Mail Stop 3561
July 29, 2005
Mr. David LaDuke, President
Sputnik, Inc.
650 Townsend Street, Suite 320
San Francisco, CA 94103
Re: Sputnik, Inc.
Registration Statement on Form SB-2
Filed June 28, 2005
File No. 333-126158
Dear Mr. La Duke:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter. Please note that the page numbers
referred to below refer to the numbering of the non-EDGAR copy.
Front of Registration Statement
1. It would appear that the amount of the registration fee would
be
$58.85. Please reconcile. See Commission press release 2004-167.
Prospectus Cover Page
2. Please disclose those persons that will offer and sell the
securities on the prospectus cover page. See Item 501(a)(9) of
Regulation S-B.
Table of Contents
3. Please remove the Part II information of the Form SB-2 from the
table of contents unless you intend to distribute Part II with the
prospectus.
Prospectus Summary, page 5
4. Please define "public Wi-Fi services."
Risk Factors, page 8
5. Clarify the reference to "sources of our revenues" in the first
risk factor.
6. In risk factor five, please discuss any specific anticipated
litigation.
7. Identify the "affiliates" mentioned in risk factor nine.
8. You should present as risk factors only those factors that
represent a material risk to investors in this offering. Do not
include risk factors that could apply to any issuer or to any
other
offering. Please remove the second and last risk factors.
9. Please include as risk factors the following:
* the lack of a market for your common stock; and
* your lack of a minimum for this offering.
Use of Proceeds, page 12
10. Please describe the use of proceeds if less than the maximum
amount is raised. See Item 504 of Regulation S-B.
11. Please provide more specificity concerning the line item
General
Operations. Your attention is directed to Item 504 Regulation S-
B.
12. Any proceeds to be used, directly or indirectly, for officers
and
directors should be indicated.
Dilution, page 12
13. Please compare prices paid per share by officers, directors,
promoters and affiliated persons during the past five years to the
price to be paid by investors in this offering. See Item 506(a)
of
Regulation S-B.
14. For each of the varying levels of proceeds, include the net
tangible book value per share after the offering, and the amount
of
the increase in the net tangible book value per share attributable
to
the cash payments made by purchasers in this offering, as required
by
Item 506(b) of Regulation S-B.
15. We have reviewed your disclosure of the pro forma net tangible
book value of ($16,426) and value per share of $.03 and it is
unclear
how you determined such amounts. Please provide the calculation
for
the net tangible book value and the number of shares utilized to
determine the amount per share.
Plan of Distribution, page 13
16. Please note that neither GoPublicToday.com nor its affiliates,
including its broker/dealer affiliate, may participate in offering
the securities in any manner without full disclosure on the cover
page of the prospectus and hereunder. Please confirm to us, in
writing, this understanding.
17. Please name the "directors and officers" who will offer the
securities. Please specifically set forth the basis in which each
will meet the safe harbor provisions set out in Rule 3a4-1 under
the
Securities Exchange Act of 1934.
18. Please outline briefly the plan of distribution by including
how
the company will solicit the securities. Also include the names
of
the states in which the securities will be offered and whether the
securities will be registered in such states. See Item 508(c) of
Regulation S-B.
19. Please file a copy of the subscription agreement as an
exhibit.
See Item 601(b)(4) and (10) of Regulation S-B. We may have
further
comments.
20. Under the subsection "Recent Events" on page 21, we note the
description of a "registration package that could be used in the
sales of securities to the public." In the "Plan of Distribution"
section, please describe the registration package in detail and
describe all offering documents.
21. Please describe in detail the work in which GoPublicToday.com
and
its affiliates have or will perform for Sputnik. Please include
all
affiliates such as Public Company Management Corporation and all
of
its lines of business and/or subsidiaries. In addition, please
discuss any work in which M&A Capital Advisers, LLC will perform
for
Sputnik and its affiliates. Please describe all arrangements and
agreements in detail including fees, and any preliminary
agreements,
including the Contract for Services between GoPublicToday.com and
the
company.
22. Please describe whether the company has any plans or
intention,
preliminary or otherwise, to enter into a merger or acquisition.
Please describe any discussions that GoPublicToday.com or any of
its
affiliates including M&A Capital Advisers has had with any
representative of Sputnik regarding any plans of a merger or
acquisition involving Sputnik.
Security Ownership of Certain Beneficial Owners and Management,
page
17
23. We note that the company has issued 500,000 shares to
GoPublicToday.com. We also note the stipulation in the Contract
for
Services Agreement between the company and GoPublicToday.com that
the
company will issue 750,000 free shares to Public Company
Management
Services, an affiliate of GoPublicToday.com. In light of these
disclosures, it appears that GoPublicToday.com should be included
in
the beneficial owner table. See Instructions to Item 403 of
Regulation S-B.
