Attached files
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EX-5.1 - PEGASUS TEL, INC. | forms1a2111309ex5-1.htm |
EX-10.4 - PEGASUS TEL, INC. | forms1a2111309ex10-4.htm |
EX-10.3 - PEGASUS TEL, INC. | forms1a2111309ex10-3.htm |
EX-10.6 - PEGASUS TEL, INC. | forms1a2111309ex10-6.htm |
EX-10.2 - PEGASUS TEL, INC. | forms1a2111309ex10-2.htm |
EX-10.8 - PEGASUS TEL, INC. | forms1a2111309ex10-8.htm |
EX-10.9 - PEGASUS TEL, INC. | forms1a2111309ex10-9.htm |
EX-23.2 - PEGASUS TEL, INC. | forms1a2111309ex23-2.htm |
EX-10.5 - PEGASUS TEL, INC. | forms1a2111309ex10-5.htm |
EX-10.7 - PEGASUS TEL, INC. | forms1a2111309ex10-7.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1/A
(Amendment
No. 2)
REGISTRATION
UNDER THE SECURITIES ACT OF 1933
PEGASUS
TEL, INC.
(Exact
name of registrant in its charter)
Delaware
|
41-2039686
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
118
Chatham Road, Syracuse, NY
|
13203
|
(Address
of principal executive offices)
|
(Zip
Code)
|
3661
|
|
(Primary
Standard Industrial Classification Code
Number)
|
Issuer’s
telephone number:
(315) 491-8262
Carl
E. Worboys
118
Chatham Road
Syracuse,
NY 13203
Telephone:
(315) 491-8262
|
(Name,
address, including zip code, and telephone number, including area code, of
agent for service)
With
a copy to:
The
Sourlis Law Firm
Virginia
K. Sourlis, Esq.
214
Broad Street
Red
Bank, New Jersey 07701
www.SourlisLaw.com
Telephone:
(732) 530-9007
Facsimile:
(732) 530-9008
|
As
soon as practicable after this Registration Statement is declared
effective.
|
(Approximate
date of commencement of proposed sale to the
public)
|
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: x
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. o
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 effective registration statement for the same
offering.
o
1
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 effective registration statement for the same
offering.
o
Indicate
by check mark whether the Company is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of “large accelerated filer,” “accelerated filer,” "non-accelerated
filer" and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large
accelerated filer
|
o
|
Accelerated
filer
|
o
|
Non-accelerated
filer
|
o
|
Smaller
reporting company
|
x
|
CALCULATION
OF REGISTRATION FEE
Title of Each Class of Securities
to be Registered
|
Amount to be
Registered (1)
|
Proposed Maximum
Offering Price Per
Share
|
Proposed Maximum
Aggregate Offering
Price
|
Amount of
Registration Fee
|
|||||
Common Stock,
Par value $0.0001 per share
|
6,425,537
|
$0.10
|
64,554.00
|
$36.00(2)
|
(1)
|
Pursuant
to Rule 415 of the Securities Act, these securities are being offered by
the Selling Stockholders named herein on a delayed or continuous
basis.
|
(2)
|
Previously
paid.
|
The
Company hereby amends this Registration Statement on such date or dates as may
be necessary to delay its effective date until the Company 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, or until this Registration Statement shall become effective on such date as
the Securities and Exchange Commission (or the “SEC”), acting pursuant to said
Section 8(a), may determine.
2
SUBJECT
TO COMPLETION, DATED NOVEMBER 13, 2009.
The
information in this prospectus is not complete and may be changed. Our Selling
Stockholders may not sell these securities until the Registration Statement
filed with the United States Securities and Exchange Commission is effective.
This Prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
PROSPECTUS
6,425,537 Shares
of Common Stock
PEGASUS
TEL, INC.
$
0.10 per Share of Common Stock
This
prospectus relates to the resale of up to 6,425,537 shares of our common stock,
par value $0.0001 per share, by the Selling Stockholders named in this
prospectus. We are registering the shares on behalf of the Selling Stockholders.
None of the Selling Shareholders are acting as underwriters in connection with
the registered shares. The shares being offered for resale represent
approximately 32% of the Company’s issued and outstanding shares of common
stock.
We have
arbitrarily set an offering price of $ 0.10 per share of common stock offered
through this prospectus. We are paying the expenses of registering these shares.
We will not receive any proceeds from this offering.
There
is currently no market for our common stock. Upon the effectiveness
of this registration statement, we intend to solicit a market-maker to apply
with FINRA (formerly, the NASD) to have our common stock quoted on the OTC
Bulletin Board (OTCBB). The Selling Stockholders may sell their shares of
our common stock from time to time in the principal market on which our stock is
traded at the offering price or the prevailing market price or in privately
negotiated transactions. The sale price to the public will vary according to
prevailing market prices or privately negotiated prices by the Selling
Stockholders.
As there
is no market for our common stock, the shares being offered for resale by the
Selling Stockholders will be offered and sold at the fixed price of $0.10 per
share for the duration of this offering or until the shares become quoted on a
securities market, such as the Over the Counter Bulletin Board or securities
exchange.
THESE
SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE
CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
PLEASE REFER TO “RISK FACTORS” BEGINNING ON PAGE 9.
THE SECURITIES AND EXCHANGE
COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT APPROVED OR DISAPPROVED OF
THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE .
The date
of this preliminary prospectus is _______________, 2009.
3
PROSPECTUS
PEGASUS
TEL, INC.
6,425,537
SHARES COMMON STOCK
$0.10
per Share
TABLE
OF CONTENTS
Item
|
Page
|
|
Summary
|
5 | |
Risk
Factors
|
7 | |
Description
of Business
|
11 | |
Description
of Properties
|
15 | |
Legal
Proceedings
|
15 | |
Use
of Proceeds
|
15 | |
Determination
of Offering Price
|
15 | |
Dilution
|
15 | |
Selling
Stockholders
|
16 | |
Plan
of Distribution
|
19 | |
Directors,
Executive Officers, Promoters and Control Persons
|
21 | |
Security
Ownership of Certain Beneficial Owners and Management
|
23 | |
Description
of Securities
|
23 | |
Interest
of Named Experts and Counsel
|
25 | |
Experts
|
25 | |
Disclosure
of Commission Position of Indemnification for Securities Act
Liabilities
|
25 | |
Organization
Within Last Five Years
|
25 | |
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
26 | |
Certain
Relationships and Related Transactions and Corporate
Governance
|
33 | |
Market
for Common Equity and Related Stockholder Matters
|
33 | |
Changes
in and Disagreements with Accountants and Financial
Disclosure
|
34 | |
Where
You Can Find More Information
|
34 | |
Financial
Statements
|
35 |
4
SUMMARY
Pegasus
Tel, Inc., or Pegasus, was incorporated under the laws of the State of Delaware
on February 19, 2002 to enter into the telecommunication business. We own,
operate and manage privately owned public payphones in the County of Delaware,
State of New York. As of December 31, 2008 and June 30, 2009, we owned, operated
and managed 13 payphones. Some of the businesses include retail stores,
convenience stores, bars, restaurants, gas stations, colleges and
hospitals.
No
trading market:
There is
currently no market for our common stock. Upon the effectiveness of
this registration statement, we intend to solicit a market-maker to apply with
FINRA (formerly, the NASD) to have our common stock quoted on the OTC Bulletin
Board (OTCBB).
Summary
Financial Information:
The table
below summarizes our audited financial statements for the fiscal years ended
December 31, 2007 and 2008 and our unaudited financial statements for the six
months ended June 30, 2009 and 2008.
The
Company’s independent public auditors have audited the contents of the table
below.
Balance
Sheet Summary:
For
the Six Months Ended
June
30
|
For
the Fiscal Years Ended December 31,
|
|||||||||||||||
2009
(Unaudited)
|
2008
(Unaudited
|
2008
(Audited)
|
2007
(Audited)
|
|||||||||||||
Balance Sheet
|
||||||||||||||||
Cash
and Cash Equivalents
|
$
|
450
|
$
|
611
|
$
|
618
|
$
|
425
|
||||||||
Total
Assets
|
$
|
560
|
$
|
2,258
|
$
|
2,160
|
$
|
2,336
|
||||||||
Total
Liabilities
|
$
|
142,780
|
$
|
118,373
|
$
|
126,573
|
$
|
86,047
|
||||||||
Total
Stockholders’ Equity (Deficit)
|
$
|
(142,220
|
)
|
$
|
(116,115
|
)
|
$
|
(124,413
|
)
|
$
|
(83,711
|
)
|
Statement
of Operations Summary:
For
the Six Months
Ended
June
30,
|
For the Fiscal Year
Ended
December
31,
|
|||||||||||||||
2009
(Unaudited)
|
2008
(Unaudited)
|
2008
(Audited)
|
2007
(Audited)
|
|||||||||||||
Statement of
Operations:
|
||||||||||||||||
Revenue
|
$
|
2,177
|
$
|
3,406
|
$
|
6,747
|
$
|
10,059
|
||||||||
Net
Income (Loss)
|
$
|
(17,807
|
)
|
$
|
(32,404
|
)
|
$
|
(40,882
|
)
|
$
|
(65,711
|
)
|
||||
Net
Earnings (Loss) Per Share of Common Stock, basic and
diluted
|
$
|
(0.00
|
)
|
$
|
(0.01
|
)
|
$
|
(0.00
|
)
|
$
|
(0.01
|
)
|
Executive
Offices and Telephone Number
Our
operations are located at 118 Chatham Road, Syracuse, NY 13203. Our telephone
number is (315) 476-5769.
