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, 2014

 

¨ 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 ¨

 

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	¨	Accelerated Filer	¨
Non-accelerated Filer	¨	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 ¨

 

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, 2014 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 June 30, 2014 have been excluded in that such persons may be deemed to be affiliates of the Registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

 

APPLICABLE ONLY TO CORPORATE REGISTRANTS

 

As of March 23, 2015, 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	11
Item 13		Certain Relationships and Related Transactions, and Director Independence	12
Item 14		Principal Accounting Fees and Services	12
		PART IV
Item 15		Exhibits, Financial Statement Schedules	13
Signatures			14

 

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, 2014		$	2.00			$	2.00
September 30, 2014		$	2.00			$	2.00
June 30, 2014		$	2.00			$	2.00
March 31, 2014		$	2.00			$	2.00
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

____________

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

 

Common Stock

 

Our Certificate of Incorporation authorizes the issuance of up to 50,000,000 shares of common stock, par value $.001 per share (the “Common Stock”). The Common Stock is listed on the OTC-BB with the symbol SPNI.OB. As of December 31, 2014, 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 an additional 10,000,000 shares designated as “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, 2014, we had net cash used in operations of $40,686. Net cash provided by financing activities was $40,453 and consisted of donated capital and a note payable to a shareholder.

 

On December 31, 2014 we had total assets of $54 compared to assets of $287 at December 31, 2013.

 

We had total liabilities of $564,638 as of December 31, 2014, which consisted of accounts payable and accrued expenses of $22,088 and shareholder notes aggregating $542,550. At December 31, 2013 we had accounts payable and accrued expenses in the amount of $4,198 and shareholder notes totaling $102,097.

 

Capital Resources

 

The Company has financed its limited operations through funds advanced from its shareholders and directors to meet minimum operating cash requirements. There is no written agreement for future funding.

 

The Company has a standing agreement with Duchess Capital (“Investor”), signed term sheet, 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. The equity line has conversion feature for repayment of amounts drawn on the equity line. Conversion pricing of the shares will be at 94% of the lowest daily variable weighted average price (VWAP) during the five consecutive trading days immediately prior to the put date. The Company has not filed an S-1 registration, therefore, the terms of the agreement have not commenced and no advances under this agreement have been made.

 

Results of Operations

 

Our net loss for the year ended December 31, 2014 was $459,251 which was an increase of $337,991 over our net loss for the year ended December 31, 2013, which was $121,460. The increase was primarily attributable to consulting expense in the amount of $400,000.

 

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 financial instruments consisting, primarily of cash, accounts payable, accrued expenses and notes payable. 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.

 

None

 

6

 

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, 2014. 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, 2014, we did not maintain effective controls over the control environment. Specifically, we have not developed and effectively communicated our accounting policies and procedures to Company employees. 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, 2014, 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, 2014 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, 2014, 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.

 

8

 

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, 2014 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

 

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, 2014 and December 31, 2013.

 

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			2014				18,706				0				0				0				0				0				400,000			$	418,706
CEO and CFO*			2013				0				0				50,000				0				0				0				0			$	50,000
Anthony Gebbia,			2014				0				0				0				0				0				0				0			$	0
COO			2013				68,000				0				2,000				0				0				0			$	5,000			$	75,000

______________

* R. Thomas Kidd terminated employment agreement terminated on January 20, 2014. Severance of $400,000 exchanged for a note payable.

 

9

 

Director Compensation

 

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

 

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.

 

10

 

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

 

(a) The following tables set forth certain information as of December 31, 2014, 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		Class		Amount and Nature of Beneficial Ownership				Percentage of Class
R. Thomas Kidd and Joan L. Kidd, husband and wife as tenants by the entireties		Convertible Preferred			5,000	(2	)		96.15	%
R. Thomas Kidd and Joan L. Kidd, husband and wife as tenants by the entireties		Common (upon conversion of Convertible Preferred)			5,000,000	(2	)		90.99	%
R. Thomas Kidd and Joan L. Kidd, husband and wife as tenants by the entireties		Common			180,000				3.28	%
		Total Common (upon conversion of Convertible Preferred)			5,180,000				94.26	%
Anthony Gebbia, Orlando, FL (1)		Convertible Preferred			200	(3	)		<5	%
Anthony Gebbia		Common (upon conversion of Convertible Preferred)			200,000	(3	)		<5	%
All Directors, Officers, and Affiliates as a Group (2 Individuals)		Common (upon conversion of Convertible Preferred)			5,380,000	(4	)		97.90	%

_____________

(1) Anthony Gebbia is an officer and director.

