UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2017

 

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from _________ to _________.

 

Commission file number 000-52366

 

SPUTNIK ENTERPRISES, INC.

(Exact name of small business issuer as specified in its charter)

 

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

 

10781 Satellite Blvd

Orlando, Florida 32837

(Address of principal executive offices)

 

321.303.0886

(Issuer’s telephone number)

 

N/A

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

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

 

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

 

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

 

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

 

As of August 4, 2017 there were 45,366,536 shares issued and outstanding of the registrant’s common stock.

 

INDEX

 

			Page
PART I. FINANCIAL INFORMATION
Item 1.	Condensed Unaudited Consolidated Financial Statements		3
	Condensed Consolidated Balance Sheets as of June 30, 2017 (unaudited) and December 31 , 2016 (audited)		3
	Condensed Consolidated Statements of Operations (unaudited) for the Three Months and Six Months Ended June 30, 2017 and 2016		4
	Condensed Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2017 and 2016		5
	Notes to Condensed Unaudited Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis or Plan of Operation		16
Item 3.	Quantitative and Qualitative Disclosure about Market Risk		18
Item 4.	Controls and Procedures		18
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		19
Item 3.	Defaults Upon Senior Securities		19
Item 4.	Mine Safety Disclosures		19
Item 5.	Other Information		19
Item 6.	Exhibits		20
Signatures			21

 

2

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

SPUTNIK ENTERPRISES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		June 30,				December 31,
		2017				2016
		(unaudited)				(audited)
ASSETS
Current assets:
Cash		$	4,872			$	-
Loans to related party			53,537				-
Loan interest receivable			2,887				-
Total current assets			61,296				-
Other Assets
Intangible Assets, net of amortization			46,568				49,280
Total assets		$	107,864			$	49,280
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses		$	145,537			$	53,984
Accrued compensation			671,607				671,607
Accrued payroll taxes			57,340				57,340
Accrued interest			64,103				49,370
Accrued purchase of intangible -current portion			9,775				8,887
Note payable, related party			362,085				79,384
Note payable			36,000				36,000
Advance from shareholder			5,000				-
Total current liabilities			1,351,447				956,572
Long-term liabilities:
Accrued Purchase of Intangible -Long Term Portion			35,591				45,367
Total liabilities			1,387,038				1,001,939
STOCKHOLDERS' DEFICIT
Preferred stock, $10.00 par value, 10,000,000 authorized;
9,685 and 4,435 shares issued and outstanding, respectively			96,851				44,351
Common stock, $.001 par value, 50,000,000 authorized;
45,366,536 and 44,351,250 shares issued and outstanding, respectively			45,367				44,351
Additional paid in capital- common stock			(373,626	)			(38,702	)
Accumulated deficit			(1,047,766	)			(1,002,659	)
Total stockholders' deficit			(1,279,174	)			(952,659	)
Total liabilities and stockholders' deficit		$	107,864			$	49,280

 

See accompanying notes to condensed unaudited consolidated financial statements

 

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SPUTNIK ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

		For the				For the				For the				For the
		Three Months				Three Months				Six Months				Six Months
		Ended				Ended				Ended				Ended
		June 30, 2017				June 30, 2016				June 30, 2017				June 30, 2016
Revenue		$	-			$	-			$	-			$	-
Operating expenses
General and administrative			24,026				8,132				32,631				17,217
Amortization of intangibles			1,356				1,356				2,713				2,261
Total operating expenses			25,382				9,488				35,344				19,478
(Loss) from operations			(25,382	)			(9,488	)			(35,344	)			(19,478	)
Other income (expense):
Interest income			73				-				73				-
Interest expense			(5,450	)			(3,878	)			(9,836	)			(7,235	)
(Loss) before taxes			(30,759	)			(13,366	)			(45,107	)			(26,713	)
Provision (credit) for taxes on income			-				-				-				-
Net loss		$	(30,759	)		$	(13,366	)		$	(45,107	)		$	(26,713	)
Basic earnings (loss) per common share		$	(0.00	)		$	(0.00	)		$	(0.00	)		$	(0.00	)
Weighted average number of shares outstanding			44,407,035				44,351,250				44,379,297				44,250,261

 

See accompanying notes to condensed unaudited consolidated financial statements

 

