SB-2/A 1 sb2a1_clean.htm

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Amendment No. 1 to

FORM SB-2

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Sputnik, Inc.

(Exact Name of registrant as specified in its charter)

 

   

 Nevada

52-2348956

3576

 (State or other jurisdiction

(IRS Employer

(Primary Standard

 of incorporation)

Identification Number)

Industrial Classification Code)

 
 

 

650 Townsend Street, Suite 320

San Francisco, CA 94103

(415) 462-5685

(Address, including zip code, and telephone number,

including area code, of registrant's principal executive offices)

 

David LaDuke, President

650 Townsend Street, Suite 320

San Francisco, CA 94103

415-462-5685

 (Name, address, including zip code, and telephone number,

including area code, of agent for service)

 

Copies to:

David LaDuke

650 Townsend Street, Suite 320

San Francisco, CA 94103

Fax: (415) 354-3342

 

Approximate date of commencement of proposed sale to the public:

As soon as practicable after the effective date of this registration statement.

 

 

 

 


 

 

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  [   ]


If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  [   ]


If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering.  [   ]


If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering.  [   ]


If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.  [   ]


CALCULATION OF REGISTRATION FEE


Title of Each Class of Securities to be Registered

Dollar Amount to be Registered

Proposed Maximum Offering Price Per Share (1)

Proposed Maximum Aggregate Offering Price (1)

Amount of Registration Fee

Common Stock, par value $0.001 per share

500,000

$1.00

$500,000

$58.85


(1)  The offering price is the stated for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933.


The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.


The information in this prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting any offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

 

 

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PROSPECTUS                                                                               

Subject to Completion, Dated September 12, 2005



SPUTNIK, INC.

500,000 Shares of Common Stock

Offering Price of $1.00 per Share


We are offering up to a total of 500,000 of common stock in a best efforts, no minimum, direct public offering, without any involvement of underwriters or broker-dealers. The offering price is $1.00 share. The offering will terminate within 120 days from the date of this prospectus.  At our sole discretion, we may extend the offering for an additional 120 days. There are no minimum purchase requirements and no arrangements to place the funds in an escrow, trust or similar account. All cleared funds will be available to us following deposit into our bank account.


Prior to this offering, there has been no market for our securities. Our common stock is not now listed on any national securities exchange, the NASDAQ stock market, or the OTC Bulletin Board.  There is no guarantee that our securities will ever trade on the OTC Bulletin Board or other exchange.


There are no underwriting commissions involved in this offering.  We have agreed to pay all the costs of this offering. Our common stock will be sold by David LaDuke, our President and Director, and Arthur Tyde, our Director for no compensation.


This offering is highly speculative and these securities involve a high degree of risk and should be considered only by persons who can afford the loss of their entire investment. There is substantial doubt about our ability to continue as a going concern.  See "Risk Factors" beginning on page 7.


Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.



The date of this prospectus is ___________________, 2005.

 

 

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TABLE OF CONTENTS


PROSPECTUS SUMMARY

5

RISK FACTORS

7

USE OF PROCEEDS

11

DILUTION

12

DETERMINATION OF OFFERING PRICE

13

PLAN OF DISTRIBUTION

13

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

17

DESCRIPTION OF SECURITIES

19

DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

19

DESCRIPTION OF BUSINESS

19

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

23

DESCRIPTION OF PROPERTY

27

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

27

EXECUTIVE COMPENSATION

33

FINANCIAL STATEMENTS

34

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

51

 

 

 

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PROSPECTUS SUMMARY


The prospectus summary contains a summary of all material terms of the prospectus. You should carefully read all information in the prospectus, including the financial statements and their explanatory notes, under the Financial Statements section beginning on page F-1 prior to making an investment decision.


Organization


Sputnik, Inc. was incorporated in Delaware on September 27, 2001.  On February 10, 2005, we filed Articles of Conversion in Nevada and became a Nevada corporation.


Our mailing address is 650 Townsend Street, Suite 320, San Francisco, CA 94103, our telephone number is (415) 462-5685, and our fax number is (415) 354-3342.  Our website is www.sputnik.com, and contains information which is not a part of this registration statement.


Business


Our customers are service providers and businesses that want to offer their own, proprietary wireless internet access services to their customers.  These networks are commonly referred to as Wi-Fi networks.  However, our customers do not want to give the general public unrestricted access to these networks.  Further, they want the ability to be able to generate revenues from the operation of their networks.


Sputnik provides software that gives service providers and businesses the ability to control and limit access to their Wi-Fi networks.  It also provides them the ability to generate revenues from the operation of their networks.


Sputnik additionally provides Wi-Fi access point hardware and accessories, such as antennas.

 

 

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The Offering

 

 

Securities Offered

500,000 shares of Common Stock

 

 

Shares of Common Stock Outstanding Before Offering

13,448,919 shares

 

 

Shares of Common Stock Outstanding After Offering (assuming sale of all shares offered)

 

13,948,919 shares

 

 

Use of Proceeds

General corporate purposes including working capital, marketing, research and development, and costs related to this offering.

 

 

Lack of Market for Company Securities

There is currently no market for our common stock; there is no assurance that any market will develop; if a market develops for our securities, it will likely be limited, sporadic and highly volatile.

 

 

Risk Factors

We face risks to continued operations including the fact that we need significant additional financing beyond what is raised through this prospectus; the fact that we operate in a new and dynamic market, which could quickly become obsolete; the fact that we face intense competition for our products, and therefore could be forced to lower prices below where they are profitable; the fact that our auditor has expressed a going concern regarding us; and the fact that our president controls a majority of the voting control of our company, and therefore has significant influence over all corporate decisions. Any of these risks may lead our being forced to abandon or curtail our business plan.

 

 


Summary Financial Information


You should read the summary financial information presented below for the three months ended March 31, 2005 and the year ended December 31, 2004.  We derived the summary financial information from our unaudited and audited financial statements appearing elsewhere in this prospectus.  You should read this summary financial information in conjunction with our plan of operation, financial statements and related notes to the financial statements, each appearing elsewhere in this prospectus.


 

Six Months Ended

Year Ended

 

June 30, 2005

(unaudited)

December 31, 2004

(audited)

 

 

 

STATEMENT OF OPERATIONS DATA:

 

 

 

 

 

Revenues

$     252,641

$      329,429

Cost of Goods Sold

$  (118,841)

$   (172,400)

Operating Expenses

$  (261,967)

$   (829,611)

Net Income (loss)

$    (69,149)

$   (675,358)

 

 

 

 

As of

 

June 30, 2005

   

TOTAL ASSETS

$       69,479

Total Current Liabilities

$       57,821

Retained deficit

$  (880,297)

Stockholders' Equity

$       11,658

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$       69,479

 

 

 

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RISK FACTORS


In addition to the other information provided in this Prospectus, you should carefully consider the following risk factors in evaluating our business before purchasing any of our common stock.  All material risks are discussed in this section.


Our poor financial condition raises substantial doubt about our ability to continue as a going concern.  


We have generated a net loss for each of the past two fiscal years and had a working capital deficit of $703,331 and an accumulated deficit of $811,148 as of December 31, 2004 and a working capital deficit of $0 and an accumulated deficit of $880,297 as of June 30, 2005.  


Our ability to continue as a going concern is dependent upon our ability to successfully accomplish our business plans and secure additional funding sources and attain profitable operations.  We do not have any commitments or identified sources of additional capital from third parties or from our officers, directors or majority shareholders.  Additional financing may not be available to us on favorable terms, if at all.  This offering may not raise the required funding.


Accordingly, our accountants have indicated there is substantial doubt about our ability to continue as a going concern over the next twelve months. Revenues have not been sufficient to cover operating costs and to allow us to continue as a going concern.  Our poor financial condition could inhibit our ability to continue in business or achieve our business plan.  


Because the Wi-Fi business is new and there are many competitors offering free services, we may not be successful and the value of our securities could become worthless.


Our market, business software for Wi-Fi networks, is new and dynamic.  Downward price pressure of managed Wi-Fi access software and services due to the proliferation of free, open unmanaged Wi-Fi networks, competition from Wi-Fi technology providers, and competition from cellular broadband alternatives could reduce our market potential.  Additionally, some new product may be developed in the future, which will supplant Wi-Fi networks and render them obsolete.  If the price of, or demand for, managed Wi-Fi access software and services is depressed downward, or Wi-Fi networks become obsolete, we could lose clients, resulting in our not having sufficient demand for our software and forcing us to discontinue its business plan. If this were to happen, the value of our securities could become worthless.

 

 

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Because our software system business depends upon our intellectual property rights, which we have not taken any formal legal action to protect against third parties, our revenues may be reduced.


We have currently not taken any formal legal steps to protect important intellectual property related to our software. We anticipate we will take these further steps upon securing additional funding.


Our management decisions are made by David LaDuke, our president and CEO; if we lose his services, our revenues could be reduced.


The success of our business is dependent upon the expertise of David LaDuke, our President and Chief Executive Officer.  Because David LaDuke, our president and CEO is essential to our operations, you must rely on his management decisions.  David LaDuke, our president and CEO will continue to control our business affairs after the filing. We have not obtained any key man life insurance relating to him. If we lose his services, we may not be able to hire and retain another president and CEO with comparable experience. As a result, the loss of his services could reduce our revenues.  We have not entered into an employment agreement with Mr. LaDuke.  


Because insiders control our activities, they may block or deter actions that you might otherwise desire that we take and may cause us to act in a manner that is most beneficial to such insiders and not to outside shareholders.


Our officers and directors control approximately 67% of our common stock. As a result, these insiders effectively control all matters requiring director and stockholder approval, including the election of directors, the approval of significant corporate transactions, such as mergers and related party transaction. Our insiders also have the ability to block, by their ownership of our stock, an unsolicited tender offer. This concentration of ownership could have the effect of delaying, deterring or preventing a change in control of our company that you might view favorably and may cause us to act in a manner that is most beneficial to such insiders and not to outside shareholders.

 

The offering price of $1.00 share has been arbitrarily set by our Board of Directors and accordingly does not indicate the actual value of our business.


The offering price of $1.00 share is not based upon earnings or operating history, does not reflect our actual value, and bears no relation to our earnings, assets, book value, net worth or any other recognized criteria of value.  No independent investment-banking firm has been retained to assist in determining the offering price for the shares. Accordingly, the offering price should not be regarded as an indication of any future price of our stock.

 

 

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Sales of our common stock under Rule 144 could reduce the price of our stock.


As of June 15, 2005, there are 2,198,919 of our common stock held by non-affiliates and 11,250,000 shares of our common stock held by our officers and directors that Rule 144 of the Securities Act of 1933 defines as restricted securities.  This is in addition to the up to 500,000 shares we are offering in this offering.  Of the shares currently owned by non-affiliates, 268,314 may currently be resold without restriction as they have been held two or more years. Ninety days after the effective date of this registration statement, there are 10,981,686 shares held by our officers and directors that are eligible for resale under the price and volume limitations of Rule 144(e).