5
THE
OFFERING
The
Issuer:
|
Pegasus
Tel, Inc., a Delaware corporation
|
|
Selling
Stockholders:
|
The
Selling Stockholders named in this prospectus are existing stockholders of
our company who received shares of our common stock exempt from the
registration requirements of the Securities Act of 1933, as amended, or
the Securities Act, under Section 4(2) of the Securities
Act.
|
|
Securities
Being Offered:
|
Up
to 6,425,537 shares of our common stock, par value $0.0001 per share, from
time to time on a delayed or continuous basis by the selling stockholders
named in this prospectus, none of which are affiliates of the
Company.
|
|
Offering
Price:
|
The
offering price of the common stock is $0.10 share. We have arbitrarily
established the offering price of the shares. Prices are subject to
prevailing market conditions and/or private negotiated
prices.
|
|
Minimum
Number of Shares to
Be
Sold in This Offering:
|
None
|
|
Common
Stock Outstanding
Before
and After the Offering:
|
20,215,136
shares of our common stock are issued and outstanding as of the date of
this prospectus and will continue to be issued and outstanding upon the
completion of this offering. All of the common stock to be sold under this
prospectus will be sold by existing stockholders. We are registering
6,425,537 shares of the 20,215,136 shares of common stock held by
non-affiliates in this registration statement. This represents
approximately 32% of the Company’s issued and outstanding shares of common
stock.
|
|
Use
of Proceeds:
|
We
will not receive any proceeds from the sale of the common stock by the
Selling Stockholders. All of the proceeds of the offering will go to the
Selling Stockholders. We will pay all expenses in connection with the
registration of the common stock.
|
|
Risk
Factors:
|
See
“Risk Factors” and the other information in this prospectus for a
discussion of the factors you should consider before deciding to invest in
shares of our common stock.
|
6
RISK
FACTORS
An
investment in our common stock involves a high degree of risk. In addition to
the other information in this prospectus, you should carefully consider the
following factors in evaluating us and our business before purchasing the shares
of common stock offered hereby. This prospectus contains, in addition to
historical information, forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed below, as well as those discussed elsewhere in this prospectus,
including the documents incorporated by reference.
We
are a development stage company and have history of losses since our
inception. If we cannot reverse our losses, we will have to
discontinue operations.
At June
30, 2009, we had $450 in cash on hand and an accumulated deficit of
$(200,084). At December 31, 2008, we had $618 in cash and cash
equivalents on hand and an accumulated deficit of $(182,277), causing our
auditors to express their doubt as to our ability to continue as a going
concern. We anticipate incurring losses in the near future. We do not
have an established source of revenue sufficient to cover our operating costs.
Our ability to continue as a going concern is dependent upon our ability to
successfully compete, operate profitably and/or raise additional capital through
other means. If we are unable to reverse our losses, we will have to discontinue
operations.
Our
history of losses is expected to continue and will need to obtain additional
capital financing in the future.
We have a
history of losses and expect to generate losses until such a time when we can
become profitable in the collection of payphone service fees.
As of
December 31, 2008, we had $618 in cash and cash equivalents on hand and an
accumulated deficit of $(182,277).
As of
December 31, 2008, the Company owed $18,691 in Related Party Accounts Payable.
As of December this balance includes $7,794 due to Lyboldt-Daly Inc. for
bookkeeping expenses and $10,673 due to Joseph C. Passalaqua (a major
shareholder of the Company and brother to John F. Passalaqua, an officer of the
Company) is President and Sole Director of Lyboldt-Daly, Inc. It also
includes $224 owed to Carl Worboys, an officer of the Company. These
amounts are non-interest bearing.
As of
December 31, 2008, the Company owed a total balance of $68,487 in Related Party
Notes Payable and had accrued $11,321 in simple interest. These notes
are owed to shareholders of the Company, Mary Passalaqua in the amount of
$53,600 that are bearing simple interest at 10% and 15% per annum and to Joseph
C. Passalaqua in the amount of 14,887 that are bearing interest at 10% and 18%.
As of December 31, 2008, the Company owed a total principal balance of $68,487
and $11,321 in simple interest in regards to these notes.
As of
June 30, 2009, we had $450 in cash and cash equivalents on hand and an
accumulated deficit of $(200,084).
As of
June 30, 2009, the Company owed $18,839 in Related Party Accounts Payable. As of
June 30, 2009 this includes $7,942 payable to Lyboldt-Daly Inc. for bookkeeping
expenses and $10,673 due to Joseph J. Passalaqua (a shareholder of the Company
and brother to John F. Passalaqua, an officer of the Company) is President and
Sole Director of Lyboldt-Daly, Inc. It also includes $224 owed to
Carl Worboys, an officer of the Company. These amounts are non-interest
bearing
As of
June 30, 2009, the Company owed a total principle balance of $68,487 in Related
Party Notes Payable and had accrued 15,858 in simple interest. These
notes are owed to Shareholders of the Company, Mary Passalaqua in the amount of
$53,600 that are bearing simple interest at 10% and 15% per annum and to Joseph
C. Passalaqua in the amount of 14,887 that are bearing interest at 15% and
18%. As of June 30, 2009, the Company owed a total principal balance
of $68,487 and $15,858 in simple interest in regards to these
notes.
All notes
are payable upon demand. We believe that our cash from borrowings will be
insufficient to fund our operations and to satisfy our long-term liquidity needs
for the next twelve months. We will required to seek additional
financing in the future to respond to increased expenses or shortfalls in
anticipated revenues, respond to competitive pressures or take
advantage of unanticipated acquisition opportunities. We cannot be certain we
will be able to find such additional financing on reasonable terms, or at all.
If we are unable to obtain additional financing when needed, we could be
required to modify our business plan in accordance with the extent of available
financing.
We
do not have any external credit facility.
We
currently do not have an external credit facility. The current
economic recession has hampered small businesses, like ours, from obtaining
loans and lines of credit from banks and lending agencies. Overall,
due to the recession and increasing bank failures, banks have become more
selective when granting loans and/or lines of credit to businesses and
individuals. If we are unable to grow our business from generating
revenues, we may need access to additional capital such as loans and/or lines of
credit. We might not qualify for such loans and/or lines of credit. Our failure
to secure an external credit facility could prevent us from growing our business
or to cease operations.
7
Our
future financings could substantially dilute our stockholders or restrict our
flexibility.
We will
need additional funding which may not be available when needed. We estimate that
we will need $50,000 to continue our operations for the next 12
months. If we are able to raise additional funds and by issuing
equity securities, you may experience significant dilution of your ownership
interest and holders of these securities may have rights senior to those of the
holders of our common stock. If we obtain additional financing by issuing debt
securities, the terms of these securities could restrict or prevent us from
paying dividends and could limit our flexibility in making business decisions.
In this case, the value of your investment could be reduced.
We
compete with the growing cell-phone industry and other well-established
companies.
The
market in which we do business is highly competitive and constantly evolving. We
face competition from the larger and more established companies -- from
companies that develop new technology, as well as the many smaller companies
throughout the country. The last several years have shown a marked increase in
the use of cellular phones and toll free services which cut into our potential
payphone customer base. Companies that have greater resources, including but not
limited to, a larger sales force, more money, larger manufacturing capabilities
and greater ability to expand their markets also cut into our potential payphone
customers. Many of our competitors have longer operating histories,
significantly greater financial strength, nationwide advertising coverage and
other resources that we do not have. Our competitors might introduce a less
expensive or more improved payphone. These, as well as other factors can have a
negative impact on our income.
The
competition from cellular phones is a very serious threat that can result in
substantially less revenue per payphone. We have attempted to address this issue
by avoiding locations that service business travelers. For many years, these
locations were the most lucrative, but now they are the locations most impacted
by the cellular user.
The large
former Bell companies who provide local service dominate the industry. These
companies have greater financial ability than us, and provide the greatest
competitive challenge. However, we compete with these companies by paying a
commission to the site owner. The commission is an enticement for the site owner
to use our phone on its site. We believe we are able to provide a higher quality
customer service because the phones alert us to any technical difficulties, and
we can service them promptly. The ability to immediately know that a problem
exists with a payphone is very important because down time for a phone means
lost revenue for us.
Our
non-coin revenue is primarily attributable to “dial-around” commissions. If the
FCC reduces or repeals the “dial-around” commission, our revenues could be
materially adversely affected.
Our
services are subject to the jurisdiction of the Federal Communications
Commission (FCC) with respect to interstate telecommunications services and
other matters for which the FCC has jurisdiction under the Communications Act of
1934, as amended.
Payphone
users can circumvent the usual payment method and avoid inserting a coin by
using an access code or 800 number provided by a long distance carrier. These
“dial-around” numbers, while convenient for users, leave payphone service
providers uncompensated for the call made. The Federal Communications
Commission, as instructed by Congress in the Telecommunications Act of 1996,
created regulations to ensure that payphone service providers receive
compensation for these “dial-around” calls.
The FCC
requires the sellers of long distance toll free services to pay the payphone
owner $0.494 cents per call. These funds are remitted quarterly through a
service provided by the American Public Communication Council
“APCC.”
If the
FCC regulation requiring sellers of long distance toll free services to pay
payphone owners $0.494 per call is reduced or repealed, it could have a negative
effect upon our revenue stream. We have no control over what rules and
regulations the state and federal regulatory agencies require us to follow now
or in the future. It is possible for future regulations to be so financially
demanding that they cause us to go out of business.
We
are highly dependent on our two executive officers, Carl E. Worboys and John F.
Passalaqua. The loss of either of them would have a material adverse affect on
our business and prospects.
We
currently have only two executive officers, Carl E. Worboys and John F.
Passalaqua. Carl E. Worboys serves as our President and Director, and John F.
Passalaqua serves as our Chief Financial Officer, Secretary and Director. The
loss of either executive officer could have a material adverse effect on our
business and prospects.
We
need additional employees. If we cannot attract, retain, motivate and integrate
additional skilled personnel, our ability to compete will be
impaired.