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SPUTNIK ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		For the Six Months				For the Six Months
		Ended				Ended
		June 30, 2017				June 30, 2016
Cash flows from operating activities:
Net (loss)		$	(45,107	)		$	(26,713	)
Adjustments to reconcile net loss to net cash provided by (used in) operations:
Amortization of intangible			2,713				2,261
Imputed interest on deferred intangible purchase price			2,313				951
Change in current assets and liabilities:
Loan interest receivable			(18	)			-
Accounts payable and accrued expenses			(9,240	)			9,717
Accrued interest			2,043				6,284
Net cash flows used in operating activities			(47,296	)			(7,500	)
Cash flows from financing activities:
Loans from shareholder and related party			56,183				7,500
Received from recapitalization			4,872
Payments on accrued purchase of intangible			(8,887	)			-
Net cash flows from investing activities			52,168				7,500
Net increase (decrease) in cash			4,872				-
Cash, beginning of period			-				-
Cash, end of period		$	4,872			$	-
Non- cash Investing and Financing Activities
Acquisition of intangible for payable		$	-			$	54,254
Total Non- cash Investing and Financing Activities		$	-			$	54,254
Supplemental cash flow disclosures:
Cash paid for interest		$	-			$	-
Cash paid for income taxes		$	-			$	-

 

See accompanying notes to condensed unaudited consolidated financial statements

 

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SPUTNIK ENTERPRISES, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION

 

Sputnik Enterprises Inc. (“Sputnik”) 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.

 

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.

 

On September 30, 2015, Sport Venture Group LLC (“SVG”) and Windy River Group, LLC (“WRG”) acquired 5,000 shares (2,500 shares each) of Convertible Preferred Stock of the Company from R. Thomas Kidd for $250,000. If converted then, this would have represented then 94% of the issued and outstanding common stock of the Company, indicating a change in control of the Company. On June 15, 2016 Mr. Grieve acquired 50 shares of Convertible Preferred Stock of the Company from the Company for $25,000. Mr. Grieve is the owner/manager of WRG.

 

On June 26, 2017, the Company closed a reverse take-over transaction by which it acquired a private company that focuses on international football (soccer) through investment in professional clubs around the world, development of fan engagement solutions and player development through global grassroots (players ages 3-9) programs. Pursuant to a Share Exchange Agreement (the “Exchange Agreement”) between the Registrant and FV Corporation, a South Carolina corporation (“FVCO”), the Registrant acquired 100% of the ownership interests of FVCO including all intellectual property, research, assets and subsidiaries including Apps FC, a limited liability company formed in South Carolina (“Apps FC”), a wholly-owned subsidiary of FVCO. FVCO is a South Carolina corporation, incorporated in South Carolina on January 7, 2013. Its wholly-owned subsidiary, APPS FC, LLC is a South Carolina limited liability corporation. FVCO’s primary purpose is business development related activities and does not currently generate income.

 

Prior to the reverse take-over under the Exchange Agreement (“Exchange Transaction”), we were a public reporting “shell company” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended. As a result of the reverse take-over transaction we acquired the business and operations of FVCO and Apps FC became our wholly-owned subsidiary.

 

On June 26, 2017, under the Exchange Agreement, the Registrant completed the acquisition of all of the issued and outstanding ownership interest in FVCO through the issuance of 44,351,250 of restricted Common Stock shares to FVCO shareholders and the equivalent of 44,351,250 of restricted Common Stock in the form of Series A Preferred Shares. Immediately after the issuance of the shares to FVCO, the Registrant had 45,366,536 shares of Common Stock issued and outstanding, of which 44,351,250 shares or 98% of Common Stock are owned by FVCO.

 

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For financial reporting purposes, the transaction is accounted for as a “reverse merger” rather than a business combination, because the sellers of FVCO effectively control the combined companies immediately following the transaction. As such, FVCO is deemed to be the accounting acquirer in the transaction and, consequently, the transaction is being treated as a reverse acquisition by SPNI. Accordingly, the assets and liabilities and the historical operations that will be reflected in SPNI’s ongoing financial statements will be those of FVCO and will be recorded at the historical cost basis of FVCO. The historical financial statements of SPNI before the transaction will be replaced with the historical financial statements of FVCO before the transaction and in all future filings with the United States Securities and Exchange Commission (“SEC”). The historical financial statements for periods prior to June 26, 2017 are those of FVCO except that the equity section and earnings per share have been retroactively restated to reflect the recapitalization. Effective June 26, 2017, the financials reflect the consolidated financial position and results of operations of Sputnik, FVCO and its wholly owned subsidiary, APPS FC, LLC.

