**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 Washington,
        D.C. 20549
 
 **FORM
        10-QSB**
 
 
 xQUARTERLY
        REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
        1934
 For
        the
        quarterly period ended June
        30, 2007
  o ࿠TRANSITION
        REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For
        the
        transition period from _____________________ to ______________
 
 Commission
        file number **333-126158**
 
 SPUTNIK,
        INC.
 
 (Exact
        name of small business issuer as specified in its charter)
 
 Nevada
              
              52-2348956(State
                  or other jurisdiction of incorporationor
                organization)
              
              (IRS
                  Employer Identification No.)
 
 650
        5th
        Street, Suite 303
 San
        Francisco, CA 94107
 
 (Address
        of principal executive offices)
 
 (415)
        355-9500
 
 (Issuer’s
        telephone number)
 
 N/A
 
 (Former
        name, former address and former fiscal year, if changed since last
        report)
 
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90 days.
 Yes
x  No
o
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
 Yes  o   No
x
 
 As
        of
        June 30, 2007, there were 14,763,919 **** shares
        issued and outstanding of the registrant’s common stock.
 
 Transitional
        Small Business Disclosure Format:
 Yes o  No
x
  
  
  **INDEX**
  **Page**PART
                  I.
              FINANCIAL
                  INFORMATIONItem
                  1.
              Financial
                  Statements
              3Balance
                  Sheets as of June 30, 2007 and December 31, 2006
                  (unaudited)
              3Statements
                  of Operations for the Three and Six Months Ended June 30, 2007
                  and 2006
                  (unaudited)
              4Statements
                  of Cash Flows for the Six Months Ended June 30, 2007 and 2006
                  (unaudited)
              5Notes
                  to Unaudited Financial Statements
              6Item
                  2.
              Management’s
                  Discussion and Analysis or Plan of Operation
              7Item
                  3.
              Controls
                  and Procedures
              10PART
                  II.
              OTHER
                  INFORMATIONItem
                  1.
              Legal
                  Proceedings
              11Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              11Item
                  3.
              Defaults
                  Upon Senior Securities
              12Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              12Item
                  5.
              Other
                  Information
              12Item
                  6.
              Exhibits
              12Signatures
              
              13
 
 
  **PART
        I — FINANCIAL INFORMATION**
 
 **Item
        1.** **Financial
        Statements.**
 
 SPUTNIK,
        INC.
 BALANCE
        SHEETS
 June
        30,
        2007 and December 31, 2006
 (unaudited)
 
 June 30,
                2007
              
              December 31,
                2006ASSETSCurrent
                  AssetsCash
              
              $
              267,645
              
              $
              7,927Accounts
                  receivable
              
              
              25,535
              
              
              4,599Inventory
              
              
              13,222
              
              
              10,053Prepaid
                  expensesand other assets
              
              
              20,044
              
              
              7,901Total
                  Current Assets
              
              
              326,446
              
              
              30,480Property
                  and equipment, net of accumulated depreciation of $14,023 and $9,386,
                  respectively
              
              
              14,490
              
              
              14,638Deposit
              
              
              6,101
              
              
              8,567TOTAL
                  ASSETS
              
              $
              347,037
              
              $
              53,685LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)Current
                  LiabilitiesAccounts
                  payable
              
              $
              10,273
              
              $
              45,940Accrued
                  liabilities
              
              
              49,984
              
              
              19,470Total
                  Current Liabilities
              
              
              60,257
              
              
              65,410Stockholders'
                  Equity (Deficit)Common
                  stock, $.001 par value, 50,000,000 shares authorized,
                  14,763,919****and
                  13,806,312 shares issued and outstanding, respectively
              
              
              14,764
              
              
              13,806Paid-in
                  capital
              
              
              1,696,191
              
              
              1,074,705Accumulated
                  deficit
              
              
              (1,424,175
              )
              
              (1,100,236
              )Total
                  Stockholders' Equity (Deficit)
              
              
              286,780
              
              
              (11,725
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
              
              $
              347,037
              
              $
              53,685
 
 See
        notes
        to financial statements.
  3
  SPUTNIK,
        INC.
 STATEMENTS
        OF OPERATIONS
 Three
        and
        Six Months Ended June 30, 2007 and 2006
 (unaudited)
 