Other
than John F. Passalaqua, our Chief Financial Officer, Secretary and Director,
and Carl E. Worboys, our President and Director, works for us on part-time and
an as-needed basis, we have no other employees. Our success depends
in large part on our ability to attract, retain and motivate highly qualified
management and technical personnel. We face intense competition for qualified
personnel. The industry in which we compete has a high level of employee
mobility and aggressive recruiting of skilled personnel. If we are unable to
continue to employ our key personnel or to attract and retain qualified
personnel in the future, our ability to successfully execute our business plan
will be jeopardized and our growth will be inhibited.
8
We
will depend on outside manufacturing sources and suppliers.
As we
purchase phones from other companies, we upgrade them with "smart card" payphone
technology. The upgrade is a circuit board with improved technology. The “smart
card” technology allows us to determine on a preset time basis the operational
status of the payphone. We were given a license to use the “smart card”
technology from Quortech, the founder and manufacturer of “smart card”
technology. The technology informs us when the coins in the phone
have to be collected, the number and types of calls that have been made from
each phone, as well as other helpful information that helps us provide better
service to our payphone using public. This upgrade of the phones reduces the
number and frequency of service visits due to outages and other payphone-related
problems and, in turn, reduces the maintenance costs. Other companies
manufacture the components of the payphones for the industry including Universal
Communications and TCI, which provides handsets, key pads, totalizers, and
relays.
We will
have limited control over the actual production process. Moreover, difficulties
encountered by any one of our third party manufacturers which result in product
defects, delayed or reduced product shipments, cost overruns or our inability to
fill orders on a timely basis, could have an adverse impact on our business.
Even a short-term disruption in our relationship with third party manufacturers
or suppliers could have a material adverse effect on our operations. We do not
intend to maintain an inventory of sufficient size to protect ourselves for any
significant period of time against supply interruptions, particularly if we are
required to obtain alternative sources of supply.
We
may be unable to adequately protect our proprietary rights or may be sued by
third parties for infringement of their proprietary rights.
The
telecommunications industry is characterized by the existence of a large number
of patents and frequent litigation based on allegations of trade secret,
copyright or patent infringement. We may inadvertently infringe a patent of
which we are unaware. In addition, because patent applications can take many
years to issue, there may be a patent application now pending of which we are
unaware that will cause us to be infringing when it is issued in the future. If
we make any acquisitions, we could have similar problems in those industries.
Although we are not currently involved in any intellectual property litigation,
we may be a party to litigation in the future to protect our intellectual
property or as a result of our alleged infringement of another's intellectual
property, forcing us to do one or more of the following:
|
·
|
Cease
selling, incorporating or using products or services that incorporate the
challenged intellectual property;
|
·
|
Obtain
from the holder of the infringed intellectual property right a license to
sell or use the relevant technology, which license may not be available on
reasonable terms; or
|
·
|
Redesign
those products or services that incorporate such
technology.
|
A
successful claim of infringement against us, and our failure to license the same
or similar technology, could adversely affect our business, asset value or stock
value. Infringement claims, with or without merit, would be expensive to
litigate or settle, and would divert management resources.
Our
employees may be bound by confidentiality and other nondisclosure agreements
regarding the trade secrets of their former employers. As a result, our
employees or we could be subject to allegations of trade secret violations and
other similar violations if claims are made that they breached these
agreements.
If
we engage in acquisitions, we may experience significant costs and difficulty
assimilating the operations or personnel of the acquired companies, which could
threaten our future growth.
If we
make any acquisitions, we could have difficulty assimilating the operations,
technologies and products acquired or integrating or retaining personnel of
acquired companies. In addition, acquisitions may involve entering markets in
which we have no or limited direct prior experience. The occurrence of any one
or more of these factors could disrupt our ongoing business, distract our
management and employees and increase our expenses. In addition, pursuing
acquisition opportunities could divert our management's attention from our
ongoing business operations and result in decreased operating performance.
Moreover, our profitability may suffer because of acquisition-related costs or
amortization of acquired goodwill and other intangible assets. Furthermore, we
may have to incur debt or issue equity securities in future acquisitions. The
issuance of equity securities would dilute our existing
stockholders.
Because
our officers and directors are indemnified against certain losses, we may be
exposed to costs associated with litigation.
If our
directors or officers become exposed to liabilities invoking the indemnification
provisions, we could be exposed to additional unreimbursable costs, including
legal fees. Our articles of incorporation and bylaws provide that our directors
and officers will not be liable to us or to any shareholder and will be
indemnified and held harmless for any consequences of any act or omission by the
directors and officers unless the act or omission constitutes gross negligence
or willful misconduct. Extended or protracted litigation could have a material
adverse effect on our cash flow.
9
There
currently is no trading market for our common stock and we cannot assure that
one will develop or be maintained. In not, your investment might be
illiquid.
Upon the
effectiveness of this registration statement, we intend to solicit a
market-maker to apply with FINRA (formerly, the NASD) to have our common stock
quoted on the OTC Bulletin Board (OTCBB). We cannot assure that a market will
develop or maintained. In not, your investment might be
illiquid.
If
a trading market develops for our common stock, we will be subject to SEC
regulations relating to “penny stock” and the market for our common stock could
be adversely affected.
The SEC
has adopted regulations concerning low-priced stock, or “penny stocks.” The
regulations generally define "penny stock" to be any equity security that has a
market price less than $5.00 per share, subject to certain exceptions. If our
shares are offered at a market price less than $5.00 per share, and do not
qualify for any exemption from the penny stock regulations, our shares may
become subject to these additional regulations relating to low-priced
stocks.
The penny
stock regulations require that broker-dealers, who recommend penny stocks to
persons other than institutional accredited investors make a special suitability
determination for the purchaser, receive the purchaser's written agreement to
the transaction prior to the sale and provide the purchaser with risk disclosure
documents that identify risks associated with investing in penny stocks.
Furthermore, the broker-dealer must obtain a signed and dated acknowledgment
from the purchaser demonstrating that the purchaser has actually received the
required risk disclosure document before effecting a transaction in penny stock.
These requirements have historically resulted in reducing the level of trading
activity in securities that become subject to the penny stock rules. The
additional burdens imposed upon broker-dealers by these penny stock requirements
may discourage broker-dealers from effecting transactions in the common stock,
which could severely limit the market liquidity of our common stock and our
shareholders' ability to sell our common stock in the secondary
market.
10
FORWARD
LOOKING STATEMENTS
When used
in this Prospectus, the words or phrases “will likely result,” “we expect,”
“will continue,” “anticipate,” “estimate,” “project,” ”outlook,” “could,”
“would,” “may,” or similar expressions are intended to identify forward-looking
statements. We wish to caution readers not to place undue reliance on any such
forward-looking statements, each of which speaks only as of the date made. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical earnings and those presently
anticipated or projected. Such risks and uncertainties include, among others,
success in reaching target markets for products in a highly competitive market
and the ability to attract future customers, the size and timing of additional
significant orders and their fulfillment, the success of our business emphasis,
the ability to finance and sustain operations, the ability to raise equity
capital in the future despite, and the size and timing of additional significant
orders and their fulfillment. We have no obligation to publicly release the
results of any revisions, which may be made to any forward-looking statements to
reflect anticipated or unanticipated events or circumstances occurring after the
date of such statements.
DESCRIPTION
OF BUSINESS
Pegasus
Tel, Inc., or Pegasus, was incorporated under the laws of the State of Delaware
on February 19, 2002 to enter into the telecommunication business.
On March
28, 2002, American Industries, Inc. and Pegasus Tel, Inc. entered into an
agreement with Pegasus Communications, Inc., a New York corporation, to acquire
100% of the outstanding shares of Pegasus Communications, Inc. in exchange for
72,721,966 shares of common stock of American Industries,
Inc. Pegasus Tel, Inc. continued as the surviving corporation and
Pegasus Communications, Inc. was merged out of existence.
On
September 21, 2006, the Company filed Amended and Restated Certificate of
Incorporation increasing its authorized capital to 110,000,000 shares, of which
100,000,000 shares were designated as Common Stock, par value $0.0001 per share,
and the remaining 10,000,000 as Preferred Stock, par value $0.0001 per
share. The designations and the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of such shares shall be
determined by the Board of Directors from time to time, without stockholder
approval.
On May 7,
2007, we filed a Registration Statement on Form 10-SB (File No.: 0-52628), or
the Registration Statement, with the SEC to register the Pegasus common stock
under Section 12(g) of the Securities Exchange Act of 1934, as amended, or the
Exchange Act. The Registration Statement went effective on July 6, 2007 through
the operation of law 60 days after its initial filing. On March 23, 2009, we
filed with the SEC a Form 15 to deregister our common stock under Section 12(g)
of the Exchange Act and to terminate our status as a reporting company under the
Exchange Act.
On May
15, 2007, the Company filed an Amended Certificate of Incorporation to
effectuate a forward stock split 5,100 to 1. This change is
retro-active and therefore changes the 1,000 shares of common stock issued on
December 31, 2003 to 5,100,000 shares of common stock. The par value
remains at $.0001 per share.
On August
5, 2008, Pegasus filed a Certificate of Designations, Powers, Preferences and
Rights (the “Certificate of Designation”) with the Secretary of State of the
State of Delaware thereby designating 2,000,000 shares of preferred stock as
Series A Convertible Preferred Stock, $0.0001 (the “Series A Preferred
Stock”). The Certificate of Incorporation of Pegasus authorizes the
designation and issuance of an aggregate of ten million (10,000,000) shares of
preferred stock in one or more series with all rights and privileges determined
by the Board of Directors of Pegasus. Prior to the filing of the
Certificate of Designation, there were no shares of preferred stock designated
or issued. Pursuant to the Certificate of Designation, each share of Series A
Preferred Stock may be converted at any time by Pegasus or the holders thereof
into ten (10) fully-paid and non-assessable shares of Pegasus Common
Stock.
