Attached files
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| EX-32 - Sputnik Enterprises, Inc | v216157_ex32.htm |
| EX-31 - Sputnik Enterprises, Inc | v216157_ex31.htm |
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, 2010
¨ 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)
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Nevada
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52-234-8956
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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650 5TH STREET SUITE 301 SAN FRANCISCO, CA 94107
(Address of principal executive offices)
(415) 355-9500
(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 ¨
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):
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Accelerated Filer
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¨
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Smaller Reporting Company
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x
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(Do not check if a smaller reporting company.)
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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 voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was $542,947 based upon 135,286 shares of common stock held by non-affiliates on June 30, 2010.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
As of March 21, 2011, there were 295,278 shares of common stock, par value $.001, outstanding.
INDEX
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Page
Number
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Item Number
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PART I
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Item 1
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Description of Business
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3
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Item 1A
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Risk Factors
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4
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Item 1B
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Unresolved Staff Comments
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5
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Item 2
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Description of Property
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5
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Item 3
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Legal Proceedings
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5
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Item 4
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Submission of Matters to a Vote of Security Holders
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5
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PART II
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Item 5
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Market for Common Equity and Related Stockholder Matters
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5
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Item 6
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Management's Discussion and Analysis or Plan of Operation
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6
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Item 7
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Quantitative and Qualitative Disclosures About Market Risk
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6
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Item 7A
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Quantitative and Qualitative Disclosures about Market Risk.
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7
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Item 8
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Financial Statements
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7
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Item 9
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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7
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Item 9A
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Controls and Procedures
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7
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Item 9B
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Other Information
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8
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PART III
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Item 10
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Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
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9
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Item 11
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Executive Compensation
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10
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Item 12
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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10
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Item 13
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Certain Relationships and Related Transactions, and Director Independence
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11
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Item 14
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Principal Accountant Fees and Services
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12
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Item 15
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Exhibits
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12
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Signatures
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13
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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, 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., 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. 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.
Sputnik Enterprises seeks the consummation of a reverse merger with another operating company but following the sale of the stock of our wholly owned subsidiary, Laika, Inc. to AstroChimp, Inc. has had and will have no active operations until such reverse merger is finalized.
3
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.
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Item 1B. Unresolved Staff Comments
None
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. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities.
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 March 01, 2010, there were 98 shareholders of record of the Common Stock.
Preferred Stock
On February 6, 2008, Sputnik amended our Articles of Incorporation to authorize the issuance of 10,000,000 shares which will be designated “Preferred Stock”. The Company has not yet issued any of its preferred stock.
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
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Issuer Purchases of Equity Securities
None.
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 Operation
Sputnik Enterprises seeks the consummation of a reverse merger with another operating company. The Company currently does not engage in any business activities that provide cash flow. During the next twelve months we anticipate incurring costs related to:
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(i)
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filing Exchange Act reports, and
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(ii)
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investigating, analyzing and consummating a reverse merger.
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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 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.
On December 31, 2010 we had total assets of $0 compared to assets of $0 at December 31, 2009 as a result of discontinuing our operations.
We had total liabilities of $25,000 as of December 31, 2010, which consisted of current liabilities and was comprised solely of a $25,000 note payable. We had an accumulated deficit from prior operations of $1,912,863 and an accumulated deficit from development stage of $68,990, as of December 31, 2010.
We had net cash used of ($10,957) for the year ended December 31, 2010, which consisted of net loss from operations of ($12,957) and imputed interest on note payable of $2,000.
We had $10,957 in net cash provided by financing activities for the year ended December 31, 2010 which consisted of $10,957 donated from a shareholder.
Results of Operations
Our net loss for the year ended December 31, 2010 was ($12,957) which was an increase of ($3,386) over our net loss for the year ended December 31, 2009, which was ($9,571).
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.
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Critical Accounting Policies
The financial reports for the period contained one additional critical accounting policy which was also an initial adoption of accounting policy that had a material impact. Below is a brief discussion of events that materially affected our financial statements and the basis in which the transactions were recorded.
DEVELOPMENT STAGE ENTERPRISE - As a result of the Company’s sale of the operations of Sputnik, Inc., the Company is now considered a development stage enterprise pursuant to FASB Standards. Users of the financial statements should be familiar with this statement and its effect on the financial statements.
