equity, received by the Company or any subsidiaries or affiliates of the Company until paid in full.

NOTE 9 – SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date the financial statements were issued. Based on our evaluation, no material events have occurred that require disclosure.

 
F-13

 
 
Item 2. Management’s Discussion and Analysis or Plan of Operation.
 
This 10−Q contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the audited consolidated financial statements and accompanying notes and the other financial information appearing elsewhere in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events. Refer also to "Cautionary Note Regarding Forward Looking Statements" and “Risk Factors” below.
 
The following discussion of our financial condition and results of operations as of September 30, 2012 should be read in conjunction with our financial statements and the related notes as provided under Item 1. With respect to the discussion within this Item 2, the terms “Sputnik,” “we,” “us,” and “our” refer to Sputnik Enterprises, Inc.

Overview

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

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

Results of Operations for the Three Months Ended March 31, 2014 Compared to the Three Months Ended March 31, 2013

Due to the fact that we were a shell company in both periods, we had revenues of $0 for the three months ended March 31, 2014, which was unchanged from our revenue of $0 for the three months ended March 31, 2013. Also related to our continuing status as a shell company, our cost of goods sold and gross profits were $0 in both periods.

Our net loss for the three months ended March 31, 2014 was $108,243, which was an increase of $78,359 from our net loss of $29,884 in the three-month period ended March 31, 2013. The increase is due to a difference in accounting expense, as well as filing fees.

 
3

 
 
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 affiliates or shareholders as we have no assets, liabilities or source of revenues.

As of March 31, 2014, the Company had $318,841 in total current assets consisting of $72 in cash and $318,841 in prepaid consulting fees.

The Company had total current liabilities totaling $407,489 as of March 31, 2014, which included $2,302 of accounts payable and accrued liabilities, a $400,000 note payable, and $5,187 of accrued interest on our loans payable.

The Company had a deficit accumulated during the development stage of $337,661 and a working capital deficit of $88,576 as of March 31, 2014.

As of the end of this quarter, the Company has approximately $72 of cash available for Company use. The Company does not believe that such funds will be sufficient to fund its expenses over the next twelve months. There can be no assurance that additional capital will be available to the Company. The Company currently has no agreements, arrangements, or understandings with any person to obtain funds through bank loans, lines of credit, or any other sources.

Previously the Company has relied upon its majority shareholder to advance funds to allow it to operate, however; we do not expect such funding to continue. Moving forward, the Company will be forced to raise additional funds to support its operations and pay its ongoing and previously accrued expenses, which may be raised through loans from the Company’s related parties (although no current plans exist for such related parties to supply such funding), traditional bank loans, and/or through the sale of debt or equity securities, which could cause material dilution to the Company’s current shareholders.

The Company had $23,118 of net cash used in operations for the three months ended March 31, 2014, which was mainly due to $108,243 of net loss offset by the amortization of a deferred contract expense of $(81,159). In addition, there was an decrease of $3,291 in accounts payable and accrued expenses.

The Company had $22,903 of net cash provided by financing activities for the three months ended March 31, 2014, which was due to borrowings from related parties.
 
Cautionary Note About Forward-Looking Statements
 
The information contained in this Report includes some statements that are not purely historical and are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and as such, may involve risks and uncertainties. These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, perceived opportunities in the market and statements regarding our mission and vision. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. You can generally identify forward-looking statements as statements containing the words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, but the absence of these words does not mean that a statement is not forward-looking. For example, our forward-looking statements may include statements regarding:

 
4

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

Item 3. Quantitative and Qualitative Disclosure about Market Risk

Not applicable.

Item 4. Controls and Procedures.
 
Evaluation of Disclosure Controls and Procedures
 
The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act) that are designed to ensure that information required to be disclosed in the Company’s Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
 
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective.

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities Exchange Act) during the fiscal quarter ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
 
5

 
 
PART II — OTHER INFORMATION
 
Item 1. Legal Proceedings.
 
None.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
(a)
Unregistered Sales of Equity Securities.
 
The Registrant did not sell any unregistered securities during the three months ended March 31, 2014.
 
(b)
Use of Proceeds.
 
The Registrant did not sell any unregistered securities during the three months ended March 31, 2014.

Item 3. Defaults Upon Senior Securities.
 
None.

Item 4. Mine Safety Disclosures.

Not Applicable.
 
Item 5. Other Information.
 
Not applicable.
 
 
6

 
 
Item 6. Exhibits.
 
(a) Exhibits.
 
Exhibit
 
Item
     
31.1
 
Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
32.1*
 
Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
Exhibit 101 
 
Interactive data files formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to the Consolidated Financial Statements.*
 
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*
___________
* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.
 
** 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.

 
7

 
 
SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
SPUTNIK ENTERPRISES, INC.
 
 
 
Date: May 15, 2014
By:
/s/ Anthony Gebbia
 
 
 
(Authorized Officer and Principal Executive Officer)
 
In accordance with the Exchange Act, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
 
SIGNATURE
 
NAME
 
TITLE
 
DATE
 
 
 
 
 
 
 
/s/ Anthony Gebbia
 
Anthony Gebbia
 
Principal Executive Officer,
 
May 15, 2014
        Principal Financial Officer and Principal Accounting officer    
 
 
8

 
 
EXHIBIT INDEX
 
Exhibit
 
Item
     
31.1
 
Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
32.1*
 
Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
Exhibit 101 
 
Interactive data files formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to the Consolidated Financial Statements.*
 
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*
__________
* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.
 
** 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.
 
 
9