On
August 15, 2008, Pegasus issued an aggregate of 1,800,000 shares of Series A
Preferred Stock to an aggregate of 17 individuals pursuant to a Securities
Purchase Agreement for $0.0001per share of Series A Preferred Stock. Pegasus
issued the Series A Preferred Stock pursuant to an exemption under Section 4(2)
of the Securities Act due to the fact that it did not involve a public offering
of securities. The shares of Series A Preferred Stock were “restricted
securities” (as such term is defined in the Securities Act).
On August
18, 2008, Sino Gas International Holdings, Inc., a Utah corporation, or Sino,
(OTCBB: SGAS), our former parent company, distributed to its stockholders of
record as of August 15, 2008, 100% of the issued and outstanding common stock of
Pegasus. The ratio of distribution of the distribution was one (1)
share of common stock of Pegasus for every twelve (12) shares
of common stock of Sino (1:12). Fractional shares were
rounded up to the nearest whole-number. An aggregate of 2,215,136
shares of Pegasus common stock were issued pursuant to the distribution to an
aggregate of 167 Sino stockholders. The Pegasus common stock issued were and
remain “restricted securities” (as defined in Rule 144 of the Securities Act of
1933, as amended), and were issued pursuant to the exemptions from the
registration requirements of the Securities Act afforded the company under
Section 4(2) of the Securities Act due to the fact that the distribution did not
involve a public offering of securities. There currently is no market
for the Pegasus common stock.
On August
18, 2008 and pursuant to the Certificate of Designation, Pegasus converted an
aggregate of 1,800,000 shares of Series A Preferred Stock into an aggregate of
18,000,000 shares of Pegasus common stock. Pegasus issued the common
stock pursuant to Section 3(a)(9) of the Securities Act due to the fact that the
securities were exchanged upon conversion of the Series A Preferred Stock held
by existing security holders and there was no commission or other remuneration
paid or given directly or indirectly for soliciting such exchange.
11
No
trading market:
There is
currently no market for our common stock. Upon the effectiveness of
this registration statement, we intend to solicit a registered broker/dealer to
apply with FINRA to have our common stock quoted on the OTCBB Bulletin Board
(OTCBB). We cannot assure that FINRA will approve the application or that a
market for our common stock will develop or maintained. In not, your
investment might be illiquid.
Dividend
Policy:
We have
never paid dividends. We do not intend to declare any dividends in the
foreseeable future. We presently intend to retain earnings, if any, for the
development and expansion of our business.
Services
and Products
We own,
operate and manage privately owned public payphones in the County of Delaware,
State of New York. As of December 31, 2008 and June 30, 2009, we
owned, operated managed 13 and 15 payphones, respectively, with 2 payphones
removed when compared with 2008. The Company does not have any
long-term agreements with the customers of these payphones and they may
terminate our license to operate at will. We may pay site owners a
commission based on a flat monthly rate or on a percentage of sales. Some of the
businesses include, but are not limited to, retail stores, convenience stores,
bars, restaurants, gas stations, colleges and hospitals. In the alternative, our
agreement with business owners may be to provide the telecommunications services
without the payment of any commissions.
The
chart below describes the specific location of each of our 15 and 13 payphones
respectively and the amount of revenue generated by each payphone for the
audited fiscal years ended December 31, 2007 and 2008.
For
the Fiscal Year
Ended
December
31,
|
|||||||||||
No.:
|
Location
|
2007
|
2008
|
||||||||
1 |
Andes
Hotel
110
Main St., Andes, NY 13731
|
$ | 205 | $ | 391 | ||||||
2 |
Andes
Public Booth
21
Main St., Andes, NY 13731
|
$ | 100 | $ | 249 | ||||||
3 |
A&
P Super Food Mart
36
Bridge St., Margaretville,
NY 12455 (outside)
|
$ | 985 | $ | 265 | ||||||
4 |
A&
P Super Food Mart
36
Bridge St., Margaretville,
NY 12455 (inside)
|
$ | 735 | N/A | |||||||
5 |
Margaretville
Central School
415
Main St., Margaretville, NY 12455
|
$ | 1,065 | $ | 1,050 | ||||||
6 |
Margaretville
Memorial Hospital
42084
State Hwy. 28, Margaretville, NY 12455 (downstairs)
|
$ | 1,095 | $ | 683 | ||||||
7 |
Margaretville
Memorial Hospital
42084
State Hwy. 28, Margaretville, NY 12455 (upstairs)
|
$ | 1,234 | $ | 494 | ||||||
8 |
Mountainside
Residential Care
42158
State Hwy. 28, Margaretville, NY 12455 (1 st Floor)
|
$ | 1,685 | $ | 1,000 | ||||||
9 |
Mountainside
Residential Care
42158
State Hwy. 28, Margaretville, NY 12455 (2 nd Floor)
|
$ | 800 | $ | 520 | ||||||
10 |
Mountainside
Residential Care
42158
State Hwy. 28, Margaretville, NY 12455 (3 rd Floor)
|
$ | 630 | $ | 500 | ||||||
11 |
Town
of Middletown
42339
State Hwy. 28, Margaretville, NY 12455
|
$ | 1,435 | $ | 640 | ||||||
12 |
Hess
Mart
42598
State Hwy. 28, Margaretville, NY 12455
|
$ | 30 | $ | 778 | ||||||
13 |
Arkville
Country Store
43525
State Hwy. 28, Arkville, NY 12406
|
$ | 20 | $ | 169 | ||||||
14 |
Hanah
Country Club
44447
State Hwy. 30, Margaretville, NY 12455
|
$ | 20 | N/A | |||||||
15 |
Summerfield’s
Rest.
654
Main St., Margaretville, NY 12455
|
$ | 20 | $ | 8 | ||||||
Total
Revenues
|
$ | 10,059 | $ | 6,747 |
12
The
chart below describes the specific location of each of our 13 payphones
respectively and the amount of revenue generated by each payphone for the
unaudited periods ended June 30, 2008 and June 30, 2009.
For
the Six Months
Ended
June
30,
|
|||||||||||
No.:
|
Location
|
2008
|
2009
|
||||||||
1 |
Andes
Hotel
110
Main St., Andes, NY 13731
|
$ | 75 | $ | 200 | ||||||
2 |
Andes
Public Booth
21
Main St., Andes, NY 13731
|
$ | 70 | $ | 100 | ||||||
3 |
A&
P Super Food Mart
36
Bridge St., Margaretville,
NY 12455 (outside)
|
$ | 455 | $ | 810 | ||||||
4 |
Margaretville
Central School
415
Main St., Margaretville, NY 12455
|
$ | 225 | $ | 305 | ||||||
5 |
Margaretville
Memorial Hospital
42084
State Hwy. 28, Margaretville, NY 12455 (downstairs)
|
$ | 325 | $ | 210 | ||||||
6 |
Margaretville
Memorial Hospital
42084
State Hwy. 28, Margaretville, NY 12455 (upstairs)
|
$ | 250 | $ | 295 | ||||||
7 |
Mountainside
Residential Care
42158
State Hwy. 28, Margaretville, NY 12455 (1 st Floor)
|
$ | 180 | $ | 655 | ||||||
8 |
Mountainside
Residential Care
42158
State Hwy. 28, Margaretville, NY 12455 (2 nd Floor)
|
$ | 210 | $ | 250 | ||||||
9 |
Mountainside
Residential Care
42158
State Hwy. 28, Margaretville, NY 12455 (3 rd Floor)
|
$ | 90 | $ | 250 | ||||||
10 |
Town
of Middletown
42339
State Hwy. 28, Margaretville, NY 12455
|
$ | 200 | $ | 235 | ||||||
11 |
Hess
Mart
42598
State Hwy. 28, Margaretville, NY 12455
|
$ | 50 | $ | 50 | ||||||
12 |
Arkville
Country Store
43525
State Hwy. 28, Arkville, NY 12406
|
$ | 27 | $ | 26 | ||||||
13 |
Summerfield’s
Rest.
654
Main St., Margaretville, NY 12455
|
$ | 20 | $ | 20 | ||||||
Total
Revenues
|
$ | 2,177 | $ | 3,406 |
The local
telephone switch controls the traditional payphone technology. The local switch
does not provide any services in the payphone that can benefit the owner of the
phone. As we purchase phones from other companies, we upgrade them with "smart
card" payphone technology which we license from Quortech. The upgrade is a
circuit board with improved technology. The “smart card” technology allows us to
determine the operational status of the payphone. It also tells us when the
coins in the phone have to be collected, the number and types of calls that have
been made from each phone, as well as other helpful information that helps us
provide better service to our payphone using public. This upgrade of the phones
reduces the number and frequency of service visits due to outages and other
payphone-related problems and, in turn, reduces the maintenance costs. Other
companies manufacture the components of the payphones for the industry including
Universal Communications and TCI, which provides handsets, key pads, totalizers,
and relays.
Payphone
users can circumvent the usual payment method and avoid inserting a coin by
using an access code or 800 number provided by a long distance carrier. These
“dial-around” numbers, while convenient for users, leave payphone service
providers uncompensated for the call made. The Federal Communications
Commission, or the FCC, as instructed by Congress in the Telecommunications Act
of 1996, created regulations to ensure that payphone service providers receive
compensation for these “dial-around” calls.
The FCC
requires the sellers of long distance toll free services to pay the payphone
owner $0.494 cents per call. These funds are remitted quarterly through a
service provided by the American Public Communication Council
(APCC).