The availability for sale of substantial amounts of common stock under Rule 144 or otherwise could reduce prevailing prices for our securities.


Because this is a best efforts, self-underwritten no minimum offering, we may have less funds available that the $500,000 maximum offering amount, which may limit our ability to implement our business plan.


No commitment exists by any broker-dealers and/or agents to purchase all or any part of the Shares being offered hereby. We will sell the shares on a "best efforts, no minimum" basis. The funds available to us from the proceeds of the offering will be reduced to the extent that less than all the shares offered hereby are sold. There are no minimum purchase requirements and no arrangements to place the funds in an escrow, trust or similar account. All cleared funds will be available to us following deposit into our bank account.  Sale of less than the maximum number of shares may curtail implementation of our business plan.


Purchasers in this offering will experience immediate dilution.


The investors in this Offering are subject to dilution of the net tangible book value of their Common Stock immediately upon completion of the Offering. Purchasers of the securities offered hereby will incur an immediate dilution of $.97 in the net tangible book value per share of Common Stock from the Offering price at $1.00 per share, assuming all 500,000 shares are sold.


Because we do not have an audit or compensation committee, shareholders will have to rely on the entire board of directors, all members of which are not independent, to perform these functions.


We do not have an audit or compensation committee comprised of independent directors. Indeed, we do not have any audit or compensation committee.  These functions are performed by the board of directors as a whole.  No members of the board of directors are independent directors.  Thus, there is a potential conflict in that board members who are management will participate in discussions concerning management compensation and audit issues that may affect management decisions.

 

 

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Because there is not now and may never be a public market for our common stock, investors may have difficulty in reselling their shares.  


Our common stock is currently not quoted on any market.  No market may ever develop for our common stock, or if developed, may not be sustained in the future.  Accordingly, our shares should be considered totally illiquid, which inhibits investors' ability to resell their shares.


Because this is a best efforts, self-underwritten no minimum offering, we may have less funds available that the $500,000 maximum offering amount, which may limit our ability to implement our business plan.


No commitment exists by any broker-dealers and/or agents to purchase all or any part of the Shares being offered hereby. We will sell the shares on a "best efforts, no minimum" basis. The funds available to us from the proceeds of the offering will be reduced to the extent that less than all the shares offered hereby are sold. There are no minimum purchase requirements and no arrangements to place the funds in an escrow, trust or similar account. All cleared funds will be available to us following deposit into our bank account.  Sale of less than the maximum number of shares may curtail implementation of our business plan.

 


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS


Information included or incorporated by reference in this prospectus may contain forward-looking statements.  This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements.  Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend" or "project" or the negative of these words or other variations on these words or comparable terminology.


This prospectus contains forward-looking statements, including statements regarding, among other things, (a) our projected sales and profitability, (b) our growth strategies, (c) anticipated trends in our industry, (d) our future financing plans and (e) our anticipated needs for working capital.  These statements may be found under "Management's Discussion and Analysis or Plan of Operations" and "Description of Business," as well as in this prospectus generally.  Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under "Risk Factors" and matters described in this prospectus generally.  In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this prospectus will in fact occur.

 

 

 

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USE OF PROCEEDS


The table below depicts how we will utilize the proceeds of this Offering in the event that 250,000 and 500,000 shares are purchased.


Purpose

250,000 Shares

Percent

500,000 Shares

Percent

         

Consulting and Legal Fees (1)

$33,000

13%

$33,000

7%

General Operations (2)

$92,000

37%

$92,000

18%

Sales and Marketing (3)

$50,000

20%

$200,000

40%

Research and Development (4)

$75,000

30%

$175,000

35%

         

TOTAL:

$250,000

100%

$500,000

100%


(1)  Consulting and Legal Fees.  We have engaged GoPublicToday.com to perform consulting and advisory services in conjunction with the development of this registration statement. We currently intend to pay $10,000 of their fee from the proceeds of this offering. In addition, we intend to pay $14,000 of legal fees not related to this offering to prior corporate counsel.


(2)  General Operations.  These expenses are comprised primarily of software systems to automate our business, additional servers to add capacity and redundancy for our online services, expenses for telecommunications, accounting, acquisition of office equipment and supplies.


(3)  Sales and Marketing.  Expenses incurred in connection with sales of services and products, including sales commissions, public relations, advertising, and direct marketing expenditures.


(4)  Research and Development.  Expenses incurred to further develop our services and products to remain competitive and meet customer demands.


The amounts set forth above are estimates developed by management for the allocations of the net proceeds of this Offering based upon the current state of our business operations, our plans and current economic and industry conditions.  To the extent we raise less than $250,000, we will apply the proceeds in the following order of priority: Consulting and Legal Expenses, General Operations, Sales and Marketing, and Research and Development.


The actual allocation of funds will depend on our success and growth. If results do not meet our requirements, we will reallocate the proceeds among the other contemplated uses of proceeds, as prudent business practices dictate.


No proceeds will be used, directly or indirectly, for officers and directors.


Pending application by us of the net proceeds of this offering, such proceeds may be invested in short-term, interest-bearing instruments.

 

 

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DILUTION


At June 30, 2005, we had a net tangible book value of $11,658 or $0.00 per share of common stock. Net tangible book value per share is equal to our tangible assets less our total liabilities, divided by the number of shares of common stock outstanding on such date.


If we sell 50% of the Maximum Offering under this Prospectus, our pro forma net tangible book value as of June 30, 2005 would be  $319,479 or $0.02 per share of common stock based on the 13,698,919 shares that would be outstanding. This represents an immediate increase in the net tangible book value per share to our  existing  shareholders  of $0.02 per share and an  immediate  dilution of $0.98 per share to those who purchase shares in this offering.


If we sell the Maximum Offering under this Prospectus, our pro forma net tangible book value as of March 31, 2005 would be  $569,479  or $0.04 per share of common stock based on the 13,948,919 shares that would be outstanding. This represents an immediate increase in the net tangible book value per share to our  existing  shareholders  of $0.04 per share and an  immediate  dilution of $0.96 per share to those who purchase shares in this offering.

  


The following illustrates the per share dilution to new investors based on certain assumed numbers of shares sold in this offering:


50% of Maximum Offering


 

Number of Shares Purchased

% of Class

Total Consideration

% of Total Consideration

Average Price per Share

Existing Shareholders

13,448,919

98%

$891,955

78%

$0.07

Public Shareholders

250,000

2%

$250,000

22%

$1.00

           

TOTAL

13,698,919

100%

$1,141,955

100%

 

 

 

100% of Maximum Offering


 

Number of Shares Purchased

% of Class

Total Consideration

% of Total Consideration

Average Price per Share

Existing Shareholders

13,448,919

96%

$891,955

64%

$0.07

Public Shareholders

500,000

4%

$500,000

36%

$1.00

           

TOTAL

13,948,919

100%

$1,391,955

100%

 


 

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DETERMINATION OF OFFERING PRICE

 

The price of the shares we are offering was arbitrarily determined in order for us to raise up to a total of $500,000 in this offering. The offering price bears no relationship whatsoever to our assets, earnings, book value or other criteria of value. The factors considered were:

 

o

our lack of operating history

o

the proceeds to be raised by the offering

o

the amount of capital to be contributed by purchasers in this offering in proportion to the amount - of stock to be retained by our existing Stockholders

o

our relative cash requirements

o

the price we believe a purchaser is willing to pay for our stock

 

PLAN OF DISTRIBUTION


We are offering up to a total of 500,000 of common stock in a best efforts, no minimum, direct public offering, without any involvement of underwriters or broker-dealers. The offering price is $1.00 per share. The offering will terminate within 120 days from the date of this prospectus.  At our sole discretion, we may extend the offering for an additional 120 days. There are no minimum purchase requirements and no arrangements to place the funds in an escrow, trust or similar account. All cleared funds will be available to us following deposit into our bank account.  There are no finders involved in our distribution.


We will sell the shares in this offering through our officers and directors, David LaDuke and Arthur Tyde. They will receive no commission from the sale of any shares. They will not register as a broker/dealer under Section 15 of the Securities Exchange Act of 1934 in reliance upon Rule 3a4-1. Rule 3a4-1 sets forth those conditions under which a person associated with an issuer may participate in the offering of the issuer's securities and not be deemed to be a broker/dealer. The conditions are that:

 

David LaDuke and Arthur Tyde each meet these conditions in that each:


o

is not statutorily disqualified, as that term is defined in Section 3(a)(39) of the Act, at the time of his participation;

o

is not compensated in connection with his participation by the payment of commissions or other remuneration based either directly or indirectly on transactions in securities;

o

is not at the time of their participation, an associated person of a broker/dealer; and

o

meets the conditions of Paragraph (a)(4)(ii) of Rule 3a4-1 of the Exchange Act, in that he (A) primarily performs, or is intended primarily to perform at the end of the offering, substantial duties for or on behalf of the issuer otherwise than in connection with transactions in securities; and (B) is not a broker or dealer, or an associated person of a broker or dealer, within the preceding twelve (12) months; and (C) do not participate in selling and offering of securities for any issuer more than once every twelve (12) months other than in reliance on Paragraphs (a)(4)(i) or (a)(4)(iii).

 

 

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David LaDuke and Arthur Tyde each are not statutorily disqualified, are not being compensated, and are not associated with a broker/dealer. They are and will continue to be one of our officers and directors at the end of the offering and have not been during the last twelve months and are currently not broker/dealers or associated with a broker/dealer. They have not during the last twelve months and will not in the next twelve months offer or sell securities for another corporation.


Each person desiring to subscribe to the shares will be contacted directly by David LaDuke and Arthur Tyde and must complete, execute, acknowledge, and deliver to us a subscription agreement, which will contain, among other provisions, representations as to the investor's qualifications to purchase the Common Stock and his ability to evaluate and bear the risk of an investment in Sputnik. It is our current intention to commence soliciting offers by contacting persons previously known by David LaDuke and Arthur Tyde or by our existing stockholders.  By executing the subscription agreement, the subscriber is agreeing that if the subscription agreement is accepted by us, such subscriber will become a shareholder in Sputnik. Upon review and before acceptance of an investor, we will assess and adhere to the respective State Securities laws that may apply to such investor's state of residence.  We currently do not intend to advertise our securities for sale.  We have not yet determined where the shares will be sold; however, they will be registered in every state that requires registration before sale.


 

Promptly upon receipt of subscription documents by us, we will make a determination as to whether a prospective investor will be accepted as a shareholder in Sputnik. We may reject a subscriber's subscription agreement for any reason. Subscriptions will be rejected for failure to conform to the requirements of this prospectus (such as failure to follow the proper subscription procedure), insufficient documentation, or such other reasons that we determine to be in the best interest of the investor and Sputnik. If a subscription is rejected, in whole or in part, the subscription funds, or portion thereof, will be promptly returned to the prospective investor without interest by depositing a check (payable to said investor) in the amount of said funds in the U.S. mail, certified returned-receipt requested.