 

(2) Convertible Preferred shares which can be converted at 1000:1 (5,000,000 Common shares)

 

(3) Convertible Preferred shares which can be converted at 1000:1 (200,000 Common shares)

 

(4) Percentage of Class based on 5,495,278 common stock equivalents (295,278 common issued and outstanding and 5,200,000 preferred shares, as if converted common stock equivalent)

 

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

 

11

 

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

 

As of December 31, 2014, we have not entered into any agreements or 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 fiscal years ended December 31, 2014, and 2013 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, 2014		$	10,000			$	0			$	0			$	0
Messineo & Co., CPAs, LLC for fiscal year ended: December 31, 2013		$	7,500			$	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.

 

12

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules

 

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

 

Exhibit		Description
31		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002

 

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

  

13

 

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
Statements of Cash Flows	F-5
Statement of Changes in Stockholders' (Deficit)	F-6
Notes to Financial Statements	F-7 - F-15

 

F-1

 

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. as of December 31, 2014 and 2013 and the related statements of operations, stockholders' deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 audits 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, 2014 and 2013, and the results of its operations and its cash flows for the years then ended 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, FL

March 23, 2015

 

F-2

 

SPUTNIK ENTERPRISES, INC.

Balance Sheets

As of December 31, 2014 and 2013

 

		December 31,				December 31,
		2014				2013
ASSETS
Current assets:
Cash		$	54			$	287
Total current assets			54				287
Total assets			54				287
LIABILITIES
Current liabilities:
Accounts payable			849				4,198
Accrued interest			21,239				-
Notes payable, related party			542,550				102,097
Total current liabilities			422,088				106,295
Total liabilities			564,638				106,295
COMMITMENTS AND CONTINGINCIES
STOCKHOLDERS' DEFICIT
Preferred stock, $.001 par value, 10,000,000 authorized;
52,000 and 52,000 shares issued and outstanding			52,000				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			1,984,653				1,983,978
Accumulated deficit			(2,601,532	)			(2,142,281	)
Total stockholders' deficit			(564,584	)			(106,008	)
Total liabilities and stockholders' deficit		$	54			$	287

 

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

 

F-3

 

SPUTNIK ENTERPRISES, INC.

(A Development Stage Entity)

Statements of Operations

 

		December 31,				December 31,
		2014				2013
Sales			-				-
General and administrative expenses:
Compensation			18,706				95,340
Legal and professional fees			14,457				8,500
Other general and administrative			404,174				10,652
Total operating expenses			437,337				114,492
(Loss) from operations			(437,337	)			(114,492	)
Other income (expense):
Interest (expense)			(21,914	)			(6,968	)
(Loss) before taxes			(459,251	)			(121,460	)
Provision (benefit) for taxes on income			-				-
Net (loss)			(459,251	)			(121,460	)
Basic earnings (loss) per common share			(1.56	)			(0.41	)
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.

Statement of Changes in Stockholders’ (Deficit)

Years Ended December 31, 2014 and 2013

 

		Preferred Stock							Common Stock					Additional Paid in Capital			Accumulated Deficit			TOTAL EQUITY
	Shares				Amount			Shares			Amount
Balance, December 31, 2012		-			$	-			295,278		$	295		$	1,981,385		$	(2,020,821	)	$	(39,141	)
Preferred stock, Series A, issued as compensation		5,200				52,000															52,000
Contributed capital, interest on shareholder loans															2,593						2,593
Net loss																		(121,460	)		(121,460	)
Balance, December 31, 2013		5,200				52,000			295,278			295			1,983,978			(2,142,281	)		(106,008	)
Common shares to be issued under consulting agreement (2 million)																					515,000
Contributed capital, interest on shareholder loans															675						675
Net loss																		(459,251	)		(459,251	)
Balance, December 31, 2014		5,200			$	52,000			295,278		$	295		$	1,984,653		$	(3,116,532	)	$	(564,584	)

 

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

 

F-5

 

SPUTNIK ENTERPRISES, INC.