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.
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
Item 9A(T). 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 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, 2010. 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.
7
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1.
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As of December 31, 2010, we did not maintain effective controls over the control environment. Specifically we have not developed and effectively communicated to our employees its accounting policies and procedures. 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.
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2.
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As of December 31, 2010, 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.
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Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2010, 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.
Attestation Report of the Registered Public Accounting Firm
This annual report does not include an attestation report of our 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 annual report.
Item 9B. Other Information.
None.
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PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act.
(a) Identification of Directors and Executive Officers. The following table sets forth certain information regarding the Company’s directors and executive officers:
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Name
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Age
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Position
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David LaDuke
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50
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Director, Chief Executive Officer, President, Chief Financial Officer and Secretary
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The following is information on the business experience of each director and officer.
Mr. LaDuke has served as President and Chief Executive Officer of Sputnik since February 2002. Since April 12, 2005, Mr. LaDuke has served as our Treasurer. Since November 2003, he has served as Secretary of Sputnik. In November 1998, he co-founded Linuxcare Inc. a provider of enterprise services for open-source software. He served as Vice President of Marketing there until April 2001. From June 2001 to July 2003 and March 1993 to November 1998, Mr. LaDuke was an independent consultant in technology, marketing and business strategy for various companies including Apple Computer, Crystal Decisions, Netscape Communications, Oracle Corporation, Pinnacle Systems, Silicon Graphics, and others. From November 1989 to February 1993, Mr. LaDuke worked as the manager of publishing industry marketing at NeXT Computer, Inc., a computer manufacturing company acquired by Apple Computer in 1996. From September 1986 to October 1989, Mr. LaDuke worked in marketing positions at Apple Computer, Inc. Mr. LaDuke earned an M.B.A. from the Tuck School of Business Administration at Dartmouth College in 1985, an M.F.A. from Columbia University in 1983 and an A.B. from Columbia College, Columbia University in 1982.
(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.
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, 2010 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
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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 following sets forth the compensation of the Company's executive officers for the two fiscal years ended December 31, 2010.
Executive Officer Compensation Table
The named executive officers received the following compensation from Sputnik Enterprises during the fiscal year ended December 31, 2010 and December 31, 2009.
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Name and Position
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Year
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Cash Compensation
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Other Compensation
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David LaDuke, current President and Director
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2010
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$ | 0 |
None
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2009
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$ | 0 |
None
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Director Compensation
We do not currently pay any cash fees to our directors, nor do we pay directors’ expenses in attending board meetings.
Employment Agreements
The Company is not a party to any employment agreements.
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, 2010, 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
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Name and Address
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Amount and Nature of
Beneficial Ownership
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Percentage
of Class
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Sputnik, Inc.(1)
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160,000 | 54.2 | % | |||||
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All Directors and Officers as a Group
(1 company)
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160,000 | 54.2 | % | |||||
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(1)
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David LaDuke is sole officer and director of Sputnik, Inc.
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(b)
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The Company currently has not authorized any compensation plans or individual compensation arrangements.
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10
Item 13. Certain Relationships and Related Transactions.
During 2010, we have not entered into and as of December 31, 2010 we do not have any agreements to enter into any 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.
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. for cancellation of $65,000 of David LaDuke to us, leaving us as a shell company. AstroChimp is wholly-owned by Mr. LaDuke. The purchase price was not determined as a result of arms’-length negotiations.
Sputnik’s financial condition has continued to deteriorate since September 30, 2007. Sputnik’s liabilities now exceed its assets and it has negative shareholder equity and net worth. Unless its business plan succeeds, it will cease operations. Sputnik has explored all other transaction structures which will allow Sputnik to implement its business plan and avoid ceasing operations and has determined that no other viable alternative exists.
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Item 14. Principal Accounting Fees and Services
The aggregate fees billed by our principal accounting firm, for fees billed for fiscal years ended December 31, 2010, and 2009 are as follows:
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Name
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Audit Fees(1)
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Audit Related
Fees
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Tax Fees (2)
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All Other Fees
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M&K CPAS, PLLC
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for fiscal year ended:
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December 31, 2010
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$ | 8,100 | $ | 0 | $ | 0 | $ | 0 | ||||||||
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December 31, 2009
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$ | 8,050 | $ | 0 | $ | 0 | $ | 0 | ||||||||
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(1)
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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
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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.