 

Section 15(g) of the Exchange Act

Our shares are covered by Section 15(g) of the Securities Exchange Act of 1934, as amended, and Rules 15g-1 through 15g-6 promulgated thereunder. They impose additional sales practice requirements on broker/dealers who sell our securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses).


Rule 15g-1 exempts a number of specific transactions from the scope of the penny stock rules.


Rule 15g-2 declares unlawful broker/dealer transactions in penny stocks unless the broker/dealer has first provided to the customer a standardized disclosure document.

 

 

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Rule 15g-3 provides that it is unlawful for a broker/dealer to engage in a penny stock transaction unless the broker/dealer first discloses and subsequently confirms to the customer current quotation prices or similar market information concerning the penny stock in question.


Rule 15g-4 prohibits broker/dealers from completing penny stock transactions for a customer unless the broker/dealer first discloses to the customer the amount of compensation or other remuneration received as a result of the penny stock transaction.


Rule 15g-5 requires that a broker/dealer executing a penny stock transaction, other than one exempt under Rule 15g-1, disclose to its customer, at the time of or prior to the transaction, information about the sales persons compensation.


Rule 15g-6 requires broker/dealers selling penny stocks to provide their customers with monthly account statements.


Rule 15g-9 requires broker/dealers to approved the transaction for the customer's account; obtain a written agreement from the customer setting forth the identity and quantity of the stock being purchased; obtain from the customer information regarding his investment experience; make a determination that the investment is suitable for the investor; deliver to the customer a written statement for the basis for the suitability determination; notify the customer of his rights and remedies in cases of fraud in penny stock transactions; and, the NASD's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.


The application of the penny stock rules may affect your ability to resell your shares.


Procedures for Subscribing


If you decide to subscribe for any shares in this offering, you must


o

Execute and deliver a subscription agreement

 

o

Deliver a check or certified funds to us for acceptance or rejection.


All checks for subscriptions must be made payable to "SPUTNIK, INC."


Right to Reject Subscriptions


We have the right to accept or reject subscriptions in whole or in part, for any reason or for no reason. All monies from rejected subscriptions will be returned immediately by us to the subscriber, without interest or deductions. Subscriptions for securities will be accepted or rejected within 48 hours after we receive them.

 

 

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No Merger or Acquisition


We have no plans or intention, preliminary or otherwise, to enter into a merger or acquisition and we have had no discussions with GoPublicToday.com or any of its affiliates including M&A Capital Advisers regarding any plans of merger or acquisition involving Sputnik.

 

 

LEGAL PROCEEDINGS


There are no pending or threatened lawsuits against us.


DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS


The Board of Directors elects our executive officers annually.  A majority vote of the directors who are in office is required to fill vacancies.  Each director shall be elected for the term of one year, and until his successor is elected and qualified, or until his earlier resignation, death, or removal. Our directors and executive officers are as follows:


Name

Age

Position

 

 

 

David LaDuke

45

President, Chief Executive Officer, Treasurer, Secretary and Director

 

 

 

Arthur Tyde

40

Director

 

 

David LaDuke, President and Chief Executive 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., now Levanta, 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.

 

 

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Arthur Tyde, Director


Mr. Tyde has served as a Director for Sputnik since February 2002.  From February 2002 to June 30, 2003, Mr. Tyde served as our Chief Operating Officer and Director of Sales. In March 2005, Mr. Tyde accepted a position as the Chief Technology Officer of The Free Standards Group, a nonprofit organization dedicated to developing and promoting open-source software standards. From June 1999 to January 2003, Mr. Tyde served as the Executive Vice President of Linuxcare Inc., now Levanta, Inc., which he co-founded.  From September 1998 to June 1999, he served as the Chief Executive Officer of Linuxcare Inc. From January 1996 to September 1998, he served as a Consultant with Hall Kinion.  Mr. Tyde received a Bachelors degree from Michigan State University in Telecommunications in 1988.


Directors serve for a one-year term.  Our Bylaws provide for three to nine directors.


Board Committees


We currently have no compensation committee or other board committee performing equivalent functions. Currently, all members of our board of directors participate in discussions concerning executive officer compensation.


Family Relationships


There are no family relationships among our officers or directors.  

 

Legal Proceedings Concerning Management


No officer or director has been involved in legal proceedings that would be material to an evaluation of our management.

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


The following tables set forth the ownership of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding common stock, our directors, and our executive officers and directors as a group.  To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted.  There are not any pending or anticipated arrangements that may cause a change in control.


The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a "beneficial owner" of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days, by the sum of the number of shares outstanding as of such date plus the number of shares as to which such person has the right to acquire voting or investment power within 60 days. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below and under applicable community property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown.

 

 

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Name and Address of Beneficial Owner(1)

Shares Beneficially Owned

Percentage Beneficially Owned Before Offering*

Percentage Beneficially Owned After Offering(1)(2)*

David LaDuke

650 Townsend St., Suite 320

San Francisco, CA 94103


President, Chief Executive Officer, Treasurer and Director

8,000,000

59.5%

57.4%

Arthur Tyde

650 Townsend St., Suite 320

San Francisco, CA 94103


Director

1,000,000

7.4%

7.2%

Kathy Giori

650 Townsend St., Suite 320

San Francisco, CA 94103

1,250,000

9.3%

9.0%

Scott Hutton

650 Townsend St., Suite 320

San Francisco, CA 94103

1,000,000

7.4%

7.2%

GoPublicToday.com, Inc. [1]

5770 El Camino Road

Las Vegas, NV  89118

1,250,000

8.8%

8.5%

All Officers and Directors as a Group (2 persons)

9,000,000

66.9%

64.5%

 

(1)  Mr. Stephen Brock is the principal of GoPublicToday.com., Inc.  Includes 750,000 shares to be issued to Public Company Management Corporation of which Mr. Brock is the principal upon effectiveness of this registration statement.

 

(2)  Assuming the sale of all Shares offered under this Prospectus.

 

 

This table is based upon information derived from our stock records. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the shareholders named in this table has sole or shared voting and investment power with respect to the shares indicated as beneficially owned. Except as set forth above, applicable percentages are based upon 13,448,919 shares of common stock outstanding as of June 15, 2005.

 

 

 

-18-


 

 

 

DESCRIPTION OF SECURITIES


We have authorized capital stock consisting of 50,000,000 shares of common stock, $.001 par value per share. We had 13,448,919 shares of common stock issued and outstanding as of June 15, 2005.


Common Stock


The holders of outstanding shares of common stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends of such times and in such amounts as the board from time to time may determine.  Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of shareholders.  There is no cumulative voting of the election of directors then standing for election.  The common stock is not entitled to pre-emptive rights and is not subject to conversion or redemption.  Upon liquidation, dissolution or winding up of our business, the assets legally available for distribution to stockholders are distributable ratably among the holders of the common stock after payment of liquidation preferences, if any, on any outstanding payment of other claims of creditors.  Each outstanding share of common stock is, and all shares of common stock to be outstanding upon completion of this offering will upon payment therefore be, duly and validly issued, fully paid and non-assessable.

 

 

DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES


Our Bylaws, subject to the provisions of Nevada Corporation Law, contain provisions which allow the corporation to indemnify any person against liabilities and other expenses incurred as the result of defending or administering any pending or anticipated legal issue in connection with service to us if it is determined that person acted in good faith and in a manner which he reasonably believed was in the best interest of the corporation.  Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

 

 

DESCRIPTION OF BUSINESS


Sputnik, Inc. was incorporated in Delaware on September 27, 2001.  On February 10, 2005, we filed Articles of Conversion in Nevada and became a Nevada corporation due to lower annual corporate filing fees.  


Our mailing address is 650 Townsend Street, Suite 320, San Francisco, CA 94103, our telephone number is (415) 462-5685, and our fax number is (415) 354-3342.  Our website is www.sputnik.com, and contains information which is not a part of this prospectus.

 

 

 

-19-


 

 

 

Our customers are service providers and businesses that want to offer their own, proprietary wireless internet access services to their customers.  These networks are commonly referred to as Wi-Fi networks.  However, our customers do not want to give the general public unrestricted access to these networks.  Further, they want the ability to be able to generate revenues from the operation of their networks.


Sputnik provides software that gives service providers and businesses the ability to control and limit access to their Wi-Fi networks.  It also provides them the ability to generate revenues from the operation of their networks as follows:  

 

o

Our software can be configured by these service providers and businesses to require users to pay a fee for wireless internet access.  

o

It can alternatively be configured to require users to view service provider or business marketing information or advertising before the users can obtain free access to the networks.  


Our software further enables service providers to monitor the status of their networks from anywhere over the internet, to remotely control wireless access points on their network, and to remotely upgrade software running on these access points.


Sputnik software has been developed by independent contractors hired by us. Based upon our agreements with the software developers, intellectual property rights to the software are owned exclusively by Sputnik.


Sputnik additionally provides Wi-Fi access point hardware and accessories, such as antennas and power supplies. We purchase standard Wi-Fi hardware components from original equipment manufacturers on an as-needed basis. We then configure these components to work with our software.  There are many suppliers of the standard Wi-Fi hardware that we use.  


Wi-Fi access points and related equipment that we resell operate in unlicensed radio frequencies.  However, the wireless access points that we resell are subject to Part 15 of Title 47 of the Code of Federal Communications Commission regulations that apply to the use of low-power, unlicensed wireless devices. Our equipment complies with these regulations.


Sputnik Wi-Fi networks are deployed in businesses and public venues such as hotels, airports, resorts, RV parks, commercial and residential real estate, cafes, and marinas.


Based on recent trends, we believe that there will be increased demand for public-access Wi-Fi services, enabling people to wirelessly access the Internet from public venues. JiWire, an online hotspot directory (www.jiwire.com), currently lists 72,360 Wi-Fi "hotspots" in 103 countries. Correspondingly, Wi-Fi hardware sales should continue to experience growth. According to Infonetics Research, Inc. ("Infonetics"), an international market research and consulting firm covering the data networking and telecommunications industries in North America, Europe, and Asia (www.infonetics.com), over 84 million Wi-Fi hardware units are forecast to ship in 2007, and Wi-Fi hardware revenue is forecast to top $3.7 billion in 2007.

 

 

-20-


 

 

 

Currently, Sputnik software and hardware is primarily sold through our online store at www.sputnik.com. Sputnik customers include Internet service providers, wireless Internet service providers, network system integrators, and hotspot providers. No customer accounts for more than 10% of our revenues.  Sputnik customers can either purchase the software and install it on their servers, or buy the right to use our software on a subscription basis, in which case we run the software for these subscribers on our servers. In addition, we offer online and phone-based technical support services, and both online and in-person training at our facilities.  


Competition


Our market, business software for Wi-Fi networks, is new and dynamic.  Downward price pressure of managed Wi-Fi access software and services due to the increase of free, open and unmanaged Wi-Fi networks, competition from Wi-Fi technology providers, and competition from cellular broadband alternatives could reduce our market potential.  Additionally, new products may be developed in the future that will supplant Wi-Fi networks and render them obsolete.  If the price of, or demand for, managed Wi-Fi access software and services is depressed downward, or Wi-Fi networks become obsolete, we could lose client market, resulting in insufficient demand for our software.