Statements of Cash Flows

Years Ended December 31, 2014 and 2013

 

		Twelve Months Ended				Twelve Months Ended
		December 31,				December 31,
		2014				2013
Cash flows from operating activities:
Net loss		$	(459,251	)		$	(121,460	)
Adjustments to reconcile net (loss) to cash provided (used) by developmental stage activities:
Imputed interest on note payable			675				2,593
Stock compensation			515,000				52,000
Compensation expense for services rendered and settled by the establishment of a note payable			400,000				-
Change in current assets and liabilities:
Accounts payable			(3,349	)			(568	)
Accounts payable and accrued expenses			21,239				-
Net cash flows from operating activities			(40,686	)			(19,615	)
Cash flows from investing activities:
Net cash flows from investing activities			-				-
Cash flows from financing activities:
Advances from shareholders and related party's			40,453				62,097
Net cash flows from financing activities			40,453				62,097
Net cash flows			(233	)			(5,338	)
Cash and equivalents, beginning of period			287				5,625
Cash and equivalents, end of period		$	54			$	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.

 

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”).

 

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.

 

Reclassification

 

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. Specifically, those presentations under reporting requirements as a development stage company. These reclassifications had no effect on reported losses.

 

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 $54 and $287 at December 31, 2014 and December 31, 2013, respectively. 

 

F-7

 

Cash Flow 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.

 

Fair Value of Financial Instruments

 

The Company’s balance sheet includes financial instruments consisting of cash, accounts payables, accrued expenses and notes payable. 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, 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.

 

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, 2014, or 2013.

 

F-8

 

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 net operating losses for December 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 for the years ending December 31, 2014 and 2013.

 

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, 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 5 for related party transactions.

 

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.

 

Share-based expense for the years ending December 31, 2014 and 2013 was $0 and $52,000, respectively.

 

F-9

 

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.

 

In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-10, which eliminated certain financial reporting requirements of companies previously identified as “Development Stage Entities” (Topic 915). The amendments in this ASU simplify accounting guidance by removing all incremental financial reporting requirements for development stage entities. The amendments also reduce data maintenance and, for those entities subject to audit, audit costs by eliminating the requirement for development stage entities to present inception-to-date information in the statements of income, cash flows, and shareholder equity. Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915. The Company has adopted this standard.

 

In June 2014, FASB issued Accounting Standards Update (ASU) No. 2014-12 Compensation — Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. A performance target in a share-based payment that affects vesting and that could be achieved after the requisite service period should be accounted for as a performance condition under Accounting Standards Codification (ASC) 718, Compensation — Stock Compensation. As a result, the target is not reflected in the estimation of the award’s grant date fair value. Compensation cost would be recognized over the required service period, if it is probable that the performance condition will be achieved. The guidance is effective for annual periods beginning after 15 December 2015 and interim periods within those annual periods. Early adoption is permitted. Management has reviewed the ASU and believes that they currently account for these awards in a manner consistent with the new guidance, therefore there is no anticipation of any effect to the financial statements.

 

In August 2014, FASB issued Accounting Standards Update (ASU) No. 2014-15 Preparation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. Under generally accepted accounting principles (GAAP), continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. If and when an entity’s liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting in accordance with Subtopic 205-30, Presentation of Financial Statements—Liquidation Basis of Accounting. Even when an entity’s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this Update should be followed to determine whether to disclose information about the relevant conditions and events. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company will evaluate the going concern considerations in this ASU however, at the current period, management does not believe that it has met conditions which would subject these financial statements for additional disclosure.

 

NOTE 3 – GOING CONCERN

 

The Company incurred a net loss of $459,251 during the year ended December 31, 2014 and had net cash used in operating activities of $40,686 for the same period. Additionally, the Company has an accumulated deficit of $2,601,532 and a working capital deficit of $564,584 at December 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 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-10

  

NOTE 4 – NOTES PAYABLE

 

Summary of notes payable:

 

		December 31, 2014				December 31, 2013
Note payable, related party (Kidd), dated January 20, 2014, interest 5%, payable upon demand of the holder (a)		$	125,000			$	--
Advances payable, related party (Kidd), 2014, interest 0%, payable upon demand (b)			17,550				102,097
Note payable, related party (Kidd), dated January 20, 2014, interest 3%, payable upon demand of the holder (c)			400,000				--
		$	542,550			$	102,097

______________________

(a) On January 20, 2014, the Company consolidated all advances and loans previously made through date 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.