 

The Merger is intended to be treated as a tax-free exchange under Section 368(a) of the Internal Revenue Code of 1986, as amended.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the SEC. The Financial Statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States (See Note 3 regarding the assumption that the Company is a “going concern”).

 

Principles of Consolidation

 

The accompanying consolidated financial statements represent the consolidated financial position and results of operations of Sputnik, FVCO and its wholly owned subsidiary, APPS FC, LLC.

 

For financial reporting purposes, the June 26, 2017 Exchange Transaction will be accounted for as a “reverse merger” rather than a business combination, because the sellers of FVCO effectively control the combined companies immediately following the transaction. As such, FVCO is deemed to be the accounting acquirer in the transaction and, consequently, the transaction is being treated as a reverse acquisition by SPNI. Accordingly, the assets and liabilities and the historical operations that will be reflected in SPNI’s ongoing financial statements will be those of FVCO and will be recorded at the historical cost basis of FVCO. The historical financial statements of SPNI before the transaction will be replaced with the historical financial statements of FVCO before the transaction and in all future filings with the United States Securities and Exchange Commission (“SEC”). The historical financial statements for periods prior to June 26, 2017 are those of FVCO except that the equity section and earnings per share have been retroactively restated to reflect the recapitalization. Effective June 26, 2017, the financials reflect the consolidated financial position and results of operations of Sputnik, FVCO and its wholly owned subsidiary, APPS FC, LLC.

 

The following adjustments were made in the condensed unaudited consolidated balance sheet as of June 30, 2017 and statement of operations for the three and six months ended June 30, 2017:

 

	·	To eliminate the 44,351,250 shares of FVCO common stock and record the issuance of 44,351,250 restricted shares of the Registrant’s common stock and the equivalent of 44,351,250 of restricted Common Stock in the form of Series A Preferred Shares (4,435 shares of Registrant’s Series A Preferred Shares) and the elimination of the difference in par values as a result of the share exchange with the Registrant.
	·	To eliminate the deficit accumulated since inception for the Registrant through June 25, 2017 as going forward the operations of FVCO will be the surviving operating entity.
	·	To eliminate the loans totaling $13,650 from Sputnik to FVCO in the second quarter ending June 30, 2017 and the related accrued interest, interest receivable and interest income and expense.

 

Additionally, for periods prior to June 26, 2017, the weighted-average shares outstanding gives effect to the issuance of 44,351,250 shares of common stock of the Registrant to FVCO shareholders in connection with the exchange transaction as if they occurred at the beginning of the period presented. The effect of any potentially dilutive instruments including the conversion of preferred stock were anti-dilutive. Therefore, dilutive earnings per share are equivalent to basic earnings per share.

 

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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.

 

Fiscal Year End

 

The Company elected December 31 as its fiscal year.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash was $4,872 and $0 at June 30, 2017 and December 31, 2016, respectively and the Company had no cash equivalents as of June 30, 2017 or December 31, 2016.

 

Fair Value of Financial Instruments

 

The Company’s balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.

 

ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also 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 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 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.

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2016. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.

 

Income Taxes

 

The Company accounts for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized as of June 30, 2017 or December 31, 2016.

 

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Basic and Diluted Net Loss per Share

 

The Company computes basic and diluted earnings per share amounts in accordance with ASC Topic 260, Earnings per Share. Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.

 

The Company has incurred a net operating loss for June 30, 2017 and 2016, and dilutive earnings per share would be anti-dilutive, therefore, dilutive earnings per share have not been presented. There are no options or warrants outstanding. The Company has common stock equivalents, in the form or convertible preferred stock, series A. Common stock equivalents were 96,851,250 and 44,351,250 at June 30, 2017 and December 31, 2016, respectively. There are only 50,000,000 shares of common stock authorized. It is the current intention of the Company to file in the future an Information Statement on Schedule 14C to, among other things, increase the number of authorized shares of common stock to one billion shares. No date has been set for this filing.