Many of our current and potential competitors, including Cisco Systems, Inc. (NASDAQ: CSCO), Linksys (a division of Cisco Systems), Netgear Inc. (NASDAQ: NTGR), D-Link Corporation, (Taiwan: 2332.tw), and a number of start-up companies currently operate in the Wi-Fi market. They have significantly greater name recognition, better access to capital, more established distribution networks and relationships with customers.


Sputnik is a much smaller company than our larger competitors. Our ability to compete successfully will depend on a number of factors both within and outside our control, including:

 

o

product innovation;

 

o

product quality and performance;

 

o

customer service and support;

 

o

the experience of our sales, marketing and service professionals;

 

o

rapid development of new products and features;

 

o

price; and

 

o

product and policy decisions announced by competitors.

 

 

-21-


 

 

 

We intend to compete by focusing on developing and marketing affordable, easy-to-use software and services that enable our customers to:

 

o

charge for Wi-Fi access;

 

o

enter into roaming agreements;

 

o

offer free Wi-Fi service supported by localized advertising;

 

o

offer voice over internet protocol (VoIP) telephone service over Wi-Fi.


Patents, Trademarks, Copyrights and Licenses


"Sputnik" is our registered trademark in International Class 009, specifically for computer hardware and software for use in providing Internet access.


Research and Development


During each of our fiscal years ending December 31, 2004 and 2003, we have expensed $79,565 and $70,181, respectively, for research and development.


Employees


We have no employees.  All persons who provide services to us are independent contractors.  We have filed our standard form independent contractor agreement as an exhibit to this registration statement.  

 

 

 

-22-


 

 

 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Overview


Our customers are service providers and businesses that want to offer their own, proprietary wireless internet access services to their customers.  These networks are commonly referred to as Wi-Fi networks.  However, our customers do not want to give the general public unrestricted access to these networks.  Further, they want the ability to be able to generate revenues from the operation of their networks.


Sputnik provides software that gives service providers and businesses the ability to control and limit access to their Wi-Fi networks.  It also provides them the ability to generate revenues from the operation of their networks.


Sputnik additionally provides Wi-Fi access point hardware and accessories, such as antennas and power supplies.


Results of Operations For the Six Months Ended  June 30, 2005 Compared to the Six Months Ended June 30, 2004


We had revenue of $252,641 for the six months ended June 30, 2005, which was an increase of $110,962 over our revenue for the six months ended June 30, 2004, which was $141,679. Our revenue increased as a result of a greater amount of sales which were generated through public relations, word of mouth, and web search advertising. In addition to the effect of increased awareness of Sputnik products, our sales growth can be attributed to the introduction of new products and services, repeat purchases by customers who initially ordered test systems, and increased overall market acceptance of Wi-Fi technology. We expect these same trends to drive future sales growth. In both quarters our revenue streams included: hardware (Wi-Fi access points, antennas, and accessories) and proprietary Sputnik software. In the June 30, 2004 quarter revenues broke down as follows: 60% hardware, 40% software. In the June 30, 2005 quarter, revenues broke down as follows: 58% hardware, 42% software.


Our cost of goods sold increased $38,128, to $118,841, for the six months ended June 30, 2005, as compared to cost of goods sold of $80,713 for the six months ended June 30, 2004. Our cost of goods sold increased as a direct result of greater sales of our products.


We had gross profit of $133,800 for the six months ended June 30, 2005, which was an increase of $72,834 when compared to our gross profit for the six months ended June 30, 2004, which was $60,966. Our increase in gross profit was attributable to the increase in our sales. Additionally, the increased volume of sales for the fiscal six months ending June 30, 2005, enabled us to decrease our per-unit hardware cost of goods sold due to higher volume discounts that we achieved on purchases of third-party Wi-Fi access points, antennas, and accessories which we resell as Sputnik-branded hardware products.

 

 

-23-


 

 

 

Our operating expenses increased $201,398, to $261,967 for the six months ended June 30, 2005, as compared to operating expenses of $60,569 for the six months ended June, 2004. Our operating expenses for the six months ended June 30, 2005 included $161,218 in other general and administrative costs, a $131,566 increase over general and administrative expenses of $29,652 for the six months ended June 30, 2004 and depreciation and amortization expense of $871 which was not an expense for us for the three months ended March 31, 2004.  Non-cash compensation increased by $57,091 from $6,909 in 2004 to $64,000 in 2005.  The increase in non-cash compensation and other general and administrative expenses included increased expenses in connection with consulting fees, accounting, auditing and other fees relating our going public, plus non-material increases in our rent, increased general office expenses due to increases in our staff, hosting fees in connection with our software subscription service, and increases in our public relations and advertising expenses.  Other income and losses included an increase in interest expense of $1,972, to $1,982 for the six months ended June 30, 2005, as compared to interest expense of $10 for the six months ended June 30, 2004 and a legal settlement of $61,000.


We had a net loss of $69,149 for the six months ended June 30, 2005, which represented a decrease of $69,536 from our net income for the six months ended June 30, 2004, which was $387.  The change from a net income to a net loss was mainly attributable to an increase of stock-based compensation.


Results of Operations For the Year Ended December 31, 2004 Compared to the Year Ended December 31, 2003


We had revenue of $329,429 for the year ended December 31, 2004, which was an increase of $304,668 over our revenue for the year ended December 31, 2003, which was $24,761.  The increase in sales revenue in the fiscal year ended December 31, 2004 is attributable to the fact that we shipped the first commercially available version of our product in November 2003, resulting in our having less than two full months of sales activity for the fiscal year ended December 31, 2003. Our revenue also increased as a result of a greater amount of sales which were generated through public relations, word of mouth, and web search advertising, which we did not run in the year ended December 31, 2004. In addition to the effect of increased awareness of Sputnik products, our sales growth can be attributed to the introduction of new products and services, repeat purchases by customers who initially ordered test systems, and increased overall market acceptance of Wi-Fi technology. We expect these same trends to drive future sales growth. (43) In both years our revenue streams included: hardware (Wi-Fi access points, antennas, and accessories) and proprietary Sputnik software. In the year ended December 31, 2003 our revenues broke down as follows: 83% hardware, 17% software; the predominant source of revenues was hardware due to the fact that, until November 2003, under the terms of our beta program, we sold Wi-Fi access point hardware and provided our beta software for free. In the year ended December 31, 2004, revenues broke down as follows: 55% hardware, 45% software.


Our cost of goods sold increased $155,902, to $172,400, for the year ended December 31, 2004, as compared to cost of goods sold of $16,498 for the year ended December 31, 2003.

 

 

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Our cost of goods sold increased as a direct result of greater sales of our product.


We had gross profit of $157,029 for the year ended December 31, 2004, which was an increase of $148,857 when compared to our gross profit for the year ended December 31, 2003, which was $8,172.  Our increase in gross profit was attributable to the increase in our sales.  Additionally, the increased level of sales for the year ended March 31, 2005, enabled us to decrease our per-unit hardware cost of goods sold due to volume discounts that we achieved on purchases of third-party Wi-Fi access points, antennas, and accessories which we resell as Sputnik-branded hardware products.


Our operating expenses increased $741,801, to $829,611for the year ended December 31, 2004, as compared to operating expenses of $87,810 for the year ended December 31, 2003.  Our operating expenses for the year ended December 31, 2004 included $616,926 in non-cash compensation, a $616,676 increase over expenses of $250 for the year ended December 31, 2003. This difference was due to increased stock issued for services to consultants and employees.  Other general and administrative costs increased to $132,852 for 2004 from $17,379 in 2003 due to increased operations.  Research and development increase by $9,384 to $79,565 in 2004 from $70,181 in 2003.  Depreciation expense was $268 in the year ended December 31, 2004; there was no depreciation expense for us for the year ended December 31, 2003.


We had interest expense of $2,776 for the year ended December 31, 2004, as compared to $0 for the year ended December 31, 2003.


We had a net loss of 675,358 for the year ended December 31, 2004, which represented an increase of $595,720 in net loss from our net loss for the year ended December 31, 2003, which was $79,638.


Liquidity and Capital Resources


We had total assets of $69,479 as of June 30, 2005, which consisted of total current assets of $61,021, which included cash of $26,715, accounts receivable of $6,607, inventory of $26,349 and prepaid expenses of $1,350; property and equipment of $5,758; and deposit of $2,700.


We had total liabilities of $57,821 as of June 20, 2005, which consisted solely of current liabilities and included $40,547 of accounts payable, and $17,274 of other current liabilities.  Our bank revolving line of credit had a balance of -0- at June 30, 2005 and is personally secured by the assets of our Directors, David LaDuke and Arthur Tyde. It has a maximum borrowing amount of $107,000, bearing interest at a variable annual rate which was 8.5% as of June 30, 2005.


We had an accumulated deficit of $880,297, as of June 30, 2005.

 

 

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We had net cash provided by operating activities of $11,645 for the six months ended June 30, 2005, which consisted of net loss of ($69,149), depreciation of $871, stock issued for services of $15,050, changes in accounts receivable of ($1,002), inventory of $8,945, prepaid expenses of $20, accounts payable and accrued liabilities of $6,910, and stock payable of $50,000.


We had net cash used by investing activities of ($3,682) for the six months ended June 30, 2005, which consisted of purchase of property and equipment of ($3,682).


We had $10,182  in net cash provided by financing activities for the six months ended June 30, 2005, which consisted of net payment on the line of credit of ($70,819), and a deposit on stock payable of $81,000.


Historically our cash has been provided by collection of sales revenues and short-term bank line of credit bearing an interest rate of 8% at December 31, 2004. Other than our contract with GoPublicToday.com and the commitment to pay off our legal debt to DLA Piper Rudnick Gray Cary, LLC, both described elsewhere, there are no major outstanding cash commitments. As we expand, we may need to make sizeable cash commitments to secure inventory, and the impact of this potential trend on our business is uncertain. We believe that our mix of capital resources will shift from short-term debt to equity-based financing as we become a public company, which will cause dilution of current shareholders. Because Sputnik keeps minimal inventories and receivables, the predominant component of our liquidity is our cash on hand. Prior to the year ended December 31, 2003, we compensated our consultants primarily with equity. In the year ended December 31, 2004, and going forward, we will need to compensate consultants at market rates, which will require a substantial increase in our capital needs. We also anticipate that continued growth of our company will require a substantial increase in capital needs. We believe that we can better serve these future capital requirements by issuing equity.


Our ability to continue as a going concern is dependent upon our ability to successfully accomplish our business plans and secure additional funding sources and attaining profitable operations.  We do not have any commitments or identified sources of additional capital from third parties or from our officers, directors or majority shareholders.  Additional financing may not be available to us on favorable terms, if at all.  This offering may not raise the required funding.


Accordingly, our accountants have indicated there is substantial doubt about our ability to continue as a going concern over the next twelve months. Revenues have not been sufficient to cover operating costs and to allow us to continue as a going concern.  Our poor financial condition could inhibit our ability to continue in business or achieve our business plan.


