Mail Stop 3561
December 9, 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
Amendment No. 2 filed November 7, 2005
File No. 333-126158
Dear Mr. LaDuke:
We have reviewed your amended 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.
Registration Statement - General
1. Please revise the format for future amendments to allow the
pages
to fit the EDGAR screen and make sure the pages fully print on the
page.
Prospectus Cover
2. Indicate the dollar amount of offering costs and the proceeds
to
the company on a maximum and minimum basis. See Item
501(a)(9)(iv)
of Regulation S-B.
3. Include the information suggested by Item 501(a)(10) if
applicable.
Risk Factors, page 7
4. The fifth risk factor should be revised to clarify that it is
David LaDuke who has absolute voting control of this company and
will
continue to after the offering.
5. We note risk factor eight which describes the risk that the
company may not be able to implement its business plan if the
maximum
amount is not raised. Please include a separate risk factor that
specifically focuses on the risk to investors that investors will
not
have the right to receive their money back if the maximum is
not raised since the company is not requiring a minimum
amount
to be escrowed.
Dilution, page 12
6. We have reviewed your response to comment 6 and your disclosure
for the pro forma net tangible book value for 50% of the maximum
offering and 100% of the maximum offering and it is does not
appear
that the pro forma net tangible book value of $319,579 and
$569,479
respectively has been updated for the September 30, 2005 balances.
The net tangible book value at September 30, 2005 of $7,029 plus
the
proceeds of 50% and 100% of the offering does not appear to
reconcile
to the amounts disclosed. Please revise.
Use of Proceeds, page 11
7. We reissue our previous comment five. In the table, please
describe in more detail the use of proceeds if less than half of
the
offering is raised. See Item 504 of Regulation S-B.
Plan of Distribution, page 13
8. Please disclose more detail regarding the manner in which these
securities will be offered. For instance, will the responsible
individuals solicit investors through direct mailings and/or
through
personal contact. Will you utilize sales material in promoting
the
sale of the shares pursuant to this prospectus? If so, we remind
you
of the Section 5 prohibition against utilizing a prospectus that
does
not meet the requirements of Section 10 of the Securities Act.
Supplementally, please confirm your understanding of this
requirement
and send us a copy of these materials for our review.
9. We reissue in part our previous comment seven. The
representations specified in the subscription agreement requiring
subscribers to represent that "Subscriber has can afford the
entire
loss of the purchase price hereto should there be such a loss"
should
be deleted, unless the representations are included because of
state
law or other requirement. In that event, a copy of the
requirement
should be furnished to us as supplemental information and the
subscription agreement must be revised to include a statement in a
prominent place informing the subscribers that by making such
representations they have not waived any right of action they may
have under the applicable federal securities laws. In addition,
it
should be noted that the federal securities laws specifically
provide
that any such waiver would be unenforceable. The subscription
agreement should also note whether the company intends to assert
the
representations as a defense in any subsequent litigation.
10. In light of the above comment, please revise the statement in
this section that "a subscription agreement, which will contain
....
representations as to the investor`s qualifications ... and his
ability to ... bear the risk of an investment in Sputnik."
11. We note your reference to Section 15(g) of the Exchange Act.
Please include in the prospectus the names of any broker-dealers
that
will assist the company in selling its securities and the terms.
12. Please disclose whether your officers, directors, employees,
and
affiliates may purchase shares. If they will purchase shares in
the
offering, please confirm, if true, that:
* no offers were made prior to the filing of the registration
statement;
* subsequent offers were made only with the prospectus; and
* no funds have or will be committed or paid prior to
effectiveness
of the registration statement.
Description of Business, page 21
13. We reissue our previous comment 25. Please describe in detail
the business development of the company and its Delaware
predecessor
since inception or at least the past three years as required by
Item
101(a) of Regulation S-B. Please also describe how the software
was
developed and discuss whether the company has exclusive
proprietary
rights to the software.
14. We reissue in part our previous comment 11. Please describe
the
principal terms of the agreements between the company and the
developers. See Items 101(b)(1) and (7) of Regulation S-B.
15. We reissue our previous comment 14. Please describe how the
company sells or markets its products and services. See Item
101(b)(1) and (2) of Regulation S-B. Please reconcile the
disclosure
in this section with the disclosure in the use of proceeds
section.
16. We reissue our previous comment 19. Please include disclosure
of
the need for any local 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.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations For the Nine Months Ended September 30, 2005
Compared to the Nine Months Ended September 30, 2004, page 25
17. The amounts disclosed for general and administrative expense
for
September 30, 2005 and 2004 and the amount disclosed as non-cash
compensation for September 30, 2005 do not reconcile to the
financial
statements. Please revise.