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.
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Exhibit
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Description
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31
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Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
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32
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Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002
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12
SPUTNIK ENTERPRISES INC.
(A Development Stage Company)
INDEX TO FINANCIAL STATEMENTS
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Page
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Report of Independent Registered Public Accounting Firm
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F-2
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Financial Statements:
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Balance Sheets
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F-3
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Statements of Operations
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F-4
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Statements of Cash Flows
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F-5
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Statement of Changes in Stockholders' Equity (Deficit)
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F-6
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Notes to Financial Statements
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F-7
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F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
(A Development Stage Company)
Sputnik Enterprises Inc.
We have audited the accompanying balance sheets of Sputnik Enterprises Inc. (a development stage company) as of December 31, 2010 and 2009, and the related statements of operations, changes in stockholders' equity (deficit), and cash flows for the years then ended and the period from re-entering the development stage (February 29, 2008) to December 31, 2010. 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 audit 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, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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. and as of December 31, 2010 and 2009, and the results of its operations, changes in stockholders' equity (deficit) and cash flows for the periods described above 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 2 to the financial statements, the Company has suffered recurring losses from operations, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ M&K CPAS, PLLC
www.mkacpas.com
Houston, Texas
March 22, 2011
F-2
SPUTNIK ENTERPRISES, INC.
(A Development Stage Company)
Balance Sheets
As of December 31, 2010 and 2009
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December 31,
2010
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December 31,
2009
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ASSETS
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Current Assets
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Cash
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$ | - | $ | - | ||||
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Total Current Assets
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- | - | ||||||
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TOTAL ASSETS
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$ | - | $ | - | ||||
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LIABILITIES AND STOCKHOLDERS' DEFICIT
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Current Liabilities
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Accrued liabilities
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$ | - | $ | - | ||||
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Note payable
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25,000 | 25,000 | ||||||
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Total Current Liabilities
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25,000 | 25,000 | ||||||
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Total Liabilities
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25,000 | 25,000 | ||||||
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Common stock, $.001 par value, 50,000,000 shares authorized, 295,278 shares issued and outstanding in both periods
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295 | 295 | ||||||
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Paid-in capital
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1,956,558 | 1,943,601 | ||||||
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Accumulated deficit from development stage
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(68,990 | ) | (56,033 | ) | ||||
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Accumulated deficit from prior operations
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(1,912,863 | ) | (1,912,863 | ) | ||||
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Total Stockholders' Deficit
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(25,000 | ) | (25,000 | ) | ||||
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
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$ | - | $ | - | ||||
The accompanying notes are an integral part of these financial statements.
F-3
SPUTNIK ENTERPRISES, INC.
(A Development Stage Company)
Statements of Operations
Years Ended December 31, 2010 and 2009 and the Period From
Re-entering Development Stage (February 29, 2008) to December 31, 2010
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Years Ended December 31,
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Re-entering
Development Stage
(February 29, 2008)
to
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2010
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2009
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December 31, 2010
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Revenue
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$ | - | $ | - | $ | - | ||||||
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Cost of goods sold
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- | - | - | |||||||||
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Gross profit
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- | - | - | |||||||||
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Expenses
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General and administrative costs
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10,957 | 7,571 | 64,990 | |||||||||
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Total operating expense
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10,957 | 7,571 | 64,990 | |||||||||
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Operating Loss
|
(10,957 | ) | (7,571 | ) | (64,990 | ) | ||||||
|
Interest expense
|
2,000 | 2,000 | 4,000 | |||||||||
|
NET LOSS
|
(12,957 | ) | (9,571 | ) | (68,990 | ) | ||||||
|
Loss per common share – basic and diluted
|
$ | (0.04 | ) | $ | (0.03 | ) | ||||||
|
Weighted average shares outstanding
|
295,278 | 295,278 | ||||||||||
The accompanying notes are an integral part of these financial statements.
F-4
SPUTNIK ENTERPRISES, INC.