13
Market
and Competition
The
market in which we do business is highly competitive and constantly evolving. We
face competition from the larger and more established companies -- from
companies that develop new technology, as well as the many smaller companies
throughout the country. The last several years have shown a marked increase in
the use of cellular phones and toll free services which cut into our potential
payphone customer base. Companies that have greater resources, including but not
limited to, a larger sales force, more money, larger manufacturing capabilities
and greater ability to expand their markets also cut into our potential payphone
customers. Many of our competitors have longer operating histories,
significantly greater financial strength, nationwide advertising coverage and
other resources that we do not have. Our competitors might introduce a less
expensive or more improved payphone. These, as well as other factors can have a
negative impact on our income.
The
competition from cellular phones is a very serious threat that can result in
substantially less revenue per payphone. We have attempted to address this issue
by avoiding locations that service business travelers. For many years, these
locations were the most lucrative, but now they are the locations most impacted
by the cellular user.
Large
companies who provide local service dominate the industry. These companies have
greater financial ability than us, and provide the greatest competitive
challenge. However, we compete with these companies by paying a commission to
the site owner. The commission is an enticement for the site owner to use our
phone on its site.
Significant
Customers
We do not
rely on a major customer for our revenue. We have a variety of small single
businesses as well as some small chain stores that we service. We do not believe
that we would suffer dramatically if any one customer or small chain decided to
stop using our phones.
Significant
Vendors
We must
buy dial tone for each payphone from the local exchange carrier. As long as we
pay the carrier bill, it is required to provide a dial tone. As a regulated
utility, the exchange carrier may not refuse to provide us service. Alternate
service exists in certain areas where Verizon competitors are located. We use
alternate local service providers when we can get a better price for the
service. We use long distance providers on all the payphones.
Intellectual
Property
As we
purchase phones from other companies, we upgrade them with "smart card" payphone
technology. The upgrade is a circuit board with improved technology. The “smart
card” technology allows us to determine on a preset time basis the operational
status of the payphone. We are given a license to use the “smart card”
technology from Quortech, the founder and manufacturer of “smart card”
technology. The technology informs us when the coins in the phone
have to be collected, the number and types of calls that have been made from
each phone, as well as other helpful information that helps us provide better
service to our payphone using public. This upgrade of the phones reduces the
number and frequency of service visits due to outages and other payphone-related
problems and, in turn, reduces the maintenance costs. Other companies
manufacture the components of the payphones for the industry including Universal
Communications and TCI, which provides handsets, key pads, totalizers, and
relays.
We do not
own any patents or trademarks. Companies in the telecommunications industry and
other industries in which we compete own large numbers of patents, copyrights
and trademarks and frequently enter into litigation based on allegations of
infringement or other violations of intellectual property rights. As we face
increasing competition, the possibility of intellectual property claims against
us grows. We might not be able to withstand any third-party claims or rights
against their use.
Government
Regulation
We are
subject to varying degrees of regulation by federal, state, local and foreign
regulators. The implementation, modification, interpretation and enforcement of
these laws and regulations vary and can limit our ability to provide many of our
services. Our ability to compete in our target markets depends, in part, upon
favorable regulatory conditions and the favorable interpretations of existing
laws and regulations.
FCC
Regulation and Interstate Rates
Our
services are subject to the jurisdiction of the Federal Communications
Commission (FCC) with respect to interstate telecommunications services and
other matters for which the FCC has jurisdiction under the Communications Act of
1934, as amended.
Payphone
users can circumvent the usual payment method and avoid inserting a coin by
using an access code or 800 number provided by a long distance carrier. These
“dial-around” numbers, while convenient for users, leave payphone service
providers uncompensated for the call made. The Federal Communications
Commission, as instructed by Congress in the Telecommunications Act of 1996,
created regulations to ensure that payphone service providers receive
compensation for these “dial-around” calls.
14
The FCC
requires the sellers of long distance toll free services to pay the payphone
owner $0.494 cents per call. These funds are remitted quarterly through a
service provided by the American Public Communication Council
(APCC). If the FCC regulation requiring sellers of long distance toll
free services to pay payphone owners $0.494 per call is reduced or repealed, it
could have a negative effect upon our revenue stream. We have no control over
what rules and regulations the state and federal regulatory agencies require us
to follow now or in the future. It is possible for future regulations to be so
financially demanding that they cause us to go out of business. We are not aware
of any proposed regulations or changes to any existing regulations.
Telecommunications
Act of 1996
The
Telecommunications Act of 1996, regulatory and judicial actions and the
development of new technologies, products and services have created
opportunities for alternative telecommunication service providers, many of which
are subject to fewer regulatory constraints. We are unable to predict
definitively the impact that the ongoing changes in the telecommunications
industry will ultimately have on our business, results of operations or
financial condition. The financial impact will depend on several factors,
including the timing, extent and success of competition in our markets, the
timing and outcome of various regulatory proceedings and any appeals, and the
timing, extent and success of our pursuit of new opportunities resulting from
the Telecommunications Act of 1996 and technological advances.
Research
and Development
We have
not expended any money in the last two fiscal years on research and development
activities.
Seasonality
Our
revenues from payphone operation are affected by seasonal variations, geographic
distribution of payphones and type of location. Because we operate in the
northeastern part of the country with many of the payphones located outdoor,
weather patterns affect our revenue streams. Revenues drop off significantly
during winter and conversely show an increase in the spring and summer. Revenues
are generally lowest in the first quarter and highest in the third
quarter.
Employees
The
company does not have any employees. John F. Passalaqua is our Chief
Financial Officer, Secretary and Director and Carl E. Worboys is our President
and Director.
DESCRIPTION
OF PROPERTIES
At the
present time we do not own or lease any real property. Our operations
are conducted our of Carl Worboy’s residence, located at 118 Chatham Road,
Syracuse, NY 13203. Carl Worboys provides us this office space free of
charge.
LEGAL
PROCEEDINGS
We are
not a party to any legal proceedings nor are we aware of any investigation,
claim or demand made on the company that may reasonably result in any legal
proceedings.
USE
OF PROCEEDS
We will
not receive any proceeds from the sale of the common stock offered through this
prospectus by the Selling Stockholders.
DETERMINATION
OF OFFERING PRICE
The
offering price of our common stock was arbitrarily determined based on our
internal assessment of what the market would support. There is no relationship
whatsoever between this price and our assets, earnings, book value or any other
objective criteria of value. There is currently no market for our common
stock. Upon the effectiveness of this registration statement, we
intend to solicit a market-maker to apply with FINRA (formerly, the NASD) to
have our common stock quoted on the OTC Bulletin Board (OTCBB). If and when the
shares are quoted on the OTCBB, the actual price of stock will be determined by
prevailing market prices at the time of sale or by private transactions
negotiated by the Selling Stockholders. The offering price would thus be
determined by market factors and the independent decisions of the Selling
Stockholders.
DILUTION
The
common stock to be sold by the Selling Stockholders is common stock that is
currently issued and outstanding. Accordingly, there will be no dilution to our
existing stockholders.
15
DIVIDENDS
We have
never declared dividends. We do not intend to declare any dividends in the
foreseeable future. We presently intend to retain earnings, if any, for the
development and expansion of our business.
SELLING
STOCKHOLDERS
The
Selling Stockholders named in this prospectus are offering an aggregate of
6,425,537 shares of our common stock registered in a registration statement of
which this prospectus is a part. The Selling Stockholders acquired such shares
of our common stock under the exemption from the registration requirements under
Regulation D and Section 4(2) promulgated under the Securities Act.
To the
best of our knowledge, none of the Selling Stockholders are a broker-dealer,
underwriter or affiliate thereof. The following table provides as of the date of
this Prospectus, information regarding the beneficial ownership of our common
stock held by each of the Selling Stockholders, including, the number of shares
of our common stock beneficially owned by each prior to this offering; the total
number of shares of our common stock that are to be offered by each Selling
Stockholder; the total number of shares that will be beneficially owned by each
Selling Stockholder upon completion of the offering; the percentage owned by
each upon completion of the offering.
There are
(2) disclosures regarding relationship between any of the Selling Stockholders
and any of the executive officers and directors of the Company in the list
below.
(i) Inna
Sheveleva is the wife of John F. Passalaqua, the Chief Financial Officer,
Secretary, and Director of Pegasus Tel.
(ii) Joseph
C. Passalaqua is the brother of John F. Passalaqua, the Chief Financial Officer,
Secretary and Director of Pegasus Tel.
The
Selling Stockholders include 169 of the Company’s shareholders. The Directors
and Officers will not be able to sell their shares unless registered with the
Securities and Exchange Commission under the Securities Act of 1933 which the
Company does currently contemplate doing.