Certain Relationships and Related Transactions, page 30
18. In the table, please attribute a specific price per share and
date of issuance for each transaction. See Item 404(a) of
Regulation
S-B.
19. It is not clear who owned the shares of this company and its
Delaware predecessor prior to the issuance of the shares listed in
the table. Please clarify. Those persons may be considered as
promoters or founders of the company, as defined.
20. We reissue in part our previous comment 22. Please
significantly
revise this section to give the names of the persons, their
relationship to the issuer, nature of the persons` interests in
the
transactions, and the amount of such interests as required by Item
404(a) of Regulation S-B. For example, please describe their
affiliation to Sputnik.
21. Please describe, without copying verbatim from the agreement,
the
work in which GoPublicToday.com and its affiliates have or will
perform for Sputnik. Please include whether any of these
companies
have assisted or will assist the company in selling or marketing
the
shares of common stock or in issuing press releases for the
company.
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. Please describe the "on-going
SEC
compliance issues" that will be performed by the affiliate of
Sputnik.
22. Please disclose whether the 500,000 shares of Sputnik common
stock have been issued to GoPublicToday.com.
23. We note the statements in the paragraph of the non-EDGAR copy
of
the prospectus that begins "I have a note into Penny about
this..."
When explaining the services provided by GoPublicToday.com in the
business section, distribution section and/or MD&A section, please
explain GoPublicToday.com`s involvement in providing the company
with
the intranets.com service.
24. We do not understand the third-to-last paragraph of this
section;
i.e., "none of this obligation is recorded. However, cost
associated
.... is included in the 2004 statement of operations." Please
reconcile these contradictory statements. Update the disclosure
through the latest practicable date.
25. The contract with PMS has not been filed.
26. Please clarify whether Messrs LaDuke and Tyde are the
promoters
as described in Item 404(d) of Regulation S-B. Identify any other
founders or promoters of the company at its inception in 2001.
Executive Compensation, page 32
27. We reissue in part our previous comment 26. Please disclose
in a
footnote the nature of the non-cash compensation paid to Mr.
LaDuke.
December 31, 2004 Financial Statements
Statements of Operations, page 37
28. We noted your disclosure of non cash stock compensation as a
single line item in the statement of operations. Please revise
your
presentation to either:
* parenthetically note within the appropriate line item, the
amount
of equity-related charge that is included in that line item and
remove the separate classification for the non-cash charge; or
* parenthetically note the amount of the non-cash stock
compensation
excluded from a particular line item, for example, SG&A (exclusive
of
non-cash stock compensation, shown below).
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies
General
29. We read your response to comment 30 and your revised
disclosure;
however, we do not see how your response adequately addresses our
comment. Please revise to disclose your policy for stock
compensation issued to both employees and non-employees. Please
refer to APB 25 and SFAS 123, as amended by SFAS 148 (employees)
and
EITF 96-18 (non-employees), and provide the minimum required
disclosures of this guidance. For example, your disclosure
indicates
that the stock issued to consultants (non-employees) was issued at
the fair value of the stock. Your disclosure should indicate how
you
determined fair valued and identify the methodology and
assumptions
used in your estimate. Please revise accordingly.
Revenue Recognition, page 40
30. We have read your response to comment 31 and it does not
appear
to address our comment as it was issued. We noted from review of
your website that the company sells software which includes 90 day
installation support and a 30 day money back guarantee, hardware,
a
"Hotspot Kit" which includes the software, hardware, 90 day
installation support and 30 day money back guarantee, a
subscription
fee agreement in which Sputnik hosts the server control center,
training, technical support and configuration support. It does
not
appear from your response that you addressed the revenue
recognition
criteria for each of these revenue streams. Specifically, 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.
31. We noted from your website that your products have a 30 day
money
back guarantee. Please explain how the refund rights are
accounted
for in accordance with SFAS No. 48 and how that impacts your
revenue
recognition. We may have further comments upon review of your
response.
Note 8 - Restatement, page 44
32. It does not appear that our request in comment 37 has been
adequately addressed. We noted that the financial statements for
the
fiscal years ended December 31, 2003 and 2004 have been restated,
but
there is no description detailing the nature of the errors that
have
been corrected. Please clarify and revise.
September 30, 2005 Unaudited Interim Financial Statements
General
33. Please revise the interim financial statements to conform to
any
changes made to the December 31, 2004 financial statements, as
necessary.
Part II - Exhibits
34. We note that exhibits 10.2, 10.5 and 10.6 are incomplete.
Note
that these agreements are required to be filed in their entirety,
including all exhibits and attachments, unless such portions of
agreements are granted a request for confidential treatment under
Rule 406 of Regulation C. Please either submit a request for
confidential treatment for such portions of the agreements or
refile
the agreements in their entirety.
* * * * *
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 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.
December 9, 2005
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