 Three
                  Months Ended
              
              Six
                  Months EndedJune
                  30,
              
              June,
                  30,2007
              
              2006
              
              2007
              
              2006Revenue
              
              $
              132,631
              
              $
              170,716
              
              $
              265,644
              
              $
              268,085Cost
                  of goods sold
              
              
              45,703
              
              
              54,364
              
              
              89,142
              
              
              89,233Gross
                  profit
              
              
              86,928
              
              
              116,352
              
              
              176,502
              
              
              178,852Expenses:General
                  and administrative costs
              
              
              280,178
              
              
              131,190
              
              
              497,732
              
              
              239,235Depreciation
                  and amortization
              
              
              2,376
              
              
              852
              
              
              4,637
              
              
              1,704Total
                  operating expense
              
              
              (282,554
              )
              
              (132,042
              )
              
              (502,369
              )
              
              (240,939
              )Operating
                  Loss
              
              
              (195,626
              )
              
              (15,690
              )
              
              (325,867
              )
              
              (62,087
              )Interest
                  income
              
              
              1,344
              
              
              35
              
              
              2,088
              
              
              47Interest
                  expense
              
              
              (139
              )
              
              (903
              )
              
              (160
              )
              
              (1,277
              )NET
                  LOSS
              
              $
              (194,421
              )
              $
              (16,558
              )
              $
              (323,939
              )
              $
              (63,317
              )Basic
                  and diluted loss per share
              
              $
              (
                  0.01
              )
              $
              (
                  0.00
              )
              $
              (
                  0.02
              )
              $
              (
                  0.00
              )Weighted
                  average shares outstanding
              
              
              14,763,919
              
              
              13,513,919
              
              
              14,582,671
              
              
              13,513,919
  See
        notes
        to financial statements.
  4
  SPUTNIK,
        INC.
 STATEMENTS
        OF CASH FLOWS
 Six
        Months Ended June 30, 2007 and 2006
 (unaudited)
 
 2007
              
              2006Cash
                  Flows from Operating ActivitiesNet
                  loss
              
              $
              (323,939
              )
              $
              (63,317
              )Adjustments
                  to reconcile net loss to cash used in operating
                  activities:Depreciation
              
              
              4,637
              
              
              1,704Changes
                  in working capital:Accounts
                  receivable
              
              
              (20,936
              )
              
              767Inventory
              
              
              (3,169
              )
              
              951Prepaid
                  expenses and other assets
              
              
              (9,677
              )
              
              1,865Accounts
                  payable and accrued liabilities
              
              
              (5,153
              )
              
              15,630Net
                  cash used in operating activities
              
              
              (358,237
              )
              
              (42,400
              )Cash
                  Flows from Investing ActivitiesPurchase
                  of property and equipment
              
              
              (4,489
              )
              
              (7,688
              )Cash
                  Flows from Financing ActivitiesNet
                  proceeds from line of credit
              
              
              -
              
              
              40,513Common
                  stock issued for cash
              
              
              622,444
              
              
              -Net
                  cash provided by financing activities
              
              
              622,444
              
              
              40,513Net
                  change in cash
              
              
              259,718
              
              
              (9,575
              )Cash
                  at beginning of period
              
              
              7,927
              
              
              26,782Cash
                  at end of period
              
              $
              267,645
              
              $
              17,207Supplemental
                  Disclosures of Cash Flow InformationCash
                  paid for interest
              
              $
              160
              
              $
              -Cash
                  paid for income taxes
              
              
              -
              
              
              -
 
 See
        notes
        to financial statements.
  5
  SPUTNIK,
        INC.
 Notes
        to
        Financial Statements
 (unaudited)
 
 NOTE
        1 -
        BASIS OF PRESENTATION
 
 The
        accompanying unaudited interim financial statements of Sputnik, Inc. have
        been
        prepared in accordance with accounting principles generally accepted in the
        United Sates of America and the rules of the Securities and Exchange Commission,
        and should be read in conjunction with Sputnik’s audited 2006 annual financial
        statements and notes thereto filed with the SEC on form 10-KSB. In the opinion
        of management, all adjustments, consisting of normal recurring adjustments,
        necessary for a fair presentation of financial position and the result of
        operations for the interim periods presented have been reflected herein.
        The
        results of operations for interim periods are not necessarily indicative
        of the
        results to be expected for the full year. Notes to the financial statements,
        which would substantially duplicate the disclosure required in Sputnik’s 2006
        annual financial statements have been omitted.
 
