10-Q 1 v131869_10q.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2008

o࿠TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________________ to ______________

Commission file number 333-126158

SPUTNIK ENTERPRISES, INC.
(Exact name of small business issuer as specified in its charter)

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

650 5th Street, Suite 303
San Francisco, CA 94107
(Address of principal executive offices)

(415) 355-9500
(Issuer’s telephone number)

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

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x  No ¨

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

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

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

As of November 6, 2008 there were 14,763,919 shares issued and outstanding of the registrant’s common stock.
 
 
INDEX
 
   
Page
PART I.
FINANCIAL INFORMATION
  
 
 
 
Item 1.
Unaudited Financial Statements
3
 
 
 
 
Balance Sheets as of September 30, 2008 and December 31, 2007 (unaudited)
3
 
 
 
 
Statements of Operations for the Three and Nine Months Ended September 30, 2008 and 2007, and from re-entering the development stage, February 29, 2008 to September 30, 2008 (unaudited)
4
 
 
 
 
Statements of Cash Flows for the Nine Months Ended September 30, 2008 and 2007, and from re-entering the development stage, February 29, 2008 to September 30, 2008 (unaudited)
5
 
 
 
 
Notes to Unaudited Financial Statements
6
 
 
 
Item 2.
Management’s Discussion and Analysis or Plan of Operation
8
 
 
 
Item 3.
Quantitative and Qualitative Disclosure about Market Risk
9
     
Item 4.
Controls and Procedures
9
 
 
 
PART II.
OTHER INFORMATION
 
 
 
 
Item 1.
Legal Proceedings
9
 
 
  
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
9
 
 
 
Item 3.
Defaults Upon Senior Securities
10
 
 
 
Item 4.
Submission of Matters to a Vote of Security Holders
10
 
 
 
Item 5.
Other Information
10
 
 
 
Item 6.
Exhibits
10
 
 
 
Signatures
 
10

2


PART I — FINANCIAL INFORMATION

Item 1.   Financial Statements.

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

   
September 30,
2008
  
December 31, 2007
  
ASSETS
            
Current Assets
            
Cash
  
$
-
  
$
4,292
  
Accounts receivable
    
-
    
29,802
  
Inventory
    
-
    
9,785
  
Prepaid expenses and other assets
    
-
    
37,315
  
Total Current Assets
    
-
    
81,194
  
 
              
Property and equipment, net of accumulated depreciation of $0 and $18,758, respectively
    
-
    
9,755
  
Deposit
    
-
    
6,101
  
TOTAL ASSETS
  
$
-
  
$
97,050
  
 
              
LIABILITIES AND STOCKHOLDERS' DEFICIT
              
 
              
Current Liabilities
              
Accounts payable
  
$
-
  
$
55,041
  
 Accrued liabilities
    
9,962
    
50,161
  
Deferred revenue
    
-
    
13,008
  
Line of credit
    
-
    
20,418
  
Note payable
    
25,000
    
-
  
Due to shareholder
    
-
    
65,000
  
Total Current Liabilities
    
34,962
    
203,628
  
 
            
Stockholders' Deficit
           
Common stock, $.001 par value, 50,000,000 shares authorized, 14,763,919 shares issued and outstanding in both periods
    
14,764
    
14,764
  
Paid-in capital
    
1,898,598
    
1,696,190
  
Accumulated deficit from development stage
    
(35,461
)
  
-
  
Accumulated deficit from prior operations
    
(1,912,863
)
  
(1,817,532
)
Total Stockholders' Deficit
   
(34,962
)
  
(106,578
)
 
            
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
 
$
-
  
$
97,050
  
 
3
 
SPUTNIK ENTERPRISES, INC.
(FORMERLY SPUTNIK, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(unaudited)
 
   
Three Months Ended
  
Nine Months Ended
  
Re-entering
 
   
September 30,
  
September, 30,
  
Development Stage to
  
   
2008
  
2007
  
2008
  
2007
  
September 30, 2008
  
                       
Revenue
  
$
-
  
$
-
  
$
-
  
$
-
  
$
-
  
Cost of goods sold
    
-
    
-
    
-
    
-
    
-
  
Gross profit
    
-
    
-
    
-
    
-
    
-
  
 
                                