 

Commitments and Contingencies

 

The Company follows ASC 450, Loss Contingencies, to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. There were no commitments or contingencies as of June 30, 2017 and December 31, 2016.

 

Related Parties

 

The Company follows subtopic ASC 850, Related Party Disclosure, for the identification of related parties and disclosure of related party transactions. See Note 6 for related party transactions.

 

Cash Flows Reporting

 

The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period.

 

Share-based Expense

 

ASC 718, Compensation – Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

 

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The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity – Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.

 

There was no share-based expense for the periods ending June 30, 2017 and 2016.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

From time to time, new accounting pronouncements issued by the FASB or other standard setting bodies are adopted by the Company as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

 

In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) , or ASU 606. ASU 606 provides guidance outlining a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers that supersedes most current revenue recognition guidance. This guidance requires us to recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The original effective date of the guidance would have required us to adopt at the beginning of our first quarter of fiscal 2017; however, the FASB approved an optional one-year deferral of the effective date. Additionally, the new guidance requires enhanced disclosures, including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition. The new guidance may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption.

 

In June 2014, FASB issued Accounting Standards Update (ASU) No. 2014-12 Compensation — Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. A performance target in a share-based payment that affects vesting and that could be achieved after the requisite service period should be accounted for as a performance condition under Accounting Standards Codification (ASC) 718, Compensation — Stock Compensation. As a result, the target is not reflected in the estimation of the award's grant date fair value. Compensation cost would be recognized over the required service period, if it is probable that the performance condition will be achieved. The guidance is effective for annual periods beginning after 15 December 2015 and interim periods within those annual periods. Early adoption is permitted. Management has reviewed the ASU and believes that they currently account for these awards in a manner consistent with the new guidance, therefore there is no anticipation of any effect to the financial statements.

 

In August 2014, FASB issued Accounting Standards Update (ASU) No. 2014-15 Preparation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. Under generally accepted accounting principles (GAAP), continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity's liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. If and when an entity's liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting in accordance with Subtopic 205-30, Presentation of Financial Statements—Liquidation Basis of Accounting. Even when an entity's liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity's ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this Update should be followed to determine whether to disclose information about the relevant conditions and events. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company will evaluate the going concern considerations in this ASU however, at the current period, management does not believe that it has met conditions which would subject these financial statements for additional disclosure.

 

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In August 2014, FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, or ASU 2014-15. ASU 2014-15 explicitly requires a company’s management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. The new standard will be effective in the first annual period ending after December 15, 2016, although early application is permitted. We do not expect the adoption of this standard to have a material impact on our consolidated statements of financial position, results of operations or cash flows.

 

In April 2015, FASB issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the presentation of Debt Issuance Costs, to reduce the complexity of having different balance sheet presentation requirements for debt issuance costs and debt discounts and premiums. The guidance requires debt issuance costs related to a recognized debt liability be reported on the balance sheet as a direct deduction from the carrying amount of that debt liability. ASU 2015-03 is effective for public companies for annual reporting periods beginning after December 15, 2015, and interim periods within those fiscal years. The Company has adopted the amendments of ASU 2015-03 effective January 1, 2016.

 

In November 2015, FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. ASU 2015-17 simplifies the presentation of deferred taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. ASU 2015-17 is effective for public companies for annual reporting periods beginning after December 15, 2016, and interim periods within those fiscal years. The guidance may be adopted prospectively or retrospectively and early adoption is permitted. We believe the adoption of this standard will have no material impact on our consolidated statements of financial position, results of operations or cash flows.

 

In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842). The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. ASU 2016-02 is effective for public companies for annual reporting periods beginning after December 15, 2018, and interim periods within those fiscal years. The guidance may be adopted prospectively or retrospectively and early adoption is permitted. The Company is currently assessing the impact the adoption of ASU 2016-02 will have on its consolidated financial statements.