(A Development Stage Company)
Statements of Cash Flows
Years Ended December 31, 2010 and 2009 and the Period From
Re-entering Development Stage (February 29, 2008) to December 31, 2010
|
2010
|
2009
|
Re-entering
Development
Stage (February
29, 2008) to
December 31,
2010
|
||||||||||
|
Cash Flows from Operating Activities
|
||||||||||||
|
Net loss from operations
|
$ | (12,957 | ) | $ | (9,571 | ) | $ | (68,990 | ) | |||
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||||||
|
Imputed interest on note payable
|
2,000 | 2,000 | 4,999 | |||||||||
|
Note payable issued for legal expenses
|
- | - | 25,000 | |||||||||
|
Changes in working capital:
|
||||||||||||
|
Accounts payable and accrued liabilities
|
- | (1,940 | ) | - | ||||||||
|
Net cash used in operating activities
|
(10,957 | ) | (9,511 | ) | (38,991 | ) | ||||||
|
Cash Flows from Investing Activities
|
||||||||||||
|
Net cash used in investing activities
|
- | - | - | |||||||||
|
Cash Flows from Financing Activities
|
||||||||||||
|
Donated capital from shareholder
|
10,957 | 9,511 | 38,991 | |||||||||
|
Net cash provided by financing activities
|
10,957 | 9,511 | 38,991 | |||||||||
|
Net change in cash
|
- | - | - | |||||||||
|
Cash at beginning of year
|
- | - | - | |||||||||
|
Cash at end of year
|
$ | - | $ | - | $ | - | ||||||
|
Supplemental Disclosures of Cash Flow Information
|
||||||||||||
|
Cash paid for interest
|
$ | - | $ | - | $ | - | ||||||
|
Cash paid for income taxes
|
- | - | - | |||||||||
F-5
SPUTNIK ENTERPRISES, INC.
(A Development Stage Company)
Statement of Changes in Stockholder's Equity (Deficit)
Years Ended December 31, 2010 and 2009
|
Accumulated
|
||||||||||||||||||||||||
|
Additional
|
(Deficit)
|
Total
|
||||||||||||||||||||||
|
|
Common Stock
|
Paid-in
|
Development
|
Prior
|
Stockholders'
|
|||||||||||||||||||
|
Number of Shares
|
Amount
|
Capital
|
Stage
|
Operations
|
Deficit
|
|||||||||||||||||||
|
Balance - December 31, 2008
|
295,278 | 295 | 1,932,090 | (46,462 | ) | (1,912,863 | ) | (26,940 | ) | |||||||||||||||
|
Imputed interest
|
- | - | 2,000 | - | - | 2,000 | ||||||||||||||||||
|
Donated capital from shareholder
|
- | - | 9,511 | - | - | 9,511 | ||||||||||||||||||
|
Net loss
|
- | - | - | (9,571 | ) | - | (9,571 | ) | ||||||||||||||||
|
Balance – December 31, 2009
|
295,278 | 295 | 1,943,601 | (56,033 | ) | (1,912,863 | ) | (25,000 | ) | |||||||||||||||
|
Imputed interest
|
- | - | 2,000 | - | - | 2,000 | ||||||||||||||||||
|
Donated capital from shareholder
|
- | - | 10,957 | - | - | 10,957 | ||||||||||||||||||
|
Net loss
|
- | - | - | (12,957 | ) | - | (12,957 | ) | ||||||||||||||||
|
Balance – December 31, 2010
|
295,278 | $ | 295 | $ | 1,956,558 | $ | (68,990 | ) | $ | (1,912,863 | ) | $ | (25,000 | ) | ||||||||||
The accompanying notes are an integral part of these financial statements.
F-6
SPUTNIK ENTERPRISES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History
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., 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. 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. The Company was considered to have re-entered the development stage at this time.
Sputnik Enterprises seeks the consummation of a reverse merger with another operating company but has had and will have no active operations until such reverse merger is finalized.
Basis of Presentation
The Company follows accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein.
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.
Cash and Cash Equivalents
For purposes of the statements of cash flows, Sputnik Enterprises considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of December 31, 2010 and 2009, there were no cash equivalents.
Development Stage Company
The Company complies with Accounting Codification Standard 915-10 for its characterization of the Company as development stage.