 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 losses of $323,939 for the six months ended June 30, 2007,
        has
        an accumulated deficit of $1,424,175 at June 30, 2007. 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 -
        EQUITY
 
 From
        January 1, 2007 to February 10, 2007, Sputnik sold 957,607 shares of common
        stock for $622,444. The price per share was $.65 in this offering. The
        shares were issued in March 2007.
 
 6
  **Item
        2.****Management’s
        Discussion and Analysis or Plan of Operation.**
  *This
        10−QSB contains forward-looking statements. Our actual results could differ
        materially from those set forth as a result of general economic conditions
        and
        changes in the assumptions used in making such forward-looking statements.
        The
        following discussion and analysis of our financial condition and results
        of
        operations should be read together with the audited consolidated financial
        statements and accompanying notes and the other financial information appearing
        else where in this report. The analysis set forth below is provided pursuant
        to
        applicable Securities and Exchange Commission regulations and is not intended
        to
        serve as a basis for projections of future events. Refer also to "Cautionary
        Note Regarding Forward Looking Statements" and “Risk Factors”
below.*
  The
        following discussion of our financial condition and results of operations
        as of
        June 30, 2007 should be read in conjunction with our financial statements
        and
        the related notes as provided under Item 1. With respect to the discussion
        within this Item 2, the terms “Sputnik,” “we,” “us,” and “our” refer to Sputnik,
        Inc.
 
 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 Three Months Ended June 30, 2007 Compared to the Three
        Months Ended June 30, 2006
 
 We
        had
        revenue of $132,631 for the three months ended June 30, 2007, which was a
        decrease of $38,085 from our revenue for the three months ended June 30,
        2006,
        which was $170,716. The
        decrease in total revenue was primarily due to the fact that our revenue
        mix
        shifted from hardware and software license sales (which are recognized when
        the
        hardware is shipped or when the software is downloaded) to recurring software
        subscription revenues (which are recognized ratably in the month the service
        is
        delivered). We
        generated $55,182 revenues from the sale of hardware in the June 30, 2007
        quarter, a decrease of $27,426 from the $82,608 worth of hardware sold in
        the
        June 30, 2006 quarter. The
        decrease in hardware revenues was due to the fact that in April, 2006 we
        ported
        our Sputnik Agent software to run on third-party Wi-Fi access points, meaning
        that our customers could utilize Sputnik software and software subscriptions
        without purchasing hardware from us. We generated $20,590 revenues from the
        sale
        of software licenses in the June 30, 2007 quarter, a decrease of $22,799
        from
        the $43,389 worth of software licenses sold in the June 30, 2006
        quarter. However,
        we generated $54,594 revenues from the sale of recurring software subscriptions
        in the June 30, 2007 quarter, an increase of $11,525 from the $43,070 worth
        of
        software subscriptions sold in the June 30, 2006 quarter.
 
 In
        both
        quarters our revenue streams included: hardware (Wi-Fi access points, antennas,
        and accessories), proprietary Sputnik software, recurring software subscriptions
        (SputnikNet setup, monthly, and annual fees), and services (training,
        support incidents, and consulting) .
        In the
        June 30, 2007 quarter, revenues broke down as follows: 42% hardware, 16%
        software, 41% software subscriptions, and 1% services. In the June 30, 2006
        quarter, revenues broke down as follows: 48% hardware, 25% software, 25%
        software subscriptions, and 1% services. Profit margins on the resale of
        hardware ranges from 20% for antennas to 40% for Wi-Fi access points.
 
 Our
        cost
        of goods sold decreased $8,661, to $45,703, for the three months ended June
        30,
        2007, as compared to cost of goods sold of $54,364 for the three months ended
        June 30, 2006.  Our cost of goods sold decreased as a direct result of
        decreased sales of our hardware products.
 
 We
        had
        gross profit of $86,928 for the three months ended June 30, 2007, which was
        a
        decrease of $ $29,424 when compared to our gross profit for the three months
        ended June 30, 2006, which was $ 116,352. Our decrease in gross profit was
        attributable to lower sales of hardware and software licenses. Our gross
        margin
        decreased from 68% for the three months ended June 30, 2006 to 66% for the
        three
        months ended June 30, 2007 primarily because the percentage of our revenue
        attributable to software licenses sales decreased.
  7
  Our
        operating expenses increased $150,512, to $282,554 for the three months ended
        June 30, 2007, as compared to operating expenses of $132,042 for the three
        months ended June 30, 2006. Our operating expenses for the three months ended
        June 30, 2007 included $280,178
        in general and administrative expenses, a $148,988 increase over general
        and
        administrative expenses of $131,190 for the three months ended June 30,
        2006 ;
        and
        depreciation and amortization expense of $2,376 compared to $852 for the
        three
        months ended June 30, 2006. The primary reason for the increase in general
        and
        administrative expense was due to increased payroll expenses due to an increase
        in the size of our staff. The
        increase in general and administrative expenses also included increased advertising
        and marketing expenses, increased accounting and auditing fees, as well as
        an
        increase in our office rent. Other
        income and losses included an increase in net interest income of $ 1,205
        for
        the three months ended June 30, 2007, as compared to net interest expense
        of
        $868 for the three months ended June 30, 2006 .
 