 

NOTE 3 - GOING CONCERN

 

The Company incurred a net loss of $45,107 during the six months ended June 30, 2017 and had net cash used in operating activities of $47,296 for the same period. Additionally, the Company had an accumulated deficit of $1,047,766 at June 30, 2017. In view of these matters, the Company's ability to continue as a going concern is dependent upon the Company's ability to achieve a level of profitability or to obtain adequate financing through the issuance of debt or equity in order to finance its operations. With securing an operating entity, through the Exchange Transaction, Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

While the Company is attempting to commence operations and produce revenues, the Company’s cash position may not be significant enough to support the Company’s daily operations. While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate revenues.

 

NOTE 4 – LOANS TO RELATED PARTY

 

Summary of loans to related party (SVG) are:

 

		June 30,				December 31,
Date Issued		2017				2016
2016		$	24,684			$	-
Quarter ending March 31, 2017			28,853				-
		$	53,537			$	-

 

These notes bear interest at 10% with maturity dates one year from issuance. If notes are paid before maturity, a minimum interest of 10% is due at that time. Interest of $2,887 was accrued as of June 30, 2017. The assets of the business, secure these notes second to any credit facility entered into by SVG.

 

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NOTE 5- INTANGIBLE ASSET

 

On January 27, 2016 the Company acquired the domain name digitalfc.com. The purchase price of £50,000 (approximately $72,000) is payable in 5 annual instalments of £10,000 commencing on January 27, 2017, which was paid in accordance with terms of the agreement. Additionally 100,000 shares of common stock and 10 shares of convertible preferred stock in the Company were issued to the sellers. The Company has imputed interest based on an interest rate of 10% and recorded the net present value of the future payments as the value of the asset acquired or $54,254. The Company intends to rebrand its digital group from APPS FC to Digital FC. The Company estimates its useful life to be ten years. Amortization expense of $2,713 and $2,261was recorded for the six months ended June 30, 2017 and 2016, respectively.

 

NOTE 6-ACCRUED COMPENSATION AND ACCRUED PAYROLL TAXES

 

Accrued compensation relates to both executive salary and board compensation for services during 2013 for FVCO’s Chairman, Ron Konersmann ($204,166); for FVCO’s former Chief Financial Officer ($147,916); and for FVCO’s former Chief Executive Officer ($171,875). Accrued compensation also includes compensation for two former FVCO’s employees ($107,025 and $40,625). Accrued payroll taxes relate to these accrued compensation amounts. These amounts were per Employment Term Sheets executed in 2012 and 2013 and terminated in 2013. The Company intends to repay these obligations in full.

 

NOTE 7– NOTES PAYABLE

 

The Company has notes payable to WRG and SVG and various individuals which amount to $398,085 at June 30, 2017 and $115,384 at December 31, 2016.

 

The details are as follows:

 

		June 30, 2017				December 31, 2016
Notes issued in 2012 and 2013			86,000				86,000
Notes issued in 2014			10,000				10,000
Notes issued in 2016			118,152				19,384
Notes issued in 2017			183,933				-
		$	398,085			$	115,384

 

Notes issued to related parties
WRG		$	240,168			$	-
SVG			59,417				16,884
Various individuals			62,500				62,500
			362,085				79,384
Notes issued to non-related parties			36,000				36,000
		$	398,085			$	115,384

 

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For the notes issued in 2012 and 2013, all had minimum interest between $500 and $5,000 accruing from date of note to maturity. After maturity, interest accrued at 10% per annum. Seven of these notes for $61,000 matured in 2013 and one for $25,000 matured in 2014. Of the notes payable issued in 2012 and 2013, $56,000 were issued to related parties, $41,000 to FVCO’s former Chief Financial Officer; $10,000 to a family member of FVCO’s Chairman, Ron Konersmann and $5,000 to a company affiliated with one of the FVCO’s outside directors, Joseph Land.

 

For the notes issued in 2014, one note payable for $5,000 had minimum interest of $500 until maturity and 10% per annum accruing thereafter. This note matured in 2014. All other notes issued in 2014 accrued interest at 10% per annum and matured in 2015. 100,000 shares of stock were issued to the holders of the notes payable issued in 2014. Of the notes issued in 2014, $4,000 was issued to related parties: $2,500 was issued to a family member of FVCO’s Chairman and $1,500 to John Voytko. FVCO contracted for Chief Financial Officer Services from John Voytko, Inc. beginning late in 2013.