The
following is a list of the Selling Stockholders:
PEGASUS
TEL, INC.
|
||||||
FREE-TRADING
SHARES
|
||||||
SHARES
|
TOTAL
|
|||||
OWNED
|
SHARES
|
OWNED
|
%
OWNED
|
|||
CONTROL
PERSON
|
PRIOR
TO
|
BEING
|
AFTER
|
AFTER
|
||
STOCKHOLDER
|
(If
Any)
|
OFFERING
|
OFFERED
|
OFFERING
|
OFFERING
|
|
1
|
AASE
ROLF
|
13
|
13
|
0
|
0%
|
|
2
|
ANCORA
GREATER CHINA FUND LP
|
JOHN
MICKLITSCH
|
15,293
|
15,293
|
0
|
0%
|
3
|
BARRETTO
JOSE M SR
|
2
|
2
|
0
|
0%
|
|
4
|
BATTAGLIA
ANTHONY
|
7
|
7
|
0
|
0%
|
|
5
|
BATTAGLIA
LENNY
|
7
|
7
|
0
|
0%
|
|
6
|
BECKLEY
SARAH
|
200,000
|
200,000
|
0
|
0%
|
|
7
|
BIGLER
KEITH E
|
4
|
4
|
0
|
0%
|
|
8
|
BIGLER
VIRGINIA B
|
4
|
4
|
0
|
0%
|
|
9
|
BLAIR
RICHARD E
|
1
|
1
|
0
|
0%
|
|
10
|
BOTTJEN
DENNIS G SOUTHWST IRA ROLLOVER CUST
|
1,067
|
1,067
|
0
|
0%
|
|
11
|
BOTTJEN
DENNIS G SOUTHWST ROLLOVER IRA CUST
|
1,083
|
1,083
|
0
|
0%
|
|
12
|
BROWN
GLEN R
|
2
|
2
|
0
|
0%
|
|
13
|
BROWNFIELD
LYMAN
|
2
|
2
|
0
|
0%
|
|
14
|
BURNS
JOHN SR
|
1,285
|
1,285
|
0
|
0%
|
|
15
|
CARBONA
PATTIANNE
|
400,000
|
400,000
|
0
|
0%
|
|
16
|
CARLSON
RONALD D
|
3
|
3
|
0
|
0%
|
|
17
|
CARLSON
RONALD D & ANGELA R
|
1
|
1
|
0
|
0%
|
|
18
|
CATRICOLA
JOHN
|
200,000
|
200,000
|
0
|
0%
|
16
19
|
CGM
C/F RONALD I HELLER IRA
|
3,330
|
3,330
|
0
|
0%
|
|
20
|
FANG
CHEN
|
5,467
|
5,467
|
0
|
0%
|
|
21
|
CHERRY
HOWARD
|
1
|
1
|
0
|
0%
|
|
22
|
CHEUNG
WAI MING
|
1
|
1
|
0
|
0%
|
|
23
|
CHRISTOPHER
KATHY R
|
410
|
410
|
0
|
0%
|
|
24
|
COBALT
BLUE LLC (Mary Passalaqua has
2,500,000
shares not registered)
|
MARY
PASSALAQUA
|
83
|
83
|
0
|
0%
|
25
|
COLEMAN
ERROL % COLUMBUS TRADERS
|
7
|
7
|
0
|
0%
|
|
26
|
COLLEY
JOEL E
|
1
|
1
|
0
|
0%
|
|
27
|
COMMONWEALTH
CAPITAL CORP
|
CHARLES
GOFF
|
20
|
20
|
0
|
0%
|
28
|
CORONADO
CAPITAL PARTNERS LP
|
WILLIAM
HELLER
|
15,000
|
15,000
|
0
|
0%
|
29
|
COZZI
MICHAEL A
|
6
|
6
|
0
|
0%
|
|
30
|
CREIGHTON
PAUL N
|
2
|
2
|
0
|
0%
|
|
31
|
CURTIS
MARVIN R
|
2
|
2
|
0
|
0%
|
|
32
|
DARBY
KENNETH O
|
27
|
27
|
0
|
0%
|
|
33
|
DEAN
MARCUS HERBERT
|
2
|
2
|
0
|
0%
|
|
34
|
DEAN
MICHAEL J
|
2
|
2
|
0
|
0%
|
|
35
|
DEMEESTER
WAYNE F
|
1
|
1
|
0
|
0%
|
|
36
|
DIXON
RICHARD A
|
1
|
1
|
0
|
0%
|
|
37
|
DONG
WANG WEI
|
2,761
|
2,761
|
0
|
0%
|
|
38
|
DREYFOUS
JAMES C
|
3
|
3
|
0
|
0%
|
|
39
|
DREYFOUS
MARGARET C
|
2
|
2
|
0
|
0%
|
|
40
|
DRIGGS
LEONARD E
|
16
|
16
|
0
|
0%
|
|
41
|
EMMETT
A LARKIN C/F M L SMITH ROTH
|
21
|
21
|
0
|
0%
|
|
42
|
ENABLE
GROWTH PARTNERS LP
|
MITCHELL
SLEVINE
|
126,832
|
126,832
|
0
|
0%
|
43
|
ENABLE
OPPORTUNITY PARTNERS LP
|
MITCHELL
SLEVINE
|
14,856
|
14,856
|
0
|
0%
|
44
|
EUBANK
CHARLES S JR
|
7
|
7
|
0
|
0%
|
|
45
|
EVANS
MARY K
|
401,166
|
401,166
|
0
|
0%
|
|
46
|
FARBMAN
MAX A
|
2
|
2
|
0
|
0%
|
|
47
|
FELT
PHILIP L SR
|
1
|
1
|
0
|
0%
|
|
48
|
GARDNER
JAMES L
|
1
|
1
|
0
|
0%
|
|
49
|
GIAUQUE
WILLIAMS TRUSTEES
|
11
|
11
|
0
|
0%
|
|
50
|
GILLETTE
ISLA & PERRY
|
2
|
2
|
0
|
0%
|
|
51
|
GODIN
AMANDA
|
400,000
|
400,000
|
0
|
0%
|
|
52
|
GOFF
CHARLES W
|
2
|
2
|
0
|
0%
|
|
53
|
GOFF
CHARLES W SR TTEE
|
90
|
90
|
0
|
0%
|
|
54
|
GOFF
GLORIS P C/F CHARLES W III
|
2
|
2
|
0
|
0%
|
|
55
|
GOFF
GLORIS P C/F EMILY M
|
2
|
2
|
0
|
0%
|
|
56
|
GOFF
GLORIS P C/F MICHAEL A
|
2
|
2
|
0
|
0%
|
|
57
|
GOFF
GLORIS P C/F STEVEN C
|
2
|
2
|
0
|
0%
|
|
58
|
GOFF
NORAH L
|
2
|
2
|
0
|
0%
|
|
59
|
GOFF
STEPHANIE ANN
|
2
|
2
|
0
|
0%
|
|
60
|
GRADY
JAMES J
|
1
|
1
|
0
|
0%
|
|
61
|
HELLER
CAPITAL INVESTMENTS LLC
|
STEVE
HART
|
6,660
|
6,660
|
0
|
0%
|
62
|
HORNE
ROBERT H
|
20
|
20
|
0
|
0%
|
|
63
|
HSBC
TRINKAUS & BURKHARDT KGAA
|
SIMONE
KOPPER
|
20,509
|
20,509
|
0
|
0%
|
64
|
HUBER
ERICH
|
7
|
7
|
0
|
0%
|
|
65
|
HUBER
ERICH D & CHERIE C AS TTEE***
|
2
|
2
|
0
|
0%
|
|
66
|
HUBER
ERICH D INTER VIVOS FAMILY TR
|
1
|
1
|
0
|
0%
|
|
67
|
INTERCAP
INC
|
LARRY
FORTMAN
|
9
|
9
|
0
|
0%
|
68
|
IRION
RICHARD DR
|
2
|
2
|
0
|
0%
|
|
69
|
J J
PASSIAS TR
|
JOHN
PASSIAS
|
3
|
3
|
0
|
0%
|
70
|
JAYHAWK
PRIVATE EQUITY CO-INVEST FD
|
MICHAEL
SCHMITZ
|
5,240
|
5,240
|
0
|
0%
|
71
|
JAYHAWK
PRIVATE EQUITY FUND LP
|
MICHAEL
SCHMITZ
|
83,246
|
83,246
|
0
|
0%
|
72
|
JENSEN
TIFFNY
|
3
|
3
|
0
|
0%
|
|
73
|
JOHNSON
J RAYMOND & GERALDINE
|
1
|
1
|
0
|
0%
|
|
74
|
JUN
LI
|
19,366
|
19,366
|
0
|
0%
|
17
75
|
JURKOVIC
ZDRAVKO
|
84
|
84
|
0
|
0%
|
|
76
|
KICKLITER
GEORGE D
|
1
|
1
|
0
|
0%
|
|
77
|
KILLIAN
ROBERT
|
15
|
15
|
0
|
0%
|
|
78
|
KINGSTON
DAVID O
|
1
|
1
|
0
|
0%
|
|
79
|
KNUDSEN
BOB JR
|
2
|
2
|
0
|
0%
|
|
80
|
KOPAUNIK
KEVIN
|
901,642
|
901,642
|
0
|
0%
|
|
81
|
KUHNS
PAUL
|
431
|
431
|
0
|
0%
|
|
82
|
KUI
BIAN SHU
|
14,496
|
14,496
|
0
|
0%
|
|
83
|
LARKO
|
2
|
2
|
0
|
0%
|
|
84
|
LEYVA
CARMEN
|
54
|
54
|
0
|
0%
|
|
85
|
LI
TIE
|
2,281
|
2,281
|
0
|
0%
|
|
86
|
LIEBMAN
STEVEN
|
394
|
394
|
0
|
0%
|
|
87
|
LIU
XIAO BING
|
15,420
|
15,420
|
0
|
0%
|
|
88
|
LOMBARDO
ANTHONY
|
1,285
|
1,285
|
0
|
0%
|
|
89
|
LOMBARDO
ANTHONY E
|
400,000
|
400,000
|
0
|
0%
|
|
90
|
MARSHALL
JOHN G
|
11
|
11
|
0
|
0%
|
|
91
|
MC
KNIGHT DEVELOPMENT CORP PRFT SH
|
HOMER
R MCKNIGHT
|
2
|
2
|
0
|
0%
|
92
|
MC
KNIGHT HOMER R & SHIRLEY M
|
7
|
7
|
0
|
0%
|
|
93
|
MCGUINESS
LEWIS A
|
1,285
|
1,285
|
0
|
0%
|
|
94
|
MCGUINNESS
REBECCA
|
401,285
|
401,285
|
0
|
0%
|
|
95
|
MCKNIGHT
& HOSTERMAN ARCHITECTURAL
|
HOMER
R MCKNIGHT
|
2
|
2
|
0
|
0%
|
96
|
MCKNIGHT
DEVELOPMENT CORP
|
HOMER
R MCKNIGHT
|
1
|
1
|
0
|
0%
|
97
|
MIDSOUTH
INVESTOR FUND LP
|
LO
HEIDTKE
|
21,848
|
21,848
|
0
|
0%
|
98
|
MIN
ZHONG ZHI
|
32,798
|
32,798
|
0
|
0%
|
|
99
|
MITCHELL
CYNTHIA
|
8
|
8
|
0
|
0%
|
|
100
|
MITCHELL
RON K & CYNTHIA K
|
16
|
16
|
0
|
0%
|
|
101
|
MITCHELL
RON K C/F MITCHELL CHILDRN
|
7
|
7
|
0
|
0%
|
|
102
|
MITCHELL
RONALD K
|
47
|
47
|
0
|
0%
|
|
103
|
MORGAN
KAYE W
|
8
|
8
|
0
|
0%
|
|
104
|
NELSON
RUTH T
|
1
|
1
|
0
|
0%
|
|
105
|
OCEANOAR
& CO
|
DAVID
OESTREICHER
|
234,712
|
234,712
|
0
|
0%
|
106
|
OSTLER
DEBORAH A LIVING TRUST
|
7
|
7
|
0
|
0%
|
|
107
|
OSTLER
STEVEN A
|
4
|
4
|
0
|
0%
|
|
108
|
PACKER
THANE G
|
9
|
9
|
0
|
0%
|
|
109
|
PASSAIS
NICK J O D & JOAN
|
1
|
1
|
0
|
0%
|
|
110
|
PASSALAQUA
JOSEPH C.