 

(b) During the years ending December 31, 2014 and 2013, cash advances and expenses paid on behalf of the company, totaling $40,453 and $62,097, respectively, were made by Mr. Kidd.  Subsequent to the consolidation of advances, described above, made by R. Thomas Kidd on January 20, 2014, Mr. Kidd has made additional cash advances on behalf of the company totaling $17,550. There is no formal note or terms and is payable on demand.

 

(c) 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 note was created under severance agreement, a non-cash transaction. 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-11

 

NOTE 5 – RELATED PARTY TRANSACTIONS

 

Notes payable

 

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.

 

During the years ending December 31, 2014 and 2013, cash advances and expenses paid on behalf of the company, totaling $40,453 and $62,097, respectively, were made by Mr. Kidd. Subsequent to the consolidation of advances made by R. Thomas Kidd on January 20, 2014, Mr. Kidd has made additional cash advances on behalf of the company totaling $17,550. There is no formal note or terms and is payable on demand.

 

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.

 

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 $2,593 for the years ending December 31, 2014 and 2013, respectively, as imputed interest on shareholder loans to the Company.

 

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.

 

F-12

 

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 entered into a consulting agreement with their former executive, R. Thomas Kidd, effective upon the completion of a merger or acquisition.  Under the agreement, the Company shall compensate Consultant in the form of two million (2,000,000) shares of unrestricted common stock of the Company with issuance to occur in installments of 250,000 shares per month for a period of 8 months.  The Consultant shall be entitled to receive the shares as earned and in the event of termination of the agreement, Company shall be obligated to continue the issuance of shares until the entire 2 million shares are issued to Consultant.  As of December 31, 2014, the shares are unissued and payable.  The Company has not recognized any stock-based compensation, as the contingent event of a merger has not occurred.

 

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, 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.

 

On January 20, 2014, the Company entered into a consulting agreement, effective upon completion of a merger or acquisition, with their former executive, R. Thomas Kidd.  Under the agreement, the Company shall compensate Consultant in the form of two million (2,000,000) shares of unrestricted common stock of the Company with issuance to occur in installments of 250,000 shares per month for a period of 8 months.  Under contractual agreement, the shares are to be issued as unrestricted shares.  The Company has not completed any merger or acquisition subsequent to the signing of the agreement.  As of December 31, 2014, the shares have not been earned and are unissued.

 

Total common shares issued and outstanding at December 31, 2014 and 2013 were 295,278.

 

F-13

 

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 September 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 September 30, 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 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 2014 and 2013, the Company incurred a net losses 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 $2,601,000 and $2,142,000 at December 31, 2014 and 2013, respectively, and will begin to expire in the year 2025.

 

At December 31, 2014 and 2013, deferred tax assets at the statutory rate consisted of the following:

 

Deferred tax assets		2014				2013
Net operating losses		$	390,200			$	321,300
Less: valuation allowance			(390,200	)			(321,300	)
Net deferred tax asset		$	-			$	-

  

F-14

 

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:

 

An Agreement and Plan of Merger was made the first day of February, 2015 by and between Sputnik Enterprises, Inc. and Ludvik Holdings, Inc., a Delaware Corporation. Subject to the terms and conditions of the Agreement, at the closing, the Issuer shall merge with and into the Ludvig Holdings, and Ludvig Holdings shall be the surviving corporation in the Merger.

 

Closing of the transaction is subject to and wholly conditioned upon: Each party shall have obtained the approval of the agreement and plan of merger by a majority of its voting shareholders, the Effective date under the Plan shall have occurred, and the issuer debt of $540,052 due in notes payable and loans payable shall have been paid to the satisfaction of the note and loan holders. In the event the closing has not been completed on or before February 27, 2015, or extended by written agreement of both parties, this agreement shall terminate and be null and void.

 

On February 26, 2015, an addendum to the Agreement was executed whereby the closing date was extended to March 10, 2015. All other terms and conditions of the Agreement remained the same.

 

On March 14, 2015, an addendum to the Agreement was executed whereby the closing date was extended to March 24, 2015. All other terms and conditions of the Agreement remained the same.

 

F-15

 

SIGNATURES

 

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

 

	SPUTNIK ENTERPRISES INC.
Dated: March 25, 2015	By	/s/ Anthony Gebbia
		Anthony Gebbia
		Chief Executive Officer and President

 

 

14

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