Critical Accounting Estimates


Due to the nature of our business, the majority of Sputnik's revenue is recognized either upon shipping of product or delivery of service. Less than 2% of our overall revenue is deferred, as it is associated with annual software subscriptions, recognized over the period of the subscription. Stock for compensation is computed at fair value.  Since we carry minimal inventories we do not set aside an inventory allowance. We make estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses in the statement of operations, and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

 

 

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DESCRIPTION OF PROPERTY


We currently rent office space from Zoro, LLC, a California Limited Liability Company , at 650 Townsend Street, Suite 320, San Francisco, CA 94103.  The rental cost is $1,350 per month.  We signed a two year lease on January 1, 2005 for the office space, which encompasses approximately 1,145 usable square feet.   As part of our lease with Zoro, we agreed to install access points on the rental property sufficient to provide adequate Wi-Fi coverage to the entire lobby of the building, including broadband Internet service, access points and antennas.


We do not anticipate any significant difficulties in renewing any facility leases or in leasing alternative or additional space, if required. We own substantially all of our other equipment, consisting principally of computers and servers.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


In December 2004, 6,000,000 shares valued at $600,000 were approved to Mr. LaDuke for services.  The shares were subsequently issued in May 2005.  These shares were valued at $600,000 on our financial statements based upon contemporaneous cash stock sales to non-affiliates.


In May 2005, we settled a dispute that clarified certain proprietary rights with a former officer and director of Sputnik, David Sifry, and the new company he formed, Technorati. Technorati paid us $61,000 and issued 20,000 shares of its common stock to Sputnik. The former officer and director returned to us 1,100,000 shares of our common stock.


In December 2004, we engaged GoPublicToday.com to perform consulting and advisory services in conjunction with the development of this registration statement that will be used in the sale of our securities to the public. Under the terms of our contract, GPT will provide the following services:


Phase 1

 

The first step is for GPT to conduct a Business Plan Review (BRP). Next is to prepare an SEC filing on Form SB-2. Company must agree to pay all required fees and expenses.  Major events include the following:

 

o

Company's mix of debt and equity is reviewed and amended to meet goals and objectives of management team.

o

Detailed questionnaire is answered by the Company management

o

Complete, up-to-date and accurate business plan furnished to GPT

o

GPT develops a peer group of companies on EDGAR using industry specific SIC Code. Similar companies can be used in a comparison analysis.

o

Initial preparations and partial payment for the Audit of the Company's financial statements are locked in place ($3,500 - $19,500) Basic Audit.

 

 

-27-


 

 

 

A Public Company Accounting Oversight Board registered accounting firm must complete the audit.


If annual revenues are less than $25,000,000, the company will need two years of audited financial statements, or less if you have been in business for less than 2 years.  If annual revenues are more than $25,000,000, the company will need three years of audited statements, or less if you have been in business for less than 3 years.  In either case, interim quarterly financials to the end of the latest quarter are also required.


First draft of SB-2 filing is delivered to company at or about the end of second week after receiving all required information from the Company.  The Company has one week to return the amended SB-2 document to GPT.  We then await completion of the audit. Together GPT and the Company must review and discuss the auditor's numbers notes. The process is outlined as follows:


(1)

GPT will assist in completing the 506 PPM convertible to an SB-2 if needed

(2)

Form SB-2 Registration Statement (Part I and Part II);

(3)

GPT will develop initial capitalization table

(4)

Re-Incorporate Company in Nevada

(5)

Founders Round Documentation

(6)

Initial Press Release

(7)

Business Plan Review

(8)

Introduction to auditors

(9)

Development of the Minute Meeting for Such Offering;

(10)

Maintain oversight of the SEC and Blue Sky filings. The Blue Sky filings can become an expensive venture, thus the filings are coordinated strategically to optimize the process. While the ultimate responsibility and sign-off resides with the company, GPT assists and directs all aspects of the SEC and Blue Sky filings, coordinating legal and accounting services, as well as escrow and transfer agent services ($1,500 per State).

(11)

Uniform Application to Register Securities (Form U-1) if applicable;

(12)

Uniform Consent to Service of Process (Form U-2 and U-2A) if applicable;

(13)

Form F-X (if applicable);

(14)

Full Coordination for Issuance of Attorney Opinion Letters Related to the Offering and Registration Attorney opinion on the transferability and fully paid status of stock issued pursuant to the Offering Circular is received from the lawyer. ($750.00 to Michael Williams, SEC Attorney, if you do not have or want yours to deliver);

(15)

Other Required Documents Including Subscription Agreement, Etc. (Not to Include Documents Unrelated to Items 1-7 of this Section);

(16)

Form 8-k SEC filings, or any other required 1934 Forms to get the Company to the NASDOTCBB or the NASDSCM; and

(17)

Additional Regulatory Filings (if contracted for).

 

 

-28-


 

 

 

The next step is that the SB-2 document along with a Form D and other required information is sent as notification in compliance with state blue sky laws to every state in which it is required.  The Form D is also filed with the SEC.  The SB-2 is reviewed; updated if needed and filed with the SEC.  The Company must keep accurate records.  


Phase II


"Form 8-A Registration" - the preparation and filing of all the required documents with regards to the Registration of Certain Classes of Securities Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") with the Securities and Exchange Commission ("SEC") for Client.  Included under this subparagraph are the following documents: Using the "EDGAR" electronic filing process the Registration Statement is filed with the SEC otherwise known as a "Form 8-A Registration" ($1,200).


(1)

Form 8-A Registration Statement;

(2)

EDGAR Federal SEC Electronic Submission;

(3)

Form F-X (if applicable);

(4)

Form 10-QSB and Form 10-KSB (if contracted for); and

(5)

Additional Regulatory Filings (if contracted for).


Please note the Form SB-2 is for raising money by the company only after it has been cleared for sale, and sales to enough shareholders must occur for which is necessary to qualify for quotation on the Over the Counter Bulletin Board.  Raising money under the SB-2 would require additional state law filings and fees.  And it would delay your securing a Ticker Symbol from the NASD until the offering is completed.


If you wish to raise money prior to filing the SB-2, you will need to conduct a Reg D 506 as described in another piece, which you can request from GPT.


Phase III


Once SB-2 Registration Statement is filed with SEC, the SEC will issue comment letters.  All comment letters require filing responsive amendments.  The NASD will not sign off on the Company's listing application until the SEC signs off on the SB-2.  Constantly updated information, including financial statements, will be required with each amendment. If a comment letter is generated by the SEC regarding the filing there will be an extra cost of filing of approximately ($1,000-$3,000) depending on number of comments.


Phase IV


"Form 211 Development" - the preparation of the Form 211 to be filed with the NASD, by the appropriate licensed market maker, as the original application for the listing of the securities of the Client on the NASD "Over-the-Counter" Bulletin Board ("NASDOTCBB"). ($5,000 fee to service provider paid for by GPT or client). Market Maker may not charge any fee for sponsorship of your application. Included under this subparagraph are the following documents and services:

 

 

 

-29


 

 

 

 (1)

Form 211 Disclosure Document;

 (2)

Appropriate Exhibits;

 (3)

Application and point of contact work with a transfer agent; File application and contract with a transfer agent. ($600-$800); and

 (4)

Financial Statement audit coordination.


To file with the NASD, the Market Maker will need:

 

o

A certified stockholder list from a Transfer Agent you must retain

o

A CUSIP number you must secure ($130)

o

A listing in Standard & Poor's Corporate Manual


Phase V


Company clears SEC and NASD, stock is qualified for quotation on the Over the Counter Bulletin Board and stock trades publicly. The main difference between this route and conducting a 506 prior to filing the SB-2 is that no money can be raise in this direct SB-2 process until the filing fully clears; then the issuer (company) can raise money.  However, under a 506 the company can immediately do a money raise prior to clearing the SB-2 filing process. Blue Sky filings will be needed.


Phase VI


After you are public, there are many, many continuing SEC reporting requirements and restrictions.  These include:

 

o

Filing a 10Q with reviewed financial statement 45 days after the end of each quarter.

o

Filing a 10K with audited financial statements 90 days after the end of each fiscal year.


In addition, officers, directors and principal stockholders of public companies are subject to many restrictions on stock trading, including:

 

o

Filing of ownership and trading reports on Forms 3, 4 and 5 as well as Schedules 13D and 13G.

o

Potential forfeiture of trading profits under the short-swing profit rules.

o

Restrictions on share resales under Rule 144.

o

Possible insider trading violations.


In order to deal with these issues, you will retain our affiliate, PCMS, under a separate contract.  The fee on this contract is 750,000 shares, with certain registration rights, plus $4,000 per month.


For these services to be performed in 2004 and 2005, Sputnik agreed to pay GPT $74,000 plus 500,000 shares of Sputnik stock. As of December 31, 2004, Sputnik has made no cash payments to GPT and none of this obligation is recorded. However, cost associated with the 500,000 shares of Sputnik stock is included in the 2004 statement of operations.


Except as set forth above, we have not entered 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.

 

 

-30-


 

 

 

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


Market Information


There is no established public trading market for our securities and a regular trading market may not develop, or if developed, may not be sustained.  A shareholder in all likelihood, therefore, will not be able to resell his or her securities should he or she desire to do so when eligible for public resales.  Furthermore, it is unlikely that a lending institution will accept our securities as pledged collateral for loans unless a regular trading market develops.  We have no plans, proposals, arrangements, or understandings with any person with regard to the development of a trading market in any of our securities.


Penny Stock Considerations


Our shares will be "penny stocks" as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00.  Our shares thus will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.


Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt.  Generally, an individual with a net worth in excess of $1,000,000, or annual income exceeding $100,000 individually or $300,000 together with his or her spouse, is considered an accredited investor.  In addition, under the penny stock regulations the broker-dealer is required to:


o

Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commissions relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;

 

o

Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;

 

o

Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer's account, the account's value and information regarding the limited market in penny stocks; and

 

o

Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction, prior to conducting any penny stock transaction in the customer's account.

 

 

-31-


 

 

 

Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market.  These additional sales practice and disclosure requirements could impede the sale of our securities, if our securities become publicly traded.  In addition, the liquidity for our securities may be decreased, with a corresponding decrease in the price of our securities.  Our shares in all probability will be subject to such penny stock rules and our shareholders will, in all likelihood, find it difficult to sell their securities.


Holders


As of the date of this prospectus, we had 57 shareholders of record of our common stock.


Dividends


We have not declared any cash dividends on our common stock since our inception and do not anticipate paying such dividends in the foreseeable future.  We plan to retain any future earnings for use in our business.  Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the Board of Directors deems relevant.


Reports to Shareholders


As a result of this offering, we will become subject to the information and reporting requirements of the Securities Exchange Act of 1934 and will file periodic reports, proxy statements, and other information with the Securities and Exchange Commission.   We will voluntarily send an annual report to shareholders containing audited financial statements.