 We
        had a
        net loss of $194,421 for the three months ended June 30, 2007, which represented
        an increase of $177,863 from our net loss for the three months ended June
        30,
        2006, which was $16,558.
 
 Results
        of Operations for the Six Months Ended June 30, 2007 Compared to the Six
        Months
        Ended June 30, 2006
 
 We
        had
        revenue of $265,644 for the six months ended June 30, 2007, which was a decrease
        of $2,441 from our revenue for the six months ended June 30, 2006, which
        was
        $268,085. While the total revenue in both periods is comparable, the revenue
        mix
        indicates a shift from predominance of hardware revenues to a greater
        contribution from recurring software subscription revenues. In both periods
        our
        revenue streams included: hardware (Wi-Fi access points, antennas, and
        accessories), proprietary Sputnik software, software subscriptions (SputnikNet
        setup, monthly, and annual fees), and services (training, support incidents,
        and
        consulting). In the six months ended June 30, 2007, revenues broke down as
        follows: 42% hardware, 18% software, 37% software subscriptions, and 2%
        services. In the six months ended June 30, 2006, revenues broke down as follows:
        50% hardware, 23% software, 26% software subscriptions, and 1% services.
        The
        relative decrease in hardware revenues was due to the fact that in April,
        2006
        we ported our Sputnik Agent software to run on third-party Wi-Fi access points,
        meaning that our customers could utilize Sputnik software and services without
        purchasing hardware from us. The relative shift from software license sales
        revenue to recurring software subscription revenue is due to cumulative growth
        in the number of subscribers to our SputnikNet hosted software
        service.
 
 Our
        cost
        of goods sold decreased $91, to $89,142, for the six months ended June 30,
        2007,
        as compared to cost of goods sold of $89,233 for the six months ended June
        30,
        2006.  Our cost of goods sold decreased as a direct result of decreased
        sales of our hardware products.
 
 We
        had
        gross profit of $176,502 for the six months ended June 30, 2007, which was
        a
        decrease of $ $2,350 when compared to our gross profit for the six months
        ended
        June 30, 2006, which was $ 178,852. Our decrease in gross profit was
        attributable to our lower overall sales in the 2007 period. Our gross margin
        decreased from 66.7% for the six months ended June 30, 2006 to 66.4% for
        the six
        months ended June 30, 2007, which was not significant.
 
 Our
        operating expenses increased $261,430, to $502,369 for the six months ended
        June
        30, 2007, as compared to operating expenses of $240,939 for the six months
        ended
        June 30, 2006. Our operating expenses for the six months ended June 30, 2007
        included $497,732 in general and administrative expenses, a $258,497 increase
        over general and administrative expenses of $239,235 for the six months ended
        June 30, 2006; and depreciation and amortization expense of $4,637 compared
        to
        $1,704 for the six months ended June 30, 2006. The primary reason for the
        increase in general and administrative expense was due to increased payroll
        expenses in connection with converting consultants to employees, and an increase
        in the size of our staff. The increase in general and administrative expenses
        also included increased advertising and marketing expenses, as well as an
        increase in our office rent. Other income and losses included an increase
        in net
        interest income of $1,928 for the six months ended June 30, 2007, as compared
        to
        net interest expense of $1,230 for the six months ended June 30,
        2006.
 
 We
        had a
        net loss of $323,939 for the six months ended June 30, 2007, which represented
        an increase of $ 260,622
        from our net loss for the six months ended June 30, 2006, which was $63,317.
  8
  Liquidity
        and Capital Resources
 
 We
        had
        total assets of $347,037 as of June 30, 2007. This consisted of total current
        assets of $326,446, which included cash of $267,645, accounts receivable
        of
        $25,535, inventory of $13,222 and prepaid expenses of $20,044. Other assets
        included property and equipment of $14,490, and deposit of $6,101. Based
        on the
        amount of cash on our balance sheet and our anticipated revenues, we do not
        believe that we have sufficient funds to operate as a going concern beyond
        the
        next quarter without further financing. Should sufficient financing not occur
        on
        a timely basis, we will reduce staff and curtail our expansion
        plans.
 