Expenses:
                                
General and administrative costs
    
27,041
    
-
    
35,461
    
-
    
35,461
  
Depreciation and amortization
    
-
    
-
    
-
    
-
    
-
  
Total operating expense
    
27,041
    
-
    
35,461
    
-
    
35,461
  
Operating Loss
    
(27,041
)
  
-
    
(35,461
)
  
-
    
(35,461
)
                                 
Interest income
    
-
    
-
    
-
    
-
    
-
  
Interest expense
    
-
    
-
    
-
    
-
    
-
  
                                 
NET LOSS FROM CONTINUING OPERATIONS
    
(27,041
)
  
-
    
(35,461
)
  
-
    
(35,461
)
                                 
Discontinued operations
                                
                                 
Loss from discontinued operations
    
-
    
(177,623
)
  
(91,467
)
  
(501,562
)
  
-
 
Loss on disposal
    
-
    
-
    
(3,864
)
  
-
    
-
  
                                 
NET LOSS
  
$
(27,041
)
$
(177,623
)
$
(130,792
)
$
(501,562
)
$
(35,461
)
 
                                
Loss per common share from continuing operations - basic and diluted
    
(0.00
)
  
(0.00
)
  
(0.00
)
  
(0.00
)
      
Loss per common share from discontinued operations - basic and diluted
    
(0.00
)
  
(0.01
)
  
(0.01
)
  
(0.03
)
      
                                 
Basic and diluted loss per share
  
$
( 0.00
)
$
( 0.01
)
$
( 0.01
)
$
( 0.03
)
      
Weighted average shares outstanding
    
14,763,919
    
14,763,919
    
14,763,919
   
14,458,748
       
   
See notes to financial statements.
 
4
 
SPUTNIK ENTERPRISES, INC.
(FORMERLY SPUTNIK, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(unaudited)

   
Nine Months Ended
  
Re-entering Development Stage
to September 30, 2008
  
   
2008
  
2007
  
Cash Flows from Operating Activities
                    
Net loss from operations
  
$
(35,461
)
$
-
  
$
(35,461
)
Net loss from discontinued operations
    
(91,467
)
  
(501,562
)
  
-
  
Loss on disposal
    
(3,864
)
  
-
        
Adjustments to reconcile net loss to cash used in operating activities:
                    
Depreciation
    
1,578
    
7,005
    
-
  
Imputed interest on note payable
    
2,408
    
-
    
499
  
Note payable issued for legal expenses
    
25,000
    
-
    
25,000
  
Changes in working capital:
                    
Accounts receivable
    
(5,660
)
  
(55,473
)
  
-
  
Inventory
    
(1,776
)
  
(7,562
)
  
-
  
Prepaid expenses and other assets
    
(2,467
)
  
(33,099
)
  
-
  
Accounts payable and accrued liabilities
    
16,366
    
50,836
    
9,962
  
Net cash used in operating activities
    
(95,343
)
  
(539,855
)
  
-
  
                     
Cash Flows from Investing Activities
                    
Cash distributed in spin off
    
(23,580
)
  
-
    
-
  
Purchase of property and equipment
    
-
    
(4,489
)
  
-
  
Net cash used in investing activities
    
(23,580
)
  
(4,489
)
  
-
  
                     
Cash Flows from Financing Activities
                    
Line of credit
    
(20,369
)
  
-
    
-
  
Proceeds from advance from shareholder
    
135,000
    
-
    
-
  
Common stock issued for cash
    
-
    
622,444
    
-
  
Net cash provided by financing activities
    
114,631
    
622,444
    
-
  
                     
Net change in cash
    
(4,292
)
  
78,100
    
-
  
Cash at beginning of period
    
4,292
    
7,927
    
-
  
Cash at end of period
  
$
-
  
$
86,027
  
$
-
  
                     
Supplemental Disclosures of Cash Flow Information
                    
Cash paid for interest
  
$
853
  
$
611
  
$
-
  
Cash paid for income taxes
    
-
    
-
    
-
  

5
 
SPUTNIK ENTERPRISES, INC.
(FORMERLY SPUTNIK, INC.)
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
(unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Sputnik Enterprises, Inc. have been prepared in accordance with accounting principles generally accepted in the United Sates of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with Sputnik’s audited 2007 annual financial statements and notes thereto filed with the SEC on form 10-KSB. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the result of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements, which would substantially duplicate the disclosure required in Sputnik’s 2007 quarterly financial statements have been omitted.