 

For the notes payable issued in 2016 one was for $2,500 to John Voytko and the note accrued interest of 10% per annum. This note matured in March 12, 2017. The other notes issued in 2016 were for $98,768 to WRG (a related party) and $16,884 to SVG (a related party), accrued interest at 10% per annum and matured or will mature in 2017.

 

For the notes payable issued in 2017, $141,400 were issued to WRG and $42,533 were issued to SVG, and the notes accrued interest of 10% per annum. These notes mature in 2018.

 

Except for the notes payable to WRG and SVG, these notes payable are unsecured notes. For the notes payable to WRG the assets of the Company secure these notes, second to any credit facility entered into by the Company. For the notes payable to SVG the assets of FVCO secure these notes, second to any credit facility entered into by FVCO.

 

No interest or principal payments have been made on these notes to date. No collection efforts have been initiated by the note holders to date. The Company intends to repay these obligations in full.

 

NOTE 8 - RELATED PARTY TRANSACTIONS

 

Loans to related party

 

Through the first six months of 2017, SVG was provided funding by the Company in the form of loans totaling $53,537. (See Note 4). At June 30, 2017, SVG owns 26,000,000 shares of common stock and 5,100 shares of convertible preferred stock of the Company. Ron Konersmann is the Owner/Manager of SVG and holds voting and investment power over any pecuniary interests in shares of the Company held by SVG and owns 1,250,000 shares of common stock and 125 shares of convertible preferred stock of the Company. Including all convertible preferred stock as converted to common stock, the combined holdings by Mr. Konersmann and SVG would represent 56% of the common stock of the Company.

 

SVG was incorporated in the State of South Carolina. The principal business of SVG is that of a sport investment and holding company that seeks to invest, hold and manage its various multisport interests.

 

Notes payable and Convertible Preferred Stock

 

Through the first six months of 2017, WRG provided funding to the Company in the form of notes payable totaling $240,168 (see Note 7) and Mr. Grieve purchased 50 shares of convertible preferred stock for $25,000. Mr. Grieve is the owner/manager of WRG. Mr. Grieve holds voting and investment power over any pecuniary interests in shares of the Company held by WRG. At June 30, 2017, WRG and Mr. Grieve own 1,250,000 shares of common stock and 2,675 shares of convertible preferred stock of the Company. Including all convertible preferred stock as converted to common stock, the combined holdings by Mr. Grieve and WRG would represent 20% of the common stock of the Company.

 

WRG was incorporated in the State of Massachusetts. The principal business of WRG is that of a private investment firm with interests in international football, banking, wealth management, and technology.

 

Through the first six months of 2017, SVG provided funding to the Company in the form of notes payable totaling $59,417 (see Note 7).

 

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Transactions with the FVCO’s Chief Financial Officer

 

FVCO contracted for Chief Financial Officer Services from John Voytko beginning in 2013. $7,500 is included in accrued expenses as of June 30, 2017 related to that. In 2014 and 2016 Voytko provided loans of $1,500 and $2,500, respectively to the Company, which notes payable accrue interest at 10% per annum. In addition Voytko and a family member have purchased 1,290,000 shares of common stock and 129 shares of convertible preferred shares. In 2016, Voytko purchased 25,000 shares of common stock and 2.5 shares of convertible preferred shares. These shares were issued in connected with the note payable issued in 2016.

 

NOTE 9 – EQUITY

 

On February 14, 2013, the Company and Dutchess Opportunity Fund, II, LP (“Dutchess”) entered into an Investment Agreement and a Registration Rights Agreement, which provides for the investment by Dutchess of up to $25 million over a period of 36 months. Under the terms of the Investment Agreement and Registration Rights Agreement, Dutchess will purchase common stock of the Company, subject to and wholly conditioned upon the Company filing an S-1 registration statement to register the shares acquired by Dutchess and the registration statement of the shares being declared effective by the Securities and Exchange Commission. The Investment Agreement sets forth the terms and conditions under which Dutchess will purchase the common stock of the Issuer and other material conditions to the agreement between the parties. As of June 30, 2017 there has been no funding under the agreement.

 

Common Stock

 

The Company has authority to issue fifty million (50,000,000) common with a par value of $.001 of which 45,366,536 have been issued.