 We
        had
        total liabilities of $60,257 as of June 30, 2007, which consisted solely
        of
        current liabilities and included $10,273 of accounts payable, and $49,984
        of
        accrued liabilities.  Our bank revolving line of credit had a balance of $0
        at June 30, 2007 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 11% as of June 30,
        2007.
 
 We
        had an
        accumulated deficit of $1,424,175 as of June 30, 2007.
 
 We
        had
        net cash used in operating activities of ($358,237) for the six months ended
        June 30, 2007, which consisted of net loss of ($323,939), depreciation of
        $4,637, changes in accounts receivable of ($20,936), inventory of ($3,169),
        prepaid expenses and other current assets of ($9,677), accounts payable and
        accrued liabilities of ($5,153).
 
 We
        had
        net cash used by investing activities of ($4,489) for the six months ended
        June
        30, 2007, which consisted solely of purchase of property and
        equipment.
 
 We
        had
        $622,444 in net cash provided by financing activities for the six months
        ended
        June 30, 2007, which consisted solely of proceeds from sale of common
        stock.
 
 In
        the
        six months ended June 30, 2007, we sold 957,607 shares of our Common Stock
        in
        consideration for an aggregate amount of $622,444. The shares were sold
        pursuant to our prospectus dated June 15, 2006. The price per share was $.65.
 
 Historically,
        our cash has been provided by collection of sales revenues and short-term
        bank
        line of credit bearing an interest rate of 11% at June 30, 2007. As we expand,
        we may need to make sizeable cash commitments to hire additional personnel
        and
        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.
 
 Our
        ability to continue as a going concern is dependent upon our 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.
 
 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.
  9
  **Cautionary
        Note About Forward-Looking Statements**
  The
        information contained in this Report includes some statements that are not
        purely historical and that are “forward-looking statements” within the meaning
        of Section 27A of the Securities Act and Section 21E of the Exchange Act,
        and as
        such, may involve risks and uncertainties. These forward-looking statements
        relate to, among other things, expectations of the business environment in
        which
        we operate, perceived opportunities in the market and statements regarding
        our
        mission and vision. In addition, any statements that refer to projections,
        forecasts or other characterizations of future events or circumstances,
        including any underlying assumptions, are forward-looking statements. You
        can
        generally identify forward-looking statements as statements containing the
        words
“anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,”
“intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,”
“projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the
        negatives of such terms, but the absence of these words does not mean that
        a
        statement is not forward-looking. For example, our forward-looking statements
        may include statements regarding:
 
 ·
              Our
                  projected sales and profitability,
  ·
              Our
                  growth strategies,
  ·
              Anticipated
                  trends in our industry,
  ·
              Our
                  future financing plans, and
  ·
              Our
                  anticipated needs for working
                  capital.
  In
        light
        of these risks, uncertainties and assumptions, the future events, developments
        or results described by our forward-looking statements herein could turn
        to be
        materially different from those we discuss or imply.
 
 **Item
        3.**  **Controls
        and Procedures.**
  **Evaluation
        of Disclosure Controls and Procedures**
  As
        of the
        end of the period covered by this report on Form 10-QSB, our Chief Executive
        Officer performed an evaluation of the effectiveness of our disclosure controls
        and procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange
        Act. Based upon this evaluation, our chief executive officer concluded that
        our
        disclosure controls and procedures were not effective to ensure that the
        information required to be disclosed by us in the reports that we file or
        submit
        under the Exchange Act is (i) recorded, processed, summarized and reported
        within the time periods specified in the Securities and Exchange Commission’s
        rules and forms, and (ii) is accumulated and communicated to our management,
        including our chief executive officer, to allow timely decisions regarding
        required disclosure.
 
 In
        connection with the completion of its review of, and the issuance of its
        report
        on the financial statements of the Company for the period ended June 30,
        2007,
        Malone & Bailey, PC identified a deficiency in our internal controls
        primarily relating to the recording of prepaid assets and the accrual of
        expenses. The adjustment relating to this item was detected in the review
        process and has been appropriately recorded and disclosed in this Form 10-QSB.
        We are in the process of improving our internal controls in an effort to
        remediate this deficiency. Additional effort is needed to fully remedy this
        deficiency and we are continuing our efforts to improve and strengthen our
        control processes and procedures. Our management and directors will continue
        to
        work with our auditors and other outside advisors to ensure that our controls
        and procedures are adequate and effective.
 
