SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended June 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.
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 o | Accelerated filer o |
Non-accelerated filer o | 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).
As of August 12, 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 June 30, 2008 and December 31, 2007 (unaudited) | | 3 |
| | | | |
| | Statements of Operations for the Three and Six Months Ended June 30, 2008 and 2007 (unaudited) | | 4 |
| | | | |
| | Statements of Cash Flows for the Three and Six Months Ended June 30, 2008 and 2007 (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 | | 10 |
| | | | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | | 10 |
| | | | |
| Item 3. | Defaults Upon Senior Securities | | 11 |
| | | | |
| Item 4. | Submission of Matters to a Vote of Security Holders | | 11 |
| | | | |
| Item 5. | Other Information | | 11 |
| | | | |
| Item 6. | Exhibits | | 11 |
| | | | |
| Signatures | | | 11 |
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
SPUTNIK ENTERPRISES, INC.
(FORMERLY SPUTNIK, INC.)
BALANCE SHEETS
June 30, 2008 and December 31, 2007
(unaudited)
| | | June 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, respectivelyw | | | - | | | 9,755 | |
| Deposit | | | - | | | 6,101 | |
| TOTAL ASSETS | | $ | - | | $ | 97,050 | |
| | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' DEFICIT | | | | | | | |
| | | | | | | | |
| Current Liabilities | | | | | | | |
| Accounts payable | | $ | - | | $ | 55,041 | |
| Accrued liabilities | | | 7,921 | | | 50,161 | |
| Deferred revenue | | | - | | | 13,008 | |
| Line of credit | | | - | | | 20,418 | |
| Due to shareholder | | | - | | | 65,000 | |
| Total Current Liabilities | | | 7,921 | | | 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 | | | 1,898,099 | | | 1,696,190 | |
| Retained deficit | | | (1,920,784 | ) | | (1,817,532 | ) |
| Total Stockholders' Deficit | | | (7,921 | ) | | (106,578 | ) |
| | | | | | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | | $ | - | | $ | 97,050 | |
SPUTNIK ENTERPRISES, INC.
(FORMERLY SPUTNIK, INC.)
STATEMENTS OF OPERATIONS
Three and Six Months Ended June 30, 2008 and 2007
(unaudited)
| | | Three Months Ended | | Six Months Ended | |
| | | June 30, | | June, 30, | |
| | | 2008 | | 2007 | | 2008 | | 2007 | |
| | | | | | | | | | | | | | |
| Revenue | | $ | - | | $ | 132,631 | | $ | - | | $ | 265,644 | |
| Cost of goods sold | | | - | | | 45,703 | | | - | | | 89,142 | |
| Gross profit | | | - | | | 86,928 | | | - | | | 176,502 | |
| | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | |
| General and administrative costs | | | 7,921 | | | 280,178 | | | 7,921 | | | 497,732 | |
| Depreciation and amortization | | | - | | | 2,376 | | | - | | | 4,637 | |
| Total operating expense | | | 7,921 | | | (282,554 | ) | | 7,921 | | | (502,369 | ) |
| Operating Loss | | | (7,921 | ) | | (195,626 | ) | | (7,921 | ) | | (325,867 | ) |
| | | | | | | | | | | | | | |
| Interest income | | | - | | | 1,344 | | | - | | | 2,088 | |
| Interest expense | | | - | | | (139 | ) | | - | | | (160 | ) |
| | | | | | | | | | | | | | |
| NET LOSS FROM CONTINUING OPERATIONS | | | (7,921 | ) | | (194,421 | ) | | (7,921 | ) | | (323,939 | ) |
| | | | | | | | | | | | | | |
| Discontinued operations | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Loss from discontinued operations | | | - | | | - | | | (91,467 | ) | | - | |
| Loss on disposal | | | - | | | - | | | (3,864 | ) | | - | |
| | | | | | | | | | | | | | |
| NET LOSS | | $ | (7,921 | ) | $ | (194,421 | ) | $ | (103,252 | ) | $ | (323,939 | ) |
| | | | | | | | | | | | | | |
| Loss per common share from continuing operations – basic and diluted | | | (0.00 | ) | | (0.01 | ) | | (0.00 | ) | | (0.02 | ) |
| Loss per common share from discontinued operations – basic and diluted | | | (0.00 | ) | | (0.00 | ) | | (0.01 | ) | | (0.00 | ) |
| | | | | | | | | | | | | | |
| Basic and diluted loss per share | | $ | ( 0.00 | ) | $ | ( 0.01 | ) | $ | ( 0.01 | ) | $ | ( 0.02 | ) |
| Weighted average shares outstanding | | | 14,763,919 | | | 14,763,919 | | | 14,763,919 | | | 14,582,671 | |
See notes to financial statements.