24. The "key employees" referred to in footnote (1) would be
required
to disclose the information required by Item 401(b) of Regulation
S-
B.
Description of Business, page 19
25. Please describe the business development of the company since
inception as required by Item 101(a) of Regulation S-B. Please
describe the reasons why the company became a Nevada corporation.
26. Please describe how the software was developed. Also describe
the company`s proprietary interest in the software. See Item
101(b)(1) and (7) of Regulation S-B.
27. Please describe how the company sells and distributes the
software. Please describe the purchasers that have purchased the
software. Also describe any services provided by the company.
See
Item 101(b)(1) and (2) of Regulation S-B.
28. Describe whether the company has entered into any licensing
agreements and, if so, please describe the principal terms of the
agreements. See Item 101(b)(7) of Regulation S-B. The company
may
need to file such agreements as an exhibit. See Item 601(b)(10)
of
Regulation S-B.
29. Please describe whether the company is dependent on one or a
few
major customers. See Item 101(b)(6) of Regulation S-B.
30. In the last paragraph on page 19, please explain the statement
"public Wi-Fi services."
31. Please explain the statement "[o]ur software is designed to
give
service providers and businesses the ability to control access to
their Wi-Fi networks, and offer free, branded, or fee-based Wi-Fi
services."
32. Please explain the statement "[o]ur software enables
centralized,
web-based management of Wi-Fi networks."
33. Please describe the software in more detail. See Item
101(b)(1)
of Regulation S-B.
34. Please describe the Wi-Fi hardware components that are
provided
by the company. Describe whether the company purchases these
products and resells to customers. Describe the principal terms
of
any agreements and file the agreements as exhibits as required by
Item 601(b)(10) of Regulation S-B.
35. Please remove the promotional statement "[a]lthough Wi-Fi
hardware is widely available, we believe service providers and
businesses lack software that enables them to efficiently deploy,
operate and generate revenues from wireless networks."
36. Please explain the statement "Sputnik develops and markets Wi-
Fi
business software specifically designed to enable service
providers
and businesses to build and operate Wi-Fi networks, and to
generate
revenues by providing public-access Wi-Fi services."
Other
37. Please describe the need for any governmental approval of
principal products or services and the effect of existing or
probable
governmental regulation on the business. See Item 101(b)(8) and
(9)
of Regulation S-B.
38. Please estimate the amount spent during each of the last two
fiscal years on research and development activities. See Item
101(b)(10) of Regulation S-B.
Recent Events, page 21
39. Please update the March 31, 2005 date through the latest
practicable date.
40. Please name the founders and consultants that received the
7,985,224 shares of the common stock.
41. Clarify whether the $61,000 and the 20,000 shares to be paid
to
Sputnik has been, in fact paid as of the prospectus date.
Estimate
the fair value of the 20,000 shares of "the former officer`s
current
company."
Employees, page 21
42. Clarify the reference to "contractors." If they are not
employees of the registrant, file the contracts for each, or a
representative executed contract, as exhibit(s) to the amended
registration statement.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 22
Results of Operations, pages 22 and 23
43. Please revise your revenue and expense discussion to describe
and
quantify underlying material activities that generate income
statement variances between periods, including expected future
trends. Please ensure to quantify separately the effect of each
causal factor that you cite for material changes in your financial
statement amounts (e.g. discuss the components of SG&A and explain
the material changes and the related causal factors) as required
in
Financial Reporting Codification Section 501.04.
44. Please describe the types of sales that generated the
revenues.
45. Please describe the "per unit production cost of our product."
Liquidity and Capital Resources, page 24
46. Please expand this section to include the following:
* historical information regarding sources of cash and capital
expenditures;
* an evaluation of the amounts and certainty of cash flows;
* the existence and timing of commitments for capital expenditures
and other known and reasonably likely cash requirements;
* discussion of and analysis of known trends and uncertainties;
* a description of expected changes in the mix and relative cost
of
capital resources;
* indications of which balance sheet or income or cash flow items
should be considered in assessing liquidity; and
* a discussion of prospective information regarding companies`
sources of and needs for capital.
See Commission`s recent Release Nos. 33-8350 (December 19, 2003),
Part IV Liquidity and Capital Resources.