Where You Can Find Additional Information


We have filed with the Securities and Exchange Commission a registration statement on Form SB-2 statement.   The registration statement and exhibits may be inspected, without charge, and copies may be obtained at prescribed rates, at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The registration statement and other information filed with the SEC are also available at the web site maintained by the SEC at http://www.sec.gov.

 

 

-32-


 

 

 

EXECUTIVE COMPENSATION


The following table sets forth summary information concerning the compensation received for services rendered to us during the fiscal years ended December 31, 2004 and 2003 by our CEO.


Name & Principal Position

Year

Salary ($)

David LaDuke

CEO, President, and Director

2004

$17,000

2003

$200


The compensation discussed herein addresses all compensation awarded to, earned by, or paid to our named executive officer.


Board Compensation


Members of our Board of Directors do not receive cash compensation for their services as Directors, although Directors may be reimbursed for reasonable expenses incurred in attending Board or committee meetings.


INTEREST OF NAMED EXPERTS


The financial statements incorporated by reference to this prospectus have been audited by Malone & Bailey PC, which are independent certified public accountants, to the extent and for the periods set forth in its report and are incorporated herein in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.


The legality of the shares offered under this registration statement is being passed upon by Williams Law Group, P.A., Tampa, Florida.  Michael T. Williams, principal of Williams Law Group, P.A., received 15,000 shares of stock of Public Company Management Corporation, an affiliate of GoPublicToday.com, Inc., our consultant, in connection with the offering.  Although these shares are due, they have not yet been issued and will be valued at the trading price of Public Company Management Corporation at the date of issue.  The cost of these services was included in the compensation paid to GoPublicToday.com.   He also receives $20,000, payable in four equal stages: $5,000 each upon commencement of work, filing of registration statement, effectiveness of registration statement and date Sputnik receives ticker symbol.  His engagement agreement also provides:   If at any time you abandon this project whether or not the work is completed, all fees, cash and stock, paid to date will be retained by this firm for services rendered to date of termination or completion.  Further, If at any time you terminate this agreement except for my material non-performance, the entire remaining unpaid fee shall become due and payable in full.  

 

 

 

-33-


 

 

 

FINANCIAL STATEMENTS


(a)

Audited Financial Statements as of December 31, 2004 and the Years Ended December 31, 2004 and 2003


(b)

Reviewed Unaudited Financial Statements as of June 30, 2005 and the Three and Six Month Periods Ended June 30, 2005 and 2004






 

 

 

 

 





 

-34-


 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors

   Sputnik, Inc.

   San Francisco, California


We have audited the accompanying balance sheet of Sputnik, Inc. as of December 31, 2004, and the related statements of operations, stockholders' deficit and of cash flows for each of the two years then ended. These financial statements are the responsibility of the management of Sputnik, Inc. Our responsibility is to express an opinion on these financial statements based on our audits.


We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide 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, Inc. as of December 31, 2004, and the results of its operations and its cash flows for each of the two years then ended in conformity with accounting principles generally accepted in the United States of America.


The accompanying financial statements have been prepared assuming that Sputnik will continue as a going concern. As shown in the financial statements, Sputnik has suffered recurring losses from operations and has a working capital deficiency and a deficiency in equity at December 31, 2004. These factors and others raise substantial doubt about Sputnik's ability to continue as a going concern. Management's plans in regard to these matters are described in Note 2 to the financial statements. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or to the amounts and classification of liabilities that might be necessary in the event Sputnik cannot continue in existence.


As discussed in Note 8, errors resulting in an understatement of expenses and an understatement in liabilities were discovered by management in 2005.  Accordingly, the financial statements as of December 31, 2004 and each of the two years then ended have been restated.


MALONE & BAILEY, PC

www.malone-bailey.com

Houston, Texas


April 15, 2005 (September 3, 2005 as to the effects of the restatement discussed in Note 8)

 

 

 

-35-


 

 

 

SPUTNIK, INC.

BALANCE SHEET

December 31, 2004

(Restated)

 


ASSETS

 

Current Assets

 

Cash

$ 8,571

Accounts receivable

5,606

Inventory

35,292

Prepaid expenses

1,370

 

 

Total Current Assets

50,839

 

 

Property and equipment, net of accumulated depreciation of $268

2,947

 

 

Deposit

2,700

 

 

TOTAL ASSETS

$ 56,486

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

Current Liabilities

 

Bank revolving line of credit

$ 70,820

Accounts payable

46,263

Stock payable

632,441

Other current liabilities

4,646

 

 

Total Current Liabilities

754,170

 

 

Stockholders' Deficit

 

Common stock, $.001 par value, 50,000,000 shares authorized,

 

6,694,358 shares issued and outstanding

6,694

Paid-in capital

106,770

Retained deficit

(811,148)

 

 

Total Stockholders' Deficit

(697,684)

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$ 56,486



See summary of accounting policies and notes to financial statements.

 

 

 

-36-


 

SPUTNIK, INC.

STATEMENTS OF OPERATIONS

Years Ended December 31, 2004 and 2003

 

 

 

 

2004

2003

 

(Restated)

 (Restated)

     

Revenue

$ 329,429

$  24,670

Cost of goods sold

172,400

16,498

 

 

 

Gross profit

157,029

8,172

 

 

 

 

 

 

Expenses

 

 

Non-cash compensation

616,926

250

Other general and administrative costs

132,852

17,379

Research and development

79,565

70,181

Depreciation and amortization

268

-

  Total operating expense

829,611

87,810

 

   

Operating Loss

(672,582)

(79,638)

     

Interest expense

 (2,776)

-

 

 

 

NET LOSS

$(675,358)

$(79,638)

 

 

 

 

 

 

Basic and diluted loss per share

$(0.10)

$(0.02)

Weighted average shares outstanding

6,694,368

4,562,151



See summary of accounting policies and notes to financial statements.


 

 

 

-37-


 

 

 

SPUTNIK, INC.

STATEMENTS OF STOCKHOLDERS' DEFICIT

Years Ended December 31, 2003 and 2004

(Restated)

 

 

 

 

Common Stock

Retained

 

 

Shares

Amount

Deficit

Total

 

 

 

 

 

Balances,

 

 

 

 

December 31, 2002

4,368,314

$  43,683

$(56,153)

$(12,470)

 

 

 

 

 

 Stock issuances

 

 

 

 

  For cash

4,367

131

 

131

  For services

2,321,677

69,650

 

69,650

         

Net Loss

-

-

(79,638)

(79,638)

         

Balances,

 

 

 

 

 December 31, 2003

6,694,358

113,464

(135,791)

(22,327)

 

 

 

 

 

Net loss

 

 

(675,357)

(675,357)

 

 

 

 

 

Balances,

 

 

 

 

 December 31, 2004

6,694,358

113,464

$(811,148)

$(697,684)


 

Less: par value

(6,694)

 

 

 

 

 

 

 

 

Paid-in capital

$  106,770

 

 



See summary of accounting policies and notes to financial statements.



 

-38-


 

 

 

SPUTNIK, INC.

STATEMENTS OF CASH FLOWS

Years Ended December 31, 2004 and 2003

 


 

2004

2003

 

(Restated)

(Restated)

Cash Flows from Operating Activities

 

 

Net loss

$(675,357)

$(79,638)

Adjustments to reconcile net income to net

 

 

cash provided by operating activities:

 

 

Depreciation

268

-

Issuance of stock for services

-

69,650

Changes in working capital:

 

 

Accounts receivable

(5,606)

(4,109)

Inventory

(31,183)

-

Prepaid expenses and other current assets

337

(1,707)

Accounts payable and other current liabilities

17,634

13,906

Stock payable

632,385

-

Net cash provided (used)

 

 

by operating activities

(61,522)

(1,898)

 

 

 

Cash Flows from Investing Activities

 

 

Purchase of property and equipment

(3,215)

-

Deposit

(2,700)

-

Net cash used by investing activities

(5,915)

-

 

 

 

Cash Flows from Financing Activities

 

 

Line of credit

70,820

-

Deposit on stock payable

56

131

Net cash provided by financing activities

70,876

131

 

 

 

Net change in cash

3,439

(1,767)

 

 

 

Cash at beginning of year

5,132

6,899

Cash at end of year

$  8,571

$   5,132

 

 

 

Supplemental Disclosures of Cash Flow Information

 

 

Cash paid for interest

$   2,764

$     -

Cash paid for income taxes

-

-



See summary of accounting policies and notes to financial statements.

 

 

 

-39-


 

 

 

SPUTNIK, INC.

Notes to Financial Statements

Years Ended December 31, 2004 and 2003

 

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Nature of business. Sputnik, Inc. ("Sputnik") is incorporated in the State of Nevada. Sputnik provides software for public Wi-Fi services. Sputnik's software is designed to give service providers and businesses the ability to control access to their Wi-Fi networks, and to offer free, branded, or fee-based Wi-Fi services. The software also enables centralized, web-based management of Wi-Fi networks. Sputnik also provides Wi-Fi hardware components that are pre-configured to work with Sputnik software.


Use of Estimates. In preparing financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses in the statement of operations, and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates.


Cash and Cash Equivalents. For purposes of the statement of cash flows, Sputnik considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.


Revenue Recognition. Sputnik recognizes revenue when persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable, and collectibility is reasonably assured. This typically occurs when the product is shipped or service provided.


Allowance for Doubtful Accounts. Bad debt expense is recognized based on management's estimate of likely losses per year, past experience and an estimate of current year uncollectible amounts. There was no allowance for doubtful accounts as of December 31, 2004.


Inventory that consists of finished goods to be sold to customers that use them to build Sputnik wireless networks is stated at the lower of average cost or market.


Property and Equipment is valued at cost. Additions are capitalized and maintenance and repairs are charged to expense as incurred. Gains and losses on dispositions of equipment are reflected in operations. Depreciation is provided using the straight-line method over the estimated five-year useful lives of the assets.


Impairment of Long-Lived Assets. Sputnik reviews the carrying value of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate. Sputnik assesses recoverability of the carrying value of the asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value.

 

 

 

-40-


 

 

 

Income taxes. Sputnik 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. Sputnik provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.


Basic and diluted net loss per share are computed by dividing the net loss by the weighted average number of shares of common stock and common stock equivalents outstanding during the years. Common stock equivalents consist of common stock issuable under Sputnik's stock compensation plan for its employees and consultants. Common stock equivalents are not included in diluted loss per share calculations because they would be anti-dilutive.


Recently issued accounting pronouncements. Sputnik does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its results of operations, financial position or cash flow.

 


NOTE 2 - GOING CONCERN


The accompanying financial statements have been prepared assuming that Sputnik will continue as a going concern. As shown in the accompanying financial statements, Sputnik suffered recurring losses of $675,357 and $79,638 in 2004 and 2003, respectively, has an accumulated deficit of $811,148 and a working capital deficit of $703,331 at December 31, 2004. These conditions raise substantial doubt as to Sputnik's ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if Sputnik is unable to continue as a going concern. Management intends to finance these deficits by selling its common stock.