SPUTNIK ENTERPRISES, INC.
(FORMERLY SPUTNIK, INC.)
STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2008 and 2007
(unaudited)
| | | 2008 | | 2007 | |
| Cash Flows from Operating Activities | | | | | |
| Net loss from operations | | $ | (7,921 | ) | $ | (323,939 | ) |
| Net loss from discontinued operations | | | (91,467 | ) | | - | |
| Loss on disposal | | | (3,864 | ) | | - | |
| Adjustments to reconcile net loss to cash used in operating activities: | | | | | | | |
| Depreciation | | | 1,578 | | | 4,637 | |
| Imputed interest on shareholder note | | | 1,909 | | | - | |
| Changes in working capital: | | | | | | | |
| Accounts receivable | | | (5,660 | ) | | (20,936 | ) |
| Inventory | | | (1,776 | ) | | (3,169 | ) |
| Prepaid expenses and other assets | | | (2,467 | ) | | (9,677 | ) |
| Accounts payable and accrued liabilities | | | 14,325 | | | (5,153 | ) |
| Net cash used in operating activities | | | (95,343 | ) | | (358,237 | ) |
| | | | | | | | |
| 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 | ) | | (3,698 | ) |
| | | | | | | | |
| 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 | ) | | 259,718 | |
| Cash at beginning of period | | | 4,292 | | | 7,927 | |
| Cash at end of period | | $ | - | | $ | 267,645 | |
| | | | | | | | |
| Supplemental Disclosures of Cash Flow Information | | | | | | | |
| Cash paid for interest | | $ | 853 | | $ | 160 | |
| Cash paid for income taxes | | | - | | | - | |
SPUTNIK ENTERPRISES, INC.
(FORMERLY SPUTNIK, INC.)
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 $103,252 for the six months ended June 30, 2008 and has an accumulated deficit of $1,920,784 at June 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 - 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.
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 | ) | $ | - | |
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 June 30, 2008 Compared to the Three Months Ended June 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 Six Months Ended June 30, 2008 Compared to the Six Months Ended June 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:
| | · | Our projected sales and profitability, |
| | · | 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
Under the supervision and with the participation of our management, including our Chief Executive Officer/Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework stated by the Committee of Sponsoring Organizations of the Treadway Commission. Furthermore, due to our financial situation, we will be implementing further internal controls as we become operative so as to fully comply with the standards set by the Committee of Sponsoring Organizations of the Treadway Commission.
The Company’s Chief Executive Officer/Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the fiscal period ending June 30, 2008 covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, the Chief Executive Officer/Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act. This conclusion by the Company’s Chief Executive Officer/Chief Financial Officer does not relate to reporting periods after June 30, 2008.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management, including our CEO/CFO, conducted an evaluation of the effectiveness of our internal control over financial reporting. Based on its evaluation, our management concluded that our internal controls over financial reporting were effective and that there is no material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s quarterly or interim financial statements will not be prevented or detected on a timely basis.
This quarterly report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Quarterly Report on Form 10-Q.
Changes in Internal Control Over Financial Reporting
No change in the Company’s internal control over financial reporting occurred during the quarter ended June 30, 2008, that materially affected, or is reasonably likely to materially affect, the Company s 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 June 30, 2008.
(b) Use of Proceeds.
The Registrant did not sell any unregistered securities during the three months ended June 30, 2008.
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 June 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 |
* 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: August 12, 2008 | By: | /s/ David LaDuke |
| | | |
| | | (Authorized Officer and Principal Executive Officer) |
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 |
* 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