47. Please include a discussion of your critical accounting
estimates
(e.g. revenue recognition for products and services, stock
compensation to employees and non-employees, allowances for
doubtful
accounts, and inventory allowances). Disclosures included in the
"Critical Accounting Estimates" section of the MD&A should provide
greater insight into the quality and variability of information
regarding financial condition and operating performance. Your
revised disclosure should supplement, not duplicate, the
description
of accounting policies that are already disclosed in the notes to
the
financial statements. Your disclosure should discuss the
judgments
and uncertainties that affect the application of your critical
accounting policies and the likelihood that materially different
amounts could be reported under different conditions or using
different assumptions. Please revise.
Certain Relationships and Related Transactions, page 25
48. For each transaction, please give the name of the person, the
relationship to the issuer, nature of the person`s interest in the
transaction, and the amount of such interest as required by Item
404(a) of Regulation S-B.
49. Update the obligation of $130,062; it appears to have
increased
as of the more recent balance sheet. Indicate who owes it and
their
intentions concerning payment.
50. Refer to Note 3 of the December financial statements. The
security pledged by stockholders should be discussed under this
heading if the stockholders are officers, directors, principal
stockholders, their affiliates or associates.
51. Please include transactions with GoPublicToday.com and its
affiliates.
52. Please include the disclosure required by Item 404(d) of
Regulation S-B.
Market for Common Equity and Related Stockholder Matters, page 26
53. Correct the reference to "date of this registration statement"
on
page 27. Registration statements do not carry a date.
54. Remove the reference to "please refer to the registration
statement and the exhibits and schedules thereto" unless this
information will be distributed with the prospectus.
Bulletin Board Considerations, page 27
55. We note that most of the information under this heading is
technical which makes the substance of the disclosure difficult to
understand. Please revise this section to remove technical
language
regarding NASDAQ and the OTC Bulletin Board. See Rule 421 of
Regulation C.
Interest of Named Experts, page 29
56. Please describe the fair value of the 20,000 shares of stock
received by Michael Williams.
57. See Item 509 of Regulation S-B regarding disclosure of
contingencies in fees owing counsel.
Other
58. Please include the disclosure regarding the determination of
the
offering price as required by Item 505 of Regulation S-B.
December 31, 2004 Financial Statements
Statements of Operations, page 33
59. Disclose the significant components of general and
administrative
expense on the face of the statement of operations or in a note
thereto.
Statements of Stockholders` Deficit, page 34
60. Please revise to present each issuance of common stock and the
related amounts ($) at par value and include in a separate column
the
amounts ($) attributable to additional paid in capital.
61. Please reconcile the number of shares outstanding at December
31,
2002 to the disclosures made on page 48 (Item 26 - Recent Sales of
Unregistered Shares).
62. We read disclosures on pages 48 and 49 (Item 26 - Recent Sales
of
Unregistered Shares) and noted several issuances of common stock
in
2003 for cash, services, and compensation. Please clarify why the
stock issued was not presented here (in the statements of
stockholders` deficit) or page 35 (statements of cash flows) for
the
period ended December 31, 2003. In addition, please clarify if
the
stock that was not issued which related to payment of services or
compensation was recorded as a liability at December 31, 2003.
63. We read disclosures on pages 48 and 49 (Item 26 - Recent Sales
of
Unregistered Shares) and noted several issuances of common stock
in
2004 for cash, services, and compensation. Please clarify if the
stock issued for cash has been accurately presented in here (in
the
statements of stockholders` deficit) and on page 35 (statements of
cash flows) for the period ended December 31, 2004. In addition,
please clarify if the stock that was not issued which related to
payment of services or compensation was recorded as a liability at
December 31, 2004.
Statements of Cash Flows, page 35
64. We note that you have classified the change in the bank
revolving
line of credit as an operating activity. Pursuant to SFAS 95 (see
paragraphs 18 through 20), the proceeds from borrowing and
repayments
of amounts borrowed should be classified as financing activities.
Please revise here and in your discussion of liquidity (page 24).
65. We noted the $2,700 deposit represents a security deposit for
your operating lease agreement. Please revise to include the cash
flows from this transaction as an operating activity.
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies
Revenue Recognition, page 36
66. The disclosures on page 20 (Description of Business) and on
your
website suggests that you are selling a suite of products and
services which include your software products, hardware,
installation, services and training. Please revise your
disclosure
to provide a detailed description of each of your significant
revenue
generating activities. Your disclosure should address the
criteria
for revenue recognition as set forth in SOP 97-2 and SOP 98-9. In
your response, please explain how you analyzed the consensus in
concluding when revenue from your products and services should be
recognized. We may have further comment upon review of your
response.