|
5,001,285
|
443
|
5,000,842
|
.0000885%
|
|
111
|
PASSALAQUA
JOSEPH J
|
501,087
|
501,087
|
0
|
0%
|
|
112
|
PASSALAQUA
STEPHANIE
|
131
|
131
|
0
|
0%
|
|
113
|
PASSIAS
DEBRA A
|
1
|
1
|
0
|
0%
|
|
114
|
PASSIAS
DR JOHN J
|
1
|
1
|
0
|
0%
|
|
115
|
PASSIAS
J J TTEE PENSION PLAN
|
JOHN
PASSIAS
|
6
|
6
|
0
|
0%
|
116
|
PETERSON
JOHN M
|
12
|
12
|
0
|
0%
|
|
117
|
PETTERSON
J W
|
1,285
|
1,285
|
0
|
0%
|
|
118
|
PIERCE
DIVERSIFIED STRATEGY MSTR FD
|
ADAM
EPSTEIN
|
6,882
|
6,882
|
0
|
0%
|
119
|
PRECEPT
CAPITAL MASTER FUND GP
|
MICK
ROOSSIEN
|
15,293
|
15,293
|
0
|
0%
|
120
|
QUINNEY
DAVID E JR
|
2
|
2
|
0
|
0%
|
|
121
|
RACHEL
JOAN
|
13
|
13
|
0
|
0%
|
|
122
|
RIMMASCH
KIM M
|
4
|
4
|
0
|
0%
|
|
123
|
RITZ
GORDON JERRON JR
|
7
|
7
|
0
|
0%
|
|
124
|
ROSS
MICHAEL J SOUTHWEST SEP IRA..
|
1,583
|
1,583
|
0
|
0%
|
|
125
|
ROTHSTEIN
H L TTEE H ROTHSTEIN TR..
|
394
|
394
|
0
|
0%
|
|
126
|
SAVAGE
HOPE
|
401,284
|
401,284
|
0
|
0%
|
|
127
|
SCORTINO
STEPHANIE
|
500,000
|
500,000
|
0
|
0%
|
|
128
|
SEI
PRIVATE TR CO FAO JM SMUCKER CO
|
SUZANNE
ROKOSNYIVE
|
22,590
|
22,590
|
0
|
0%
|
129
|
SHERANIAN
MARK
|
2
|
2
|
0
|
0%
|
|
130
|
SHEVELEVA
INNA
|
401,285
|
401,285
|
0
|
0%
|
18
131
|
SHOEN
SAM
|
2,156
|
2,156
|
0
|
0%
|
|
132
|
SHUN
CHONG
|
22,925
|
22,925
|
0
|
0%
|
|
133
|
SHUPE
WILLIAM R TRUSTEE
|
7
|
7
|
0
|
0%
|
|
134
|
SJOBERG
DUANE G & SONDRA S
|
2
|
2
|
0
|
0%
|
|
135
|
SKAGGS
DON L
|
6
|
6
|
0
|
0%
|
|
136
|
SOLLISH
MARGARET L
|
200,560
|
200,560
|
0
|
0%
|
|
137
|
SOLOMON
MARK
|
1
|
1
|
0
|
0%
|
|
138
|
SOLOMON
SUSAN TRUST
|
1
|
1
|
0
|
0%
|
|
139
|
STEVER
DAVID F
|
547
|
547
|
0
|
0%
|
|
140
|
STRAUS
PARTNERS LP
|
CRAIG
CONNERS
|
22,122
|
22,122
|
0
|
0%
|
141
|
STRAUS-GEPT
PARTNERS LP
|
CRAIG
CONNERS
|
27,037
|
27,037
|
0
|
0%
|
142
|
STROSCHEIN
PAUL
|
1
|
1
|
0
|
0%
|
|
143
|
SUAREZ
CELSO JR
|
157
|
157
|
0
|
0%
|
|
144
|
SUNYICH
FAMILY TRUST
|
STEVEN
L SUNYICH
|
12
|
12
|
0
|
0%
|
145
|
SUNYICH
KATHRYN JOY
|
9
|
9
|
0
|
0%
|
|
146
|
SUNYICH
STEVEN L
|
2
|
2
|
0
|
0%
|
|
147
|
TABAR
WILLIAM J
|
2
|
2
|
0
|
0%
|
|
148
|
TERRY
DR STEPHEN KEOUGH RET PLAN
|
2
|
2
|
0
|
0%
|
|
149
|
TERRY
DR STEPHEN R
|
3
|
3
|
0
|
0%
|
|
150
|
THOMPSON
MARC L
|
1
|
1
|
0
|
0%
|
|
151
|
TORSON
CHARLES R
|
27
|
27
|
0
|
0%
|
|
152
|
TRI
AMERICAN ARMS
|
CHARLES
GOFF
|
6
|
6
|
0
|
0%
|
153
|
VEENKER
JOSEPHINE V TTEE
|
1
|
1
|
0
|
0%
|
|
154
|
VISION
OPPORTUNITY MASTER FUND LTD
|
ADAM
BENOWITZ
|
192,834
|
192,834
|
0
|
0%
|
155
|
VISION
CAPITAL ADVANTAGE FUND LP
|
ADAM
BENOWITZ
|
56,993
|
56,993
|
0
|
0%
|
156
|
VOZOS
NANCY
|
6
|
6
|
0
|
0%
|
|
157
|
WAGNER
I J
|
4
|
4
|
0
|
0%
|
|
158
|
WANG
LI SHU
|
32,798
|
32,798
|
0
|
0%
|
|
159
|
WARNER
RICHARD L
|
2
|
2
|
0
|
0%
|
|
160
|
WHITEBOX
INTERMARKET PARTNERS LP
|
BARB
RELLER
|
32,772
|
32,772
|
0
|
0%
|
161
|
WIGHTMAN
JENNIE G
|
2
|
2
|
0
|
0%
|
|
162
|
WILLIAMS
CHARLES O
|
7
|
7
|
0
|
0%
|
|
163
|
WILLIS
KENTON W
|
6
|
6
|
0
|
0%
|
|
164
|
WILMES
GLEN T
|
2
|
2
|
0
|
0%
|
|
165
|
XIANG
SHUN YING
|
14,353
|
14,353
|
0
|
0%
|
|
166
|
ZAHARIAS
JARRY J
|
17
|
17
|
0
|
0%
|
|
167
|
ZHONG
SHANG JIAN
|
6,523
|
6,523
|
0
|
0%
|
|
168
|
ZHUO
QING HUI
|
9,165
|
9,165
|
0
|
0%
|
|
169
|
ZIONS
1ST NATL BNK TTEE J DREYFOUS
|
JULES
DREYFOUS
|
2
|
2
|
0
|
0%
|
169
|
TOTAL
SHAREHOLDERS TOTAL
SHARES
|
6,425,537
|
6,425,537
|
Selling Stockholder
Relationships
To the
best of our knowledge, none of the Selling Stockholders:
1.
|
Is
an affiliate of a broker-dealer;
|
2.
|
Has
had a material relationship with us other than as a stockholder at any
time within the past three years;
or
|
3.
|
Has
ever been one of our officers and
directors.
|
PLAN
OF DISTRIBUTION
This
prospectus is part of a registration statement that enables the Selling
Stockholders to sell their shares on a continuous or delayed after this
registration statement is declared effective by the Securities and Exchange
Commission. The Selling Stockholders may sell some or all of their common stock
in one or more transactions, including block transactions:
19
·
|
In
public markets as the common stock may be trading from time to
time;
|
·
|
In
privately negotiated transactions;
|
·
|
Through
the writing of options on the common
stock;
|
·
|
In
short sales; or
|
·
|
In
any combination of the aforementioned methods of
distributions.
|
We have
arbitrarily established the offering price. There is currently no market for our
common stock. As there is no market for our common stock, the shares being
offered for resale by the Selling Stockholders will be offered and sold at the
fixed price of $0.10 per share for the duration of this offering or until the
shares become quoted on a securities market, such as the Over the Counter
Bulletin Board or securities exchange. Upon the effectiveness of this
registration statement, we intend to solicit a market-maker to apply with FINRA
(formerly, the NASD) to have our common stock quoted on the OTC Bulletin
Board.. If and when our common stock is quoted on the OTC Bulletin
Board, the sales price to the public will vary according to the selling
decisions of each Selling Stockholder and the market for our stock at the time
of resale. In these circumstances, the sales price to the public may
be:
·
|
the
market price of our common stock prevailing at the time of
sale;
|
·
|
a
price related to such prevailing market price of our common stock;
or
|
·
|
such
other price as the Selling Stockholders determine from time to
time.
|
The
Selling Stockholders named in this prospectus may also sell their shares
directly to market makers acting as agents in unsolicited brokerage
transactions. Any broker or dealer participating in such transactions as an
agent may receive a commission from the Selling Stockholders, or, if they act as
an agent for the purchaser of such common stock, from such purchaser. The
Selling Stockholders are expected to pay the usual and customary brokerage fees
for such services.