 **Changes
        in Internal Control Over Financial Reporting**
  There
        were no changes in the Company’s internal control over financial reporting that
        occurred during the most recent fiscal quarter that have materially affected,
        or
        are reasonably likely to materially affect, its internal control over financial
        reporting for that period.
  10
 
 **PART
        II — OTHER INFORMATION**
  **Item
        1.** **Legal
        Proceedings.**
  None.
  **Item
        2.** **Unregistered
        Sales of Equity Securities and Use of Proceeds.**
  (a)
              Unregistered
                  Sales of Equity Securities.
  The
        Registrant did not sell any unregistered securities during the three months
        ended June 30, 2007.
  (b)
              Use
                  of Proceeds.
  On
        June
        15, 2006, the Securities and Exchange Commission declared effective the
        Company's registration statement on Form SB-2 (File No. 333-126158) relating
        to
        the offer and sale of 1,250,000 shares of the Company’s common stock, at a price
        of $0.65 per share. The
        aggregate price of the offering amount registered was $812,500. As of June
        30,
        2007, all 1,250,000 shares had been sold with $812,500 in aggregate proceeds,
        of
        which $10,000 was used to pay offering costs and $68,698 was
        used
        to pay down the Company’s outstanding 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 $107,000, and an interest rate
        of
        11%. At June 30, 2007, $0 was outstanding under the line of credit. The offering
        was extended for an additional 120 days, thus terminated on February 10,
        2007.
 
 The
        offering was conducted in a best efforts, no minimum, direct public offering
        without any involvement of underwriters or broker- dealers and the Company
        has
        not paid and will not pay commissions in connection with the sale of the
        shares.
        Since June 15, 2006 through the end of the period covered by this Report
        on Form
        10-QSB, the Company’s offering expenses (all of which were incurred to persons
        other than our directors, officers or ten percent or greater stockholders)
        were
        $0.
  11
  **Item
        3.** **Defaults
        Upon Senior Securities**
  None.
 
 **Item
        4.** **Submission
        of Matters to a Vote of Security Holders.**
  The
        Registrant did not submit any matters to a vote of its security holders during
        the three-months ended June 30, 2007.
  **Item
        5.** **Other
        Information.**
  Not
        applicable.
  **Item
        6.** **Exhibits.**
  (a)
        Exhibits.
  **Exhibit**
              
              **Item**31.1
              
              Certification
                  of Principal Executive and Principal Financial Officer pursuant
                  to Section
                  302(a) of the Sarbanes-Oxley Act of 200232.1*
              
              Certification
                  of Principal Executive and Principal Financial Officer pursuant
                  to Section
                  302(a) of the Sarbanes-Oxley Act of
                  2002
  ________________
 *
        This
        exhibit shall not be deemed “filed” for purposes of Section 18 of the
        Securities Exchange Act of 1934 or otherwise subject to the liabilities of
        that
        section, nor shall it be deemed incorporated by reference in any filing under
        the Securities Act of 1933 of the Securities Exchange Act of 1934, whether
        made
        before or after the date hereof and irrespective of any general incorporation
        language in any filings.
  12
  **SIGNATURES**
 
 In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
 SPUTNIK,
                  INC.Date:August
                  14, 2007
              By:
              /s/ David
                LaDuke(Authorized
                  Officer and Principal Executive
                  Officer)
  13
  **EXHIBIT
        INDEX**
  **Exhibit**
              
              **Item**31.1
              
              Certification
                  of Principal Executive and Principal Financial Officer pursuant
                  to Section
                  302(a) of the Sarbanes-Oxley Act of 200232.1*
              
              Certification
                  of Principal Executive and Principal Financial Officer pursuant
                  to Section
                  906 of the Sarbanes-Oxley Act of
                  2002
  ________________
 *
        This
        exhibit shall not be deemed “filed” for purposes of Section 18 of the
        Securities Exchange Act of 1934 or otherwise subject to the liabilities of
        that
        section, nor shall it be deemed incorporated by reference in any filing under
        the Securities Act of 1933 of the Securities Exchange Act of 1934, whether
        made
        before or after the date hereof and irrespective of any
        general