 

No holder of shares of stock of any class is entitled, as a matter of right, to subscribe for or purchase or receive any part of any new or additional issue of shares of stock of any class, or of securities convertible into shares of stock of any class, whether now hereafter authorized or whether issued for money, for consideration other than money, or by way of dividend.

 

Total common shares issued and outstanding at June 30, 2017 and December 31, 2016 were 45,366,536 and 44,351,250, respectively.

 

If the Series A Convertible Preferred Stock was converted into common shares that would add additional shares of common stock of 96,851,250 as of June 30, 2017, more than the 50,000,000 shares of common stock currently authorized. It is the current intention of the Company to file in the future an Information Statement on Schedule 14C to, among other things, increase the number of authorized shares of common stock to one billion shares. No date has been set for this filing.

 

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Preferred stock

 

The Company amended its Articles of Incorporation in May 2013 and subsequently has authority to issue ten million (10,000,000) Series A Convertible Preferred with a par value of $10.00, of which 9,685 shares have been issued as of June 30, 2017. On December 22, 2015, the Company filed an Amendment to the Certificate of Designation that modified the rights of the holders of Series A Convertible Preferred Stock by changing the conversion ratio to 10,000 shares of common stock for one share of Series A Convertible Preferred Stock and eliminating any holding requirement before conversion. There are no liquidation preferences over common shares, but the Series A Convertible Preferred may be voted as if converted and are entitled to dividend treatment as if converted to common. Series A Convertible Preferred may be converted to common shares at any time after one year from the date of issuance at the option of the holder.

 

Total preferred shares, series A, issued and outstanding as of June 30, 2017 and December 31, 2016 were 9,685 and 4,435, respectively.

 

NOTE 10 – COMMITMENTS AND CONTINGENCIES

 

The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities that become available. They may face a conflict in selecting between the Company and other business interests. The Company has not formulated a policy for the resolution of such conflicts.

 

In the normal course of business, the Company may become a party to litigation matters involving claims against the Company. The Company's management is unaware of any pending or threatened assertions and there are no current matters that would have a material effect on the Company’s financial position or results of operations.

 

The Company’s operations are subject to significant risks and uncertainties including financial, operational and regulatory risks, including the potential risk of business failure.

 

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Item 2. Management’s Discussion and Analysis or Plan of Operation

 

This 10−Q contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the audited consolidated financial statements and accompanying notes and the other financial information appearing elsewhere in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events. Refer also to "Cautionary Note Regarding Forward Looking Statements" and “Risk Factors” below.

 

The following discussion of our financial condition and results of operations as of June 30, 2017 should be read in conjunction with our financial statements and the related notes as provided under Item 1. With respect to the discussion within this Item 2, the terms “Sputnik,” “the Company” “we,” “us,” and “our” refer to Sputnik Enterprises, Inc.

 

Overview

 

The Company focuses on international football (soccer) through investment in professional clubs around the world, development of fan engagement solutions and player development through global grassroots (players ages 3-9) programs.

 

During the next twelve months we anticipate incurring costs related to these activities and filing Exchange Act reports. 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

 

For the six months ended June 30, 2017, we had net cash flows used in operations of $47,296.

 

On June 30, 2017, we had total assets of $107,864 compared to total assets of $49,280 at December 31, 2016.

 

We had total liabilities of $1,387,038 as of June 30, 2017, which consisted of accrued compensation of $671,607, accrued payroll taxes of $57,340, notes payable, related party of $362,085, notes payable of $36,000, accounts payable and accrued expenses of $145,537, accrued interest of $64,103, accrued purchase of intangible of $45,366 and advance from shareholder of $5,000. At December 31, 2016 we had total liabilities of $1,001,939, which consisted of accrued compensation of $671,607, accrued payroll taxes of $57,340, notes payable, related party of $79,384, notes payable of $36,000, accounts payable and accrued expenses of $53,984, accrued interest of $49,370 and accrued purchase of intangible of $54,254.

 

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Capital Resources

 

The Company has financed its limited operations through funds advanced from its stockholders, management or other investors to meet minimum operating cash requirements. There is no written agreement for future funding.