Revenue Recognition
Sputnik Enterprises recognizes revenue when persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured.
F-7
Income Taxes
The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets likely.
Basic and Diluted Net Loss per Share
Basic earnings per common share is computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share consists of the weighted average number of common shares outstanding plus the dilutive effects of options and warrants calculated using the treasury stock method. In loss periods, dilutive common equivalent shares are excluded as the effect would be anti-dilutive. At December 31, 2010 and 2009, no equivalents existed because the effect would be anti-dilutive.
Fair Value of Financial Instruments
Pursuant to ASC No. 820, “Fair Value Measurements and Disclosures”, the Company is required to estimate the fair value of all financial instruments included on its balance sheet as of December 31, 2010. The Company’s financial instruments consist of cash. The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to the short-term nature of these financial instruments.
Recently Issued Accounting Pronouncements
In October 2009, the FASB issued FASB ASU No. 2009-13, “Multiple-Deliverable Revenue Arrangements,” which is now codified under FASB ASC Topic 605, “Revenue Recognition.” This ASU establishes a selling price hierarchy for determining the selling price of a deliverable; eliminates the residual method of allocation and requires arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method; and requires a vendor determine its best estimate of selling price in a manner consistent with that used to determine the selling price of the deliverable on a standalone basis. The ASU also significantly expands the required disclosures related to a vendor’s multiple-deliverable revenue arrangements. FASB ASU No. 2009-13 was effective on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. This ASU is not expected to have an effect on the timing of revenue recognition and our results of operations or cash flows.
In October 2009, the FASB issued FASB ASU No. 2009-14, “Certain Revenue Arrangements That Include Software Elements,” which is now codified under FASB ASC Topic 985, “Software.” This ASU changes the accounting model for revenue arrangements which include both tangible products and software elements, providing guidance on how to determine which software, if any, relating to the tangible product would be excluded from the scope of the software revenue guidance. FASB ASU No. 2009-14 was effective on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. This ASU is not expected to have an effect on the timing of revenue recognition and our results of operations or cash flows.
In January 2010, the FASB issued FASB ASU No. 2010-06, “Improving Disclosures about Fair Value Measurements,” which is now codified under FASB ASC Topic 820, “Fair Value Measurements and Disclosures.” This ASU will require additional disclosures regarding transfers in and out of Levels 1 and 2 of the fair value hierarchy, as well as a reconciliation of activity in Level 3 on a gross basis (rather than as one net number). The ASU also provides clarification on disclosures about the level of disaggregation for each class of assets and liabilities and on disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. FASB ASU No. 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the disclosures requiring a reconciliation of activity in Level 3. Those disclosures will be effective for interim and annual periods beginning after December 15, 2010. The adoption of the portion of this ASU effective after December 15, 2009, as well as the portion of the ASU effective after December 15, 2010, did not have an impact on our financial position, results of operations or cash flows.
F-8
In April 2010, the FASB issued FASB ASU No. 2010-17, “Milestone Method of Revenue Recognition,” which is now codified under FASB ASC Topic 605, “Revenue Recognition.” This ASU provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research and development transactions. Consideration which is contingent upon achievement of a milestone in its entirety can be recognized as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. A milestone should be considered substantive in its entirety, and an individual milestone may not be bifurcated. An arrangement may include more than one milestone, and each milestone should be evaluated individually to determine if it is substantive. FASB ASU No. 2010-17 was effective on a prospective basis for milestones achieved in fiscal years (and interim periods within those years) beginning on or after June 15, 2010, with early adoption permitted. If an entity elects early adoption, and the period of adoption is not the beginning of its fiscal year, the entity should apply this ASU retrospectively from the beginning of the year of adoption. This ASU did not have any effect on the timing of revenue recognition and our results of operations or cash flows.