 


NOTE 3 - BANK REVOLVING LINE OF CREDIT


Sputnik has a revolving line of credit that is secured by the assets of certain stockholders. The line of credit has a maximum borrowing amount of $95,000, and an interest rate of 8% at December 31, 2004.

 


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 2004 and 2003, Sputnik incurred net losses and, therefore, has no tax liability. The net deferred tax asset generated by the loss carryforward has been fully reserved. The cumulative net operating loss carryforward is approximately $59,000 at December 31, 2004, and will expire in years 2022 through 2024.

 

 

 

-41-


 

 

 

At December 31, 2004, deferred tax assets consisted of the following:


Net operating losses

$ 20,100

Less: valuation allowance

(20,100)

 

 

Net deferred tax asset

$       0

 

 

 


NOTE 5 - COMMITMENTS


Sputnik leases office space under an operating lease that expires in December 2006 that requires monthly rental payments of $1,350, for an aggregate of $16,200 in 2005 and 2006. Sputnik incurred no rent expense in 2004 or 2003 as the result of an arrangement made by one of Sputnik's stockholders.


In December 2004, Sputnik engaged GoPublicToday.com (GPT) to perform consulting and advisory services in conjunction with the development of a registration package that could be used in the sale of Sputnik securities to the public. For these services to be performed in 2005, Sputnik agreed to pay GPT $74,000 plus 500,000 shares of Sputnik stock. As of December 31, 2004, Sputnik has made no cash payments to GPT and none of this obligation is recorded. However, cost associated with the 500,000 shares of Sputnik stock is included in the 2004 statement of operations.  Additionally, 750,000 shares will be issued upon effectiveness of the registration.

 


NOTE 6 - EQUITY


Sputnik was incorporated on September 27, 2001 in the State of Delaware, with 10,000,000 shares of authorized stock at $0.0001 par value. On February 10, 2005 Sputnik converted to a Nevada Corporation, with 50,000,000 shares of authorized stock at $0.001 par value. The newly authorized shares and par value are reflected retroactively in the accompanying financial statements.


In April 2005 Sputnik memorialized in a Board of Director's meeting its plans regarding the issuance of stock to founders and consultants. Those plans assign specific numbers of shares to the founders and consultants, with an allocation of the shares occurring over several years. These stock issuance plans are presented retroactively in the accompanying financial statements. The financial statements include an obligation of $632,441, representing the issuance of 6,394,061 shares that were approved but not issued as of December 31, 2004.


In December 2003, 2,250,000 shares were issued to employees for $131 in cash.  The shares were valued at $67,500 creating an additional compensation expense of $67,369.

 

 

 

-42-


 

 

 

In December 2003, 76,044 shares valued at $2,281 were issued to various consultants for services rendered.


In January 2004, 139,295 shares were approved to an employee for $56.  The shares were valued at $6,965 creating an additional expense of $6,909.  The shares were subsequently issued in May 2005.


In December 2004, 6,000,000 shares valued at $600,000 were approved to a founder for services.  The shares were subsequently issued in May 2005.


In December 2004, 254,766 shares valued at $25,477 were approved to various consultants for services rendered.  The shares were subsequently issued in May 2005.

 


NOTE 7 - STOCK OPTION PLAN


In April 2005 Sputnik terminated its 2003 Stock Option Plan ("the Plan"). Sputnik did not issue any options under the Plan.


 

 

 

 

 

 

 

 

-43-


 

 

 

NOTE 8 - RESTATEMENT


The following summarizes the restatement of the balance sheet as of December 31, 2004 and statements of operations for the years ended December 31, 2004 and 2003 for the related errors primarily due to the timing and valuation of stock issuances.  Additionally, non-cash compensation and research and development costs have been disclosed separately on the statements of operations.

 


BALANCE SHEET

December 31, 2004


 

Previous

Change

Restated

ASSETS

     

Total Current Assets

50,839

 

50,839

Property and equipment

2,947

 

2,947

Deposit

2,700

 

2,700

TOTAL ASSETS

$  56,486

 

$  56,486

 

   

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

   

 

Current Liabilities

   

 

Bank revolving line of credit

$  70,820

 

$  70,820

Accounts payable

46,263

 

46,263

Stock payable

130,062

502,379

632,441

Other current liabilities

4,648

(2)

4,646

Total Current Liabilities

251,793

502,377

754,170

 

   

 

Stockholders' Deficit

   

 

Common stock, $.001 par value, 50,000,000 shares authorized, 6,694,358

   

 

shares issued and outstanding

5,603

1,091

6,694

Paid-in capital

82,501

24,269

106,770

Retained deficit

(283,411)

(527,737)

(811,148)

 

   

 

Total Stockholders' Deficit

(195,307)

(502,377)

(697,684)

 

   

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$  56,486

 

$  56,486

 

 

 

-44-


 

 

 

STATEMENT OF OPERATIONS

Year Ended December 31, 2004


 

Previous

Change

As Restated

 

   

 

Revenue

$ 329,429

 

$ 329,429

Cost of goods sold

172,400

 

172,400

Gross profit

157,029

 

157,029

 

   

 

Expenses

   

 

Non-cash compensation

44,702

572,224

616,926

General and administrative costs

196,902

(64,050)

132,852

Research and development

-

79,656

79,565

Depreciation and amortization

268

 

268

Total operating expense

241,872

587,739

829,611

Operating Loss

(84,843)

(587,739)

(672,582)

       

Interest expense

(2,776)

 

(2,776)

       

NET LOSS

$(87,619)

(587,739)

$(675,358)

 

   

 

Basic and diluted loss per share

$(0.02)

 

$(0.10)

Weighted average shares outstanding

5,455,572

 

6,694,368

 

 

 

 

-45-


 

 

 

STATEMENT OF OPERATIONS

Year Ended December 31, 2003


 

Previous

Change

As Restated

 

   

 

Revenue

$  24,761

(1)

$ 24,670

Cost of goods sold

16,498

 

16,498

Gross profit

8,172

 

8,172

 

 

 

 

Expenses

 

 

 

Non-cash compensation

-

250

250

General and administrative costs

87,811

(70,432)

17,379

Research and development

-

70,181

70,181

Depreciation and amortization

-

 

-

Total operating expense

87,811

 

87,810

Operating Loss

(79,638)

 

(79,638)

 

 

 

 

Interest expense

-

 

-

 

 

 

 

NET LOSS

$ (79,639)

1

$ (79,638)

 

 

 

 

Basic and diluted loss per share

$ (0.02)

 

$  (0.02)

Weighted average shares outstanding

4,388,900

 

4,562,151


 

 

 

 

 

-46-


 

 

 

SPUTNIK, INC.

BALANCE SHEET

June 30, 2005

(unaudited)


ASSETS

 

Current Assets

 

Cash

$  26,715

Accounts receivable

6,607

Inventory

26,349

Prepaid expenses

1,350

Total Current Assets

61,021

   

Property and equipment, net of accumulated depreciation of $1,139

5,758

   

Deposit

2,700

   

TOTAL ASSET

$  69,479

   

LIABILITIES AND STOCKHOLDERS' EQUITY

 

Current Liabilities

 

Accounts payable

$  40,547

Other current liabilities

17,274

Total Current Liabilities

57,821

   
   

Stockholders' Equity

 

  Common stock, $.001 par value, 50,000,000

 

    shares authorized, 13,448,919 shares

 

    issued and outstanding

13,449

Paid-in capital

878,506

Retained deficit

(880,297)

Stockholders' Equity

11,658

TOTAL LIABILITIES AND

 

   STOCKHOLDERS' DEFICIT

$  69,479


 

 

 

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SPUTNIK, INC.

STATEMENTS OF OPERATIONS

Three and Six Months Ended June 30, 2005 and 2004

(unaudited)

 


 

Three Months Ended

Six Months Ended

 

June 31,

June 30,

 

2005

2004

2005

2004

Revenue

$138,536

$99,179

$252,641

$141,679

Cost of goods sold

67,923

59,420

118,841

80,713

Gross profit

70,613

39,759

133,800

60,966

         

Operating expenses

       

Non-cash compensation

14,000

-

64,000

6,909

Other general and

       

  administrative costs

84,534

27,445

161,218

29,652

Research and development

18,378

21,086

35,878

24,008

Depreciation and amortization

516

-

871

-

Total operating expenses

(117,428)

(48,531)

(261,967)

(60,569)

Operating income (loss)

(46,815)

(8,772)

(128,167)

397

         

Gain on legal settlement

61,000

-

61,000

-

Interest expense

(1,151)

-

(1,982)

(10)

NET INCOME (LOSS)

$13,034

$(8,772)

$(69,149)

$387

         

Basic and diluted loss

       

  per share

0.00

(0.00)

(0.01)

0.00

         

Weighted average shares

       

  outstanding

10,443,457

6,694,358

8,558,551

6,694,358


 

 

 

 

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SPUTNIK, INC.

STATEMENTS OF CASH FLOWS

Six Months Ended June 30, 2005 AND 2004

(unaudited)

 


 

2005

2004

Cash Flows from Operating Activities

   

Net loss

$ (69,149)

$     387

Adjustments to reconcile net loss to

   

cash used by operating activities

   

Depreciation

871

-

Stock issued for services

15,050

-

Changes in working capital:

   

Accounts receivable

(1,002)

(3,255)

Stock payable

50,000

6,909

Inventory

8,945

(12,510)

Accounts payable and accrued liabilities

6,910

8,646

Prepaid expenses

20

(3,750)

Net cash provided (used) by operating activities

11,645

(3,573)

Cash Flows from Investing Activities

   

Purchase of property and equipment

(3,682)

-

Net cash used by investing activities

(3,682)

-

Cash Flows from Financing Activities

   

Line of credit

(70,819)

47,192

Deposit on stock payable

81,000

56

Net cash provided by financing activities

10,182

47,248

Net change in cash

18,145

43,675

Cash at beginning of period

8,571

6,839

Cash at end of period

$  26,715

$  50,514

     

Supplemental Disclosures of Cash Flow Information

   

Cash paid during the period for interest

$            -

$       -

Cash paid during the period for taxes

-

-

     

Supplemental Non-cash Investing and Financing Information

   

Stock issued for debt

$ 763,441

$       -

Shares returned for settlement

1,100

-



 

 

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SPUTNIK, INC.

Notes to Financial Statements

(unaudited)


NOTE 1 - BASIS OF PRESENTATION


The interim financial statements of Sputnik, Inc. ("Sputnik") and the summarized notes included herein were prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, pursuant to rules and regulations of the Securities and Exchange Commission. Because certain information and notes normally included in complete financial statements prepared in accordance with accounting principles generally accepted in the United States of America were condensed or omitted pursuant to such rules and regulations, it is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in this Form SB-2.  In the opinion of management, these interim financial statements include all adjustments, consisting of normal and recurring adjustments, necessary for a fair presentation of financial position and results of operations for the interim periods presented. Such financial results should not be construed as necessarily indicative of future results.