NOTE 2 - GOING CONCERN

The accompanying financial statements have been prepared assuming that Sputnik will continue as a going concern. As shown in the accompanying financial statements, Sputnik suffered losses of $103,792 for the nine months ended September 30, 2008 and has an accumulated deficit of $1,948,324 at September 30, 2008. These conditions raise substantial doubt as to Sputnik's ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if Sputnik is unable to continue as a going concern. Management intends to finance these deficits by selling its common stock.

NOTE 3 - ACCOUNTING POLICIES

Development Stage Enterprise - As a result of the Company’s sale of Laika, Inc., its only source of revenue, the Company is now considered a development stage enterprise pursuant to FASB Statement 7, which focuses on development stage companies. Users of the financial statements should be familiar with this Statement and its effect on the financial statements.

NOTE 4 - NOTE PAYABLE

On July 1, 2008, the Company issued a note in the amount of $25,000 to legal counsel for legal expenses to be incurred during the quarter. The note is due on demand and has no stated interest rate. Imputed interest in the amount of $499 is reflected as an increase to additional paid in capital.
 
NOTE 5 - DISCONTINUED OPERATIONS

On February 6, 2008, Sputnik amended our 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., and to give the authority to issue an additional 10,000,000 shares which will be designated “Preferred Stock”

This resolution was undertaken because management determined that additional capital could be raised by transforming itself into a public shell, having management sell a controlling interest in the public shell, and management agreeing to invest all proceeds of the sale of such controlling interest into Laika, after payment of all personal tax liabilities and out-of-pocket expenses as a result of such sale, and management has agreed to do so.

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.
 
6
 
In connection with the sale of stock, all of the assets and liabilities were transferred and the due to affiliate was forgiven and treated as additional paid in capital. The following schedule shows the effects of the dividend distribution which resulted from the sale of the stock of the wholly owned subsidiary at February 29, 2008:
 
   
February 29, 2008
  
Adjustments
 
Adjusted February 29, 2008
  
ASSETS
                  
Current Assets
                  
Cash
  
$
27,444
  
$
(27,444
)
$
-
  
Accounts receivable
    
35,462
    
(35,462
)
  
-
  
Inventory
    
11,561
    
(11,561
)
  
-
  
Prepaid expenses and other assets
    
39,782
    
(39,782
)
  
-
  
Total Current Assets
    
114,249
    
(114,249
)
  
-
  
 
                    
Property and equipment, net
    
8,177
    
(8,177
)
  
-
  
Deposit
    
6,101
    
(6,101
)
  
-
  
TOTAL ASSETS
  
$
128,527
  
$
(128,527
)
$
-
  
 
                    
LIABILITIES AND STOCKHOLDERS' EQUITY
                   
 
                    
Current Liabilities
                    
Accounts payable
  
$
61,494
  
$
(61,494
)
$
-
  
Due to affiliate
    
200,000
    
(200,000
)
  
-
  
Deferred revenue
    
13,008
    
(13,008
)
  
-
  
Accrued liabilities
    
50,161
    
(50,161
)
  
-
  
Total Current Liabilities
    
324,663
    
(324,663
)
  
-
  
 
                    
Stockholders' Equity
                   
Preferred stock, $.001 par value, 10,000,000 shares authorized, none issued and outstanding
    
-
    
-
    
-
  
Common stock, $.001 par value, 50,000,000 shares authorized 14,763,919 shares issued and outstanding
    