In December 2010, the FASB issued FASB ASU No. 2010-28, “When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts,” which is now codified under FASB ASC Topic 350, “Intangibles — Goodwill and Other.” This ASU provides amendments to Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not a goodwill impairment exists. When determining whether it is more likely than not an impairment exists, an entity should consider whether there are any adverse qualitative factors, such as a significant deterioration in market conditions, indicating an impairment may exist. FASB ASU No. 2010-28 is effective for fiscal years (and interim periods within those years) beginning after December 15, 2010. Early adoption is not permitted. Upon adoption of the amendments, an entity with reporting units having carrying amounts which are zero or negative is required to assess whether is it more likely than not the reporting units’ goodwill is impaired. If the entity determines impairment exists, the entity must perform Step 2 of the goodwill impairment test for that reporting unit or units. Step 2 involves allocating the fair value of the reporting unit to each asset and liability, with the excess being implied goodwill. An impairment loss results if the amount of recorded goodwill exceeds the implied goodwill. Any resulting goodwill impairment should be recorded as a cumulative-effect adjustment to beginning retained earnings in the period of adoption. This ASU is not expected to have any material impact to our future financial statements.
In December 2010, the FASB issued FASB ASU No. 2010-29, “Disclosure of Supplementary Pro Forma Information for Business Combinations,” which is now codified under FASB ASC Topic 805, “Business Combinations.” A public entity is required to disclose pro forma data for business combinations occurring during the current reporting period. This ASU provides amendments to clarify the acquisition date to be used when reporting the pro forma financial information when comparative financial statements are presented and improves the usefulness of the pro forma revenue and earnings disclosures. If a public company presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) which occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The supplemental pro forma disclosures required are also expanded to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. FASB ASU No. 2010-29 is effective on a prospective basis for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010, with early adoption permitted. The adoption of this ASU will not have a material effect on our financial position, results of operations or cash flows.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared assuming that Sputnik Enterprises will continue as a going concern. As shown in the accompanying financial statements, Sputnik suffered losses of $12,957 for the year ended December 31, 2010 and has an accumulated deficit of $1,981,953 at December 31, 2010. 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.
NOTE 3 - RELATED PARTY TRANSACTIONS
During the years ended December 31, 2010 and 2009, the Company’s President paid expenses on behalf of the Company in the amounts of $10,957 and $9,511, respectively. These amounts are included in additional paid in capital.
NOTE 4 - INCOME TAXES
Sputnik 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 2010 and 2009, Sputnik incurred a net loss 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 $1,567,296 and $1,554,339 at December 31, 2010 and 2009, respectively, and will begin to expire in the year 2023.
F-9
At December 31, 2010 and 2009, deferred tax assets consisted of the following:
|
Deferred tax assets
|
2010
|
2009
|
||||||
|
Net operating losses
|
$ | 532,881 | $ | 528,475 | ||||
|
Less: valuation allowance
|
(532,881 | ) | (528,475 | ) | ||||
|
Net deferred tax asset
|
$ | - | $ | - | ||||
NOTE 5 – 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. The note is due on demand and has no stated interest rate. Imputed interest in the amount of $2,000 calculated at 8% interest is reflected as an increase to additional paid in capital.
NOTE 6 – CAPITAL STOCK
On October 27, 2008, Sputnik Enterprises, Inc. executed a 50:1 reverse split of its stock, with fractional shares rounded up. All share information presented has been adjusted to reflect the reverse split.
NOTE 7 - FAIR VALUE ACCOUNTING
Fair Value Measurements
On January 1, 2008, the Company adopted ASC No. 820-10 (ASC 820-10), Fair Value Measurements. ASC 820-10 relates to financial assets and financial liabilities.
ASC 820-10 defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (GAAP), and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively with limited exceptions.
ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This standard is now the single source in GAAP for the definition of fair value, except for the fair value of leased property as defined in SFAS 13. ASC 820-10 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, that are 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 under ASC 820-10 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. These inputs rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability. (The unobservable inputs are developed based on the best information available in the circumstances and may include the Company's own data.)
|
F-10
The following presents the Company's fair value hierarchy for those assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2010 and 2009:
Level 1: None
Level 2: None
Level 3: None
Total Gain (Losses): None
NOTE 8 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the date these financial statements were issued. There are no reporting subsequent events requiring disclosure.
F-11
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 24, 2010
|
By:
|
/s/David LaDuke
|
|
David LaDuke, Chief Executive Officer and President
|
||
|
Dated: March 24, 2010
|
By:
|
/s/ David LaDuke
|
|
David LaDuke, Director
|
13