67. Considering the comment above, and to enhance an investors`
understanding of your business, please revise your disclosures in
MD&A (i.e. comparative discussions surrounding your results of
operations) to discuss (both qualitatively and quantitatively)
your
significant revenue generating activities and the nature of costs
included in cost of sales (i.e. cost of goods sold and cost of
services).
Note 5 - Commitments, page 38
68. We noted your disclosure that you have agreed to pay
GoPublicToday.com (GPT) $74,000 and 500,000 shares of common stock
for consulting services to be performed, and that as of December
31,
2004 none of the obligation was recorded. We also noted that in
section three of the agreement (filed as exhibit 10.1), upon
execution (December 22, 2004) you were required to pay GPT a non-
refundable retainer of $19,000. Please revise to clarify whether
this $19,000 is recorded as a liability at December 31, 2004. If
the
amount to GPT is not recorded, tell us why not and how your
accounting treatment complies with GAAP.
69. Please clarify your disclosure that the cost associated with
the
500,000 shares of Sputnik common stock is included in the 2004
statement of operations. Tell us in detail how you have accounted
for the issuance of the stock in your financial statements, and
cite
the specific authoritative literature you used to support your
accounting treatment. In your response, provide a narrative
discussion addressing the applicability of EITF 96-18.
Note 6- Common Stock Agreements, page 38
70. We noted the disclosure of an obligation of $130,062 to
founders
and consultants that will be paid through the issuances of
7,985,224
shares and that the issuance plans are presented retroactively.
Tell
us in detail how you have accounted for the obligation in your
financial statements, and cite the specific authoritative
literature
you used to support your accounting treatment. Please address
whether these shares are being issued as compensation for services
and how the value of the obligation was determined. For those
shares
issued for services to non-employees, provide a narrative
discussion
addressing the applicability of EITF 96-18.
71. We noted the issuance of 1,214,295 shares of common stock for
cash and services as disclosed on page 34 (statement of
stockholders`
deficit). Please disclose the terms of the issuance of these
shares
and to whom the shares have been issued to. For those shares
issued
for services to non-employees, provide a narrative discussion
addressing the applicability of EITF 96-18.
March 31, 2005 and 2004 Interim Financial Statements
General
72. Please revise the interim financial statements to conform to
any
changes made to the December 31, 2004 financial statements, as
necessary.
Note 2 - Common Stock, page 43
73. We noted from your disclosure that you sold 810,000 shares of
common stock for $81,000 during the first quarter of 2005. It is
not
apparent however, where the sale of these shares was recorded in
your
interim financial statements. Please clarify, and disclose, to
whom
the shares were issued to, the terms of the sale of these shares
(i.e. cash, subscription receivable), and tell us where this
transaction has been recorded in your financial statements.
Please
advise and revise.
Note 4 - Subsequent events, page 43
74. We noted your disclosure of a warrant that was issued to a
consultant, but did not note any discussion of this warrant in the
December 31, 2004 financial statements. Please tell us how you
have
accounted for this transaction, and expand your disclosure here
and
in the December 31, 2004 financial statements (if applicable) to
describe all of the material terms of the warrants, including when
the warrant was issued, who has the rights to convert (i.e. the
holder or the Company), the exercise price, the exercise feature
(i.e. physical, net cash, or net share settlement, etc.), and any
redemption features. We may have further comments.
Other
75. Please provide a current accountant`s consent in any
amendment.
Part II
Item 25. Other Expenses of Issuance and Distribution, page 47
76. Please include those fees to be paid to GoPublicToday.com and
its
affiliates and specify the purpose of each fee. See Item 511 of
Regulation S-B.
Item 26. Recent Sales of Unregistered Securities, page 48
77. For each of the transactions, please describe whether the
company
engaged in any general solicitation or advertisements when
offering
the securities. See Item 701(c) and (d) of Regulation S-B.
Exhibits
78. Please revise your legality opinion to indicate that opinion
opines upon Nevada law including the Nevada Constitution, all
applicable provisions of the statutory provisions, and reported
judicial decisions interpreting those laws.
79. The EDGAR version of exhibit 10.2 is not fully executed.
Please
file a fully executed version.
* * * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your response to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert staff comments and the declaration of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Angela Halac at (202) 551-3398 or Hugh West
at
(202) 551-3872 if you have questions regarding comments on the
financial statements and related matters. Please contact Thomas
Kluck at (202) 551-3233 or Don Rinehart, who supervised the review
of
your filing, at (202) 551-3235 with any other questions.
Sincerely,
John Reynolds
Assistant Director
cc: Michael Williams
Fax (813) 832-5284
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David LaDuke
Sputnik, Inc.
July 29, 2005
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