NOTE 2 - EQUITY


In December 2004, 500,000 shares valued at $50,000 were authorized to GoPublicToday.com for consulting services for services to be rendered in fiscal 2005.  $50,000 was accrued in stock payables during the first quarter of fiscal 2005.  The shares were subsequently issued in May 2005.


In January 2005, 810,000 shares sold for $81,000 in proceeds.  The shares were subsequently issued in May 2005.


In April 2005, 150,500 shares valued at $15,050 were issued to various consultants for services.


In May 2005, 7,704,061 shares valued at $763,441 were issued to settle accrued stock payables, and 1,100,000 shares were returned to Sputnik from an original founder as part of his settlement agreement.

 

 

 

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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE



None.










 

 

 

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PRELIMINARY PROSPECTUS

SPUTNIK, INC.

Dated ________________, 2005


We are offering up to a total of 500,000 of common stock in a best efforts, no minimum, direct public offering, without any involvement of underwriters or broker-dealers. The offering price is $1.00 per share. The offering will terminate within 120 days from the date of this prospectus.  At our sole discretion, we may extend the offering for an additional 120 days. There are no minimum purchase requirements and no arrangements to place the funds in an escrow, trust or similar account. All cleared funds will be available to us following deposit into our bank account.


Prior to this offering, there has been no market for our securities. Our common stock is not now listed on any national securities exchange, the NASDAQ stock market, or the OTC Bulletin Board.


There are no underwriting commissions involved in this offering.  We have agreed to pay all the costs of this offering. Our common stock will be sold by our officers and directors for no compensation.


Dealer Prospectus Delivery Obligation


Until 90 days from the date of this prospectus, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 


INFORMATION NOT REQUIRED IN PROSPECTUS


Item 24.  Indemnification of Directors and Officers.


Our Articles of Incorporation provide that no director or officer of the Company shall be personally liable to the Company or its stockholders for monetary damages for any breach of fiduciary duty by such person as a director or officer, except for the payment of dividends in violation of Nevada law.  Our Bylaws provide, in pertinent part, that the Company shall indemnify any person made a party to or involved in any civil, criminal or administrative action, suit or proceeding by reason of the fact that such person is or was a director or officer of the Company, or of any corporation which such person served as such at the request of the Company, against expenses reasonably incurred by, or imposed on, such person in connection with, or resulting from, the exercise of such action, suit, proceeding or appeal thereon, except with respect to matters as to which it is adjudged in such action, suit or proceeding that such person was liable to the Company, or such other corporation, for negligence or misconduct in the performance of such persons duties as a director or officer of the Company.  The determination of the rights of such indemnification and the amount thereof may be made, at the option of the person to be indemnified, by (1) order of the Court or administrative body or agency having jurisdiction over the matter for which indemnification is being sought; (2) resolution adopted by a majority of a quorum of our disinterested directors; (3) if there is no such quorum, resolution adopted by a majority of the committee of stockholders and disinterested directors of the Company; (4) resolution adopted by a majority of the quorum of directors entitled to vote at any meeting; or (5) Order of any Court having jurisdiction over the Company.  Such right of indemnification is not exclusive of any other right which such director or officer may have, and without limiting the generality of such statement, they are entitled to their respective rights of indemnification under any bylaws, agreement, vote of stockholders, provision of law, or otherwise in addition to their rights under our Bylaws.

 

 

 

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Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.


Item 25.  Other Expenses of Issuance and Distribution.


The following table sets forth estimated expenses expected to be incurred in connection with the issuance and distribution of the securities being registered. Sputnik will pay all expenses in connection with this offering.

 


Description

Amount to be Paid

 

 

Filing Fee - Securities and Exchange Commission

$  50.00

EDGAR Filing Fee

2,000

Attorney's fees and expenses

25,000

Accountant's fees and expenses

10,000

Transfer agent's and registrar fees and expenses

1,500

Printing and engraving expenses

1,500

Miscellaneous expenses

-

GoPublicToday.com*

$  74,000

Total

$  114,050

 

*The purpose of all parts of this fee are described in Certain Relationships and Certain Transactions


Item 26.  Recent Sales of Unregistered Securities.


In April 2005, we memorialized in a Board of Director's meeting our plans regarding the issuance of stock to our founders and consultants. The Audited Financial Statements for the year ended December 31, 2004 include an obligation of $632,441, representing the issuance of 6,394,061 shares that were approved but not issued as of December 31, 2004.  These shares were valued at $632,441 on our financial statements based upon contemporaneous cash stock sales to non-affiliates.


On April 9, 2002, we issued 2,000,000 shares of our Common Stock to David LaDuke, in consideration for his services as our CEO and founder.


On April 9, 2002, we issued 1,000,000 shares of our Common Stock to our Director, Arthur Tyde, in consideration for his services as a Director of Sputnik.


On April 9, 2002, we issued 1,250,000 shares of our Common Stock to a former Director in consideration for services provided to the Company, of which we have both since agreed to cancel 1,100,000 shares. (see "Recent Events" under "Description of Business," above).

 

 

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On December 31, 2002, we issued an aggregate of 118,314 shares of our Common Stock to seven (7) individuals in consideration for consulting services provided to us, including services in connection with our website, corporate identity design, finances, legal services and sales. We valued these shares at $.01 per share by assigning a minimal value based on our limited operating history.


 

On December 2, 2003, we issued 1,250,000 shares of our Common Stock to Kathy Giori for $75 in connection with Ms. Giori's service to the Company in her capacity as Director of Product Management. We valued these shares at $.03 per share by assigning a minimal value based on our limited operating history.  This created an additional expense to the company of $37,425.


 

On December 11, 2003, we issued 1,000,000 shares of our Common Stock to Scott Hutton for $56 in connection with services he provided us as our Director of Engineering. We valued these shares at $.03 per share by assigning a minimal value based on our limited operating history. This created an additional expense to the company of $29,944.


 On December 31, 2003, we issued an aggregate of 76,044 shares of our Common Stock to seven (7) individuals in consideration for services provided us that included services in connection with our web development, office space, finances, marketing and software development. We valued these shares at $.03 per share by assigning a minimal value based on our limited operating history.


 

On January 5, 2004, we agreed issued 139,295 shares of our Common Stock to Vesna Swartz for $56 in connection with her engagement as our Vice President of Marketing and Business Development.  Her employment and services provided to Sputnik amicably ceased on August 9, 2004. We valued these shares at $.05 per share by assigning a minimal value based on our limited operating history. This created an additional expense to the company of $6,909.


 

In December 2004, we agreed to issue an additional 6,000,000 shares of our Common Stock to David LaDuke, in consideration for his services as our CEO and founder.  


On December 31, 2004, we agreed to issue an aggregate of 254,766 shares of our Common Stock to Twenty-Three (23) individuals in consideration for consulting services provided to us in connection with marketing, legal services, web development, software development, office management, operations, finances, technological strategy, public relations and telesales, which were not issued as of December 31, 2004.  


 

On December 31, 2004, we issued 500,000 shares of our restricted Common Stock to GoPublicToday.com in consideration for services GoPublicToday.com agreed to perform for the Company in connection with the Company becoming listed on the OTC Bulletin Board.


On January 5, 2005, we sold 810,000 shares of our Common Stock in a private offering to Twelve (12) individuals in consideration for an aggregate amount of $81,000. The price per share was $.10 in these private offering. These shares were issued in May 2005.

 

 

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On April 8, 2005, we issued 150,500 shares of our Common Stock to Seven (7) individuals in consideration for consulting services provided to us in connection with software development, higher education market advisory, sales, legal advice, software development and operations.  We valued these shares at $.10 per share by assigning a minimal value based on our limited operating history.


 

The valuations assigned above were calculated in a gradual step up by year from original valuation (determined by our officers and directors) of $.01 in 2002, to $.03 in 2003, to $.05 in January 2004, and to the $.10 for shares authorized in December 2004 and for the private offerings we conducted to our friends, family and close associates occurring in early 2005. Our valuation method is reflected in our balance sheets included with this registration statement.


Our shares were issued in all of the foregoing transactions in reliance upon Section 4(2) of the 1933 Act in view of the following:

 

o

None of these issuances involved underwriters, underwriting discounts or commissions.

o

Restrictive legends were and will be placed on all certificates issued as described above.

o

The distribution did not involve general solicitation or advertising.


The distributions were made only to investors who were sophisticated enough to evaluate the risks of the investment.  
 

In addition to representations given to us by the above-referenced investors, we have made independent determinations that all of the above-referenced persons were accredited or sophisticated investors, and that they were capable of analyzing the merits and risks of their investment, and that they understood the speculative nature of their investment.


 

Furthermore, all of the above-referenced persons were provided the opportunity to obtain any additional information, to the extent we possessed such information, necessary to verify the accuracy of the information to which the investors were given access.

 

 

 

 

 

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Item 27.  Exhibits


Exhibit No.

Description of Exhibit

   

1.

Subscription Agreement*

   

3.1

Certificate of Incorporation, and Amendments thereto - State of Delaware

 

 

3.2

Original By-Laws

 

 

3.3

Articles of Conversion - Nevada Corporation

 

 

3.4

Articles of Incorporation (restated) - State of Nevada

 

 

3.5

Amended By-Laws

 

 

5

Opinion of Counsel*

 

 

10.1

Agreement with GoPublicToday.com

   

10.2

General Release and Settlement Agreement with former Officer and Director*

 

 

10.3

Corporate Office Lease

   

10.4

Form of Independent Contractor Agreement *

   

23.1(1)

Consent of Williams Law Group, P.A.*  (included with Exhibit 5)

 

 

23.2

Consent of Malone & Bailey.*

 

 

*filed herewith

(1)  Incorporated by reference to Exhibit 5.1.

 

 

 

 

 

 

-56-


 

 

 

 

Item 28. Undertakings.


The undersigned registrant hereby undertakes:


(1)  To file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to:


(i)  Include any prospectus required by Sections 10(a)(3) of the Securities Act of 1933 (the "Act");


(ii)  Reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement.  Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement;


(iii)  Include any additional or changed material information on the plan of distribution;


(2)  That, for the purpose of determining any liability under the Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the bona fide offering thereof.


(3)  To remove from registration by means of a post-effective amendment any of the securities that remain unsold at the end of the offering.


Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.  In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

 

 

 

 

-57-


 

 

 

SIGNATURES


In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form SB-2 and authorized this registration statement to be signed on our behalf by the undersigned, in the City of San Francisco, State of California on June 27, 2005.


SPUTNIK, INC.

 

By:  /s/ David LaDuke

Name:  David LaDuke

Title:  Chief Executive Officer

 


 

In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated:


Signature

Name

Title

Date

 

 

 

 

/s/ David LaDuke

David LaDuke

Chief Executive Officer

September 12, 2005

 

 

Principal Accounting Officer and Principal Financial Officer

 


 

In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated:


Signature

Name

Title

Date

 

 

 

 

/s/ David LaDuke

David LaDuke

Director

September 12, 2005

 

 

 

 

/s/ Arthur Tyde

Arthur Tyde

Director

September 12, 2005


 

 

 

 

 

 

 

-58-