 

The Company has a standing agreement with Duchess Capital (“Investor”), signed term sheet, for an Equity Line Facility. The Investor shall commit to purchase up to $25 million of the Company’s stock over a 36 month period, after a registration statement of the stock has been declared effective by the US Securities and Exchange Commission. The equity line has conversion feature for repayment of amounts drawn on the equity line. Conversion pricing of the shares will be at 94% of the lowest daily variable weighted average price (VWAP) during the five consecutive trading days immediately prior to the put date. The Company has not filed an S-1 registration, therefore, the terms of the agreement have not commenced and no advances under this agreement have been made.

 

Results of Operations

 

Three Months Ended June 30, 2017 compared to the three months ended June 30, 2016

 

Our net loss for the three months ended June 30, 2017 was $30,759 which was an increase of $17,393 over our net loss for the three months ended June 30, 2016, which was $13,366. The increase was primarily due to increased other general and administrative costs, primarily legal and professional fees.

 

Six Months Ended June 30, 2017 compared to the six months ended June 30, 2016

 

Our net loss for the six months ended June 30, 2017 was $45,107 which was an increase of $18,394 over our net loss for the six months ended June 30, 2016, which was $26,713. The increase was primarily due to increased other general and administrative costs, primarily legal and professional fees.

 

Cautionary Note About Forward-Looking Statements

 

The information contained in this Report includes some statements that are not purely historical and are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and as such, may involve risks and uncertainties. These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, perceived opportunities in the market and statements regarding our mission and vision. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. You can generally identify forward-looking statements as statements containing the words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, but the absence of these words does not mean that a statement is not forward-looking. For example, our forward-looking statements may include statements regarding:

 

·

Our projected sales and profitability,

 

·

Our growth strategies,

 

·

Anticipated trends in our industry,

 

·

Our future financing plans, and

 

·

Our anticipated needs for working capital.

 

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In light of these risks, uncertainties and assumptions, the future events, developments or results described by our forward-looking statements herein could turn to be materially different from those we discuss or imply.

 

Item 3. Quantitative and Qualitative Disclosure about Market Risk

 

Not applicable.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act) that are designed to ensure that information required to be disclosed in the Company’s Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective.

 

Changes in Internal Control over Financial Reporting

 

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities Exchange Act) during the fiscal quarter ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

(a)	Unregistered Sales of Equity Securities.

 

The Registrant issued unregistered securities during the three months ended June 30, 2017, related to the

June 26, 2017 reverse take-over transaction whereby Sputnik Enterprises acquired all of the issued and outstanding ownership interest in FV Corporation through the issuance of 44,351,250 of restricted Common Stock shares and 4,351 shares of the Series A Preferred Shares, the equivalent of 44,351,250 of restricted Common Stock.

 

(b)	Use of Proceeds.

 

The Registrant did not receive any proceeds from issuing the unregistered shares during the three months ended June 30, 2017.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not Applicable.

 

Item 5. Other Information.

 

Not applicable.

 

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Item 6. Exhibits.

 

(a) Exhibits.

 

Exhibit		Item
31.1		Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
Exhibit 101		Interactive data files formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to the Consolidated Financial Statements.*
101.INS**		XBRL Instance Document*
101.SCH**		XBRL Taxonomy Extension Schema Document*
101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF**		XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB**		XBRL Taxonomy Extension Label Linkbase Document*
101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document*

___________

* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

 

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

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SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

	SPUTNIK ENTERPRISES,INC.
Date: August 15, 2017	By:	/s/ Anthony Gebbia
		(Authorized Officer and Principal Executive Officer)

 

In accordance with the Exchange Act, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

SIGNATURE		NAME		TITLE		DATE
/s/ Anthony Gebbia		Anthony Gebbia		Principal Executive Officer, Principal Financial		August 15, 2017
				Officer and Principal Accounting officer

 

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EXHIBIT INDEX

 

Exhibit		Item
31.1		Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Principal Executive and Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
Exhibit 101		Interactive data files formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to the Consolidated Financial Statements.*
101.INS**		XBRL Instance Document*
101.SCH**		XBRL Taxonomy Extension Schema Document*
101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF**		XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB**		XBRL Taxonomy Extension Label Linkbase Document*
101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document*

____________

* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

 

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

  

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