14,764
    
-
    
14,764
  
Paid-in capital
    
1,698,099
    
200,000
    
1,898,099
  
Accumulated deficit
    
(1,908,999
)
  
(3,864
)
  
(1,912,863
)
Total Stockholders' Equity
   
(196,136
)
  
196,136
    
-
  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  
$
128,527
  
$
(128,527
)
$
-
  
 
NOTE 6 – SUBSEQUENT EVENT

On November 18, 2008, Sputnik Enterprises, Inc. and Sputnik, Inc. entered into a rescission agreement pursuant to which the parties agreed to rescind ab initio the issuance of 35,000,000 shares to Sputnik, Inc. on or about April 14, 2008.
 
7
 
 
This 10−Q contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the audited consolidated financial statements and accompanying notes and the other financial information appearing else where in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events. Refer also to "Cautionary Note Regarding Forward Looking Statements" and “Risk Factors” below.
 

Overview

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

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

Results of Operations for the Three Months Ended September 30, 2008 Compared to the Three Months Ended September 30, 2007

Because 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, the quarterly results are not comparable or material and thus a discussion thereof is omitted.

Results of Operations for the Nine Months Ended September 30, 2008 Compared to the Nine Months Ended September 30, 2007

Because 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, the quarterly results are not comparable or material and thus a discussion thereof is omitted.

Liquidity and Capital Resources

On February 29, 2008, we closed the sale of the stock of our wholly owned subsidiary, Laika, Inc. to AstroChimp, Inc., leaving us as a shell company. All expenses will be funded as an advance by our officers as we have no assets, liabilities or source of revenues.
 
Cautionary Note About Forward-Looking Statements
 
The information contained in this Report includes some statements that are not purely historical and are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and as such, may involve risks and uncertainties. These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, perceived opportunities in the market and statements regarding our mission and vision. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. You can generally identify forward-looking statements as statements containing the words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, but the absence of these words does not mean that a statement is not forward-looking. For example, our forward-looking statements may include statements regarding:
 
8
 
·  
Our projected sales and profitability,
 
·  
Our growth strategies,
 
·  
Anticipated trends in our industry,
 
·  
Our future financing plans, and
 
·  
Our anticipated needs for working capital.
 
In light of these risks, uncertainties and assumptions, the future events, developments or results described by our forward-looking statements herein could turn to be materially different from those we discuss or imply.
  
Item 3. Quantitative and Qualitative Disclosure about Market Risk

Not applicable.

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

As of September 30, 2008, under the direction of our Chief Executive Officer/Chief Financial Officer, we evaluated our disclosure controls and procedures as of September 30, 2008 and concluded that our disclosure controls and procedures were effective as of September 30, 2008.

There were no changes in our internal control over financial reporting during the fiscal quarter ended September 30, 2008, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION
 
Item 1.   Legal Proceedings.
 
None.
 
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.
 
(a)
Unregistered Sales of Equity Securities.
 
The Registrant did not sell any unregistered securities during the three months ended September 30, 2008.
 
(b)
Use of Proceeds.
 
The Registrant did not sell any unregistered securities during the three months ended September 30, 2008.
 
9
 
Item 3.   Defaults Upon Senior Securities
 
None.

Item 4.   Submission of Matters to a Vote of Security Holders.
 
The Registrant did not submit any matters to a vote of its security holders during the three-months ended September 30, 2008.
 
Item 5.   Other Information.
 
Not applicable.
 
Item 6.   Exhibits.
 
(a) Exhibits.
 
Exhibit
 
Item
31.1
 
Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
32.1*
 
Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
10.1   
Rescission Agreement
________________
* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

 SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
     
 
SPUTNIK ENTERPRISES,INC.
 
 		  
 		  
 
Date: November 18, 2008 By:   /s/ David LaDuke
 
 
(Authorized Officer and Principal Executive Officer)
 
10
 
EXHIBIT INDEX
 
 
Exhibit
 
Item
31.1
 
Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
32.1*
 
Certification of Principal Executive and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
10.1  
Rescission Agreement
 
________________
* 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
 
11