We
can provide no assurance that all or any of the common stock offered will be
sold by the Selling Stockholders named in this prospectus.
The
estimated costs of this offering are $70,996. We are bearing all costs relating
to the registration of the common stock. The Selling Stockholders, however, will
pay any commissions or other fees payable to brokers or dealers in connection
with any sale of the common stock.
The
Selling Stockholders named in this prospectus must comply with the requirements
of the Securities Act and the Exchange Act in the offer and sale of the common
stock. The Selling Stockholders and any broker-dealers who execute sales for the
Selling Stockholders may be deemed to be an "underwriter" within the meaning of
the Securities Act in connection with such sales. In particular, during such
times as the Selling Stockholders may be deemed to be engaged in a distribution
of the common stock, and therefore be considered to be an underwriter, they must
comply with applicable law and be required to, among other things:
·
|
Not
engage in any stabilization activities in connection with our common
stock;
|
||
·
|
Furnish
each broker or dealer through which common stock may be offered, such
copies of this prospectus, as amended from time to time, as may be
required by such broker or dealer;
and
|
·
|
Not
bid for or purchase any of our securities or attempt to induce any person
to purchase any of our securities other than as permitted under the
Exchange Act.
|
If an
underwriter is selected in connection with this offering, an amendment will be
filed to identify the underwriter, disclose the arrangements with the
underwriter, and we will file the underwriting agreement as an exhibit to this
prospectus.
The
Selling Stockholders and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations under such act, including, without
limitation, Regulation M. These provisions may restrict certain activities of,
and limit the timing of purchases and sales of any of the shares by the Selling
Stockholders or any other such person. In the event that the Selling
Stockholders are deemed affiliated purchasers or distribution participants
within the meaning of Regulation M, then the Selling Stockholders will not be
permitted to engage in short sales of common stock. Furthermore, under
Regulation M, persons engaged in a distribution of securities are prohibited
from simultaneously engaging in market making and certain other activities with
respect to such securities for a specified period of time prior to the
commencement of such distributions, subject to specified exceptions or
exemptions. In regards to short sells, the Selling Stockholder can only cover
its short position with the securities they receive from us upon conversion. In
addition, if such short sale is deemed to be a stabilizing activity, then the
Selling Stockholder will not be permitted to engage in a short sale of our
common stock. All of these limitations may affect the marketability of the
shares.
20
DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS
The
following table sets forth the names and ages of our current directors,
executive officers and key consultants as well as the principal offices and
positions held by each person. We are managed by our Board of Directors.
Currently, the Board has two members. Our executive officers serve at the
discretion of the Board of Directors. There are no family relationships between
any of the directors and executive officers. In addition, there was no
arrangement or understanding between any executive officer and any other person
pursuant to which any person was selected an executive officer.
Name
|
Age
|
Position
with Pegasus
|
Year
First Became a Director
|
|||
Carl E.
Worboys
|
66
|
President
and Director
(Principal
Executive Officer)
|
2004
|
|||
John
F. Passalaqua
|
73
|
Chief
Financial Officer, Secretary and Director
(Principal
Financial Officer
and
Principal Accounting Officer)
|
2004
|
Biographies:
Carl E. Worboys is a
practicing attorney in the State of New York. He has been active in
the public payphone business for several clients. From 1992 to 2004,
Mr. Worboys was in charge of regulatory affairs for American Telecommunications
Enterprises, Inc., a long distance carrier, and is responsible for the
development of payphone leasing programs for the carrier. From
October 2004 to September 2006, Mr. Worboys served as an executive officer and
director of Dolce Ventures, Inc.
John F. Passalaqua has been
serving as the Chief Financial Officer, Secretary and Director of the company
since October 2004. Mr. Passalaqua served as technical support employee for
several payphone companies in the local area, including Daytone, Inc., a New
York based phone company from September 2001 to September 2004. He was elected
an officer and director of Dolce Ventures, Inc. in October 2004 through
September 2006.
Involvement
in Certain Legal Proceedings
During
the past five years no director or executive officer of the company (i) has been
involved as a general partner or executive officer of any business which has
filed a bankruptcy petition; (ii) has been convicted in any criminal proceeding
nor is subject to any pending criminal proceeding; (iii) has been subjected to
any order, judgment or decree of any court permanently or temporarily enjoining,
barring, suspending or otherwise limiting his involvement in any type of
business, securities or banking activities; and (iv) has been found by a court,
the Commission or the Commodities Futures Trading Commission to have violated a
federal or state securities or commodities law.
Family
Relationships amongst Directors and Officers:
None of
the Officers or Directors are related.
Involvement
in Certain Legal Proceedings
None of
the executive officers of the Company (i) has been involved as a general partner
or executive officer of any business which has filed a bankruptcy petition; (ii)
has been convicted in any criminal proceeding nor is subject to any pending
criminal proceeding; (iii) has been subjected to any order, judgment or decree
of any court permanently or temporarily enjoining, barring, suspending or
otherwise limiting his involvement in any type of business, securities or
banking activities; and (iv) has been found by a court, the Commission or the
Commodities Futures Trading Commission to have violated a federal or state
securities or commodities law.
No
compensation has been awarded to, earned by or paid to our officers or directors
since our inception in 2002. Management has agreed to act without compensation
until authorized by our Board of Directors. As of the date of this Annual
Report, we have no funds available to pay officers or directors. Further, our
officers and directors are not accruing any compensation pursuant to any
agreement with us.
21
Indemnity
The
Articles of Incorporation provide for indemnification to the full extent
permitted by the laws of the State of Delaware for each person who becomes a
party to any civil or criminal action or proceeding by reason of the fact that
he, or his testator, or intestate, is or was a director or officer of the
corporation or served any other corporation of any type or kind, domestic or
foreign in any capacity at the request of the corporation.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors or officers pursuant to the foregoing provisions, we are
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy, as expressed in the Securities Act and
is, therefore, unenforceable.
Director
Compensation
We do not
currently pay any cash fees to our directors, but we pay directors’ expenses in
attending board meetings. During the year ended December 31, 2008, no director
expenses were reimbursed.
Employment
Agreements
The
Company is not a party to any employment agreements.
Significant
Employees
The
Company has no employees. Our executive officers and directors serve
as such on as-needed basis. The Company does not have any consultants or third
parties.
Committees
of the Board of Directors
Because
of our limited resources, our Board does not currently have an established audit
committee or executive committee. The current members of the Board perform the
functions of an audit committee, governance/nominating committee, and any other
committee on an as needed basis. If and when the Company grows its business
and/or becomes profitable, the Board intends to establish such
committees.
Code
of Business Conduct and Code of Ethics
Our Board
has not adopted a Code of Business Conduct and Ethics due to the Company’s
limited size. As our business grows, we anticipate adopting a Code of Business
Conduct and Ethics.
22
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table
on the following page sets forth certain information concerning the beneficial
ownership of our common stock by (i) each person known by us to be the owner of
more than 5% of our outstanding common stock, (ii) each director, (iii) each
Named Executive Officer, and (iv) all directors and executive officers as a
group, without naming them. In general, “beneficial ownership” includes those
shares a shareholder has the power to vote or the power to transfer, and stock
options and other rights to acquire common stock that are exercisable currently
or become exercisable within 60 days.
Except as
indicated otherwise, the persons named in the table below have sole voting and
investment power with respect to all shares shown as beneficially owned by
them. Unless otherwise indicated, the address of each of reporting person
is c/o Pegasus Tel, Inc., 118 Chatham Road, Syracuse, NY 13203.
Beneficial
Owner
|
Amount
and Nature of
Beneficial
Ownership
As
of the Record Date
|
Percentage
of Beneficial Ownership
(1)
|
||||||
Carl
E. Worboys
President
and Director
(Principal
Executive Officer)
|
2,502,189 | 12.38 | % | |||||
John
F. Passalaqua (2)
Chief
Financial Officer, Secretary and Director
(Principal
Financial/Accounting Officer)
|
3,103,367 | 15.35 | % | |||||
Joseph
C. Passalaqua (3)
|
7,501,285 | 37.10 | % | |||||
Mary
Passalaqua (4)
|
7,501,285 | 37.10 | % | |||||
All
Officers and Directors as a group (without naming them) (2
persons)
|
5,605,556 | 27.73 | % | |||||
(1)
|
Based
on 20,215,136 shares of common stock issued and outstanding as of the date
of this prospectus.
|
(2)
|
Includes
401,285 shares of common stock held by Inna Sheveleva. Inna
Sheveleva is the wife of John F. Passalaqua, Chief Financial Officer,
Secretary and Director of the Company.
|
(3)
|
Includes
2,500,000 shares of common stock held by Mary Passalaqua. Mary
Passalaqua is the wife of Joseph C. Passalaqua.
|
(4)
|
Includes
5,001,285 shares of common stock held by Joseph C.
Passalaqua. Joseph C. Passalaqua is the husband of Mary
Passalaqua.
|
DESCRIPTION
OF SECURITIES
General
On
February 19, 2002, we filed a Certificate of Incorporation with the Secretary of
State of Delaware. Our authorized capital was 1,000 shares of common
stock, no par value.
On
September 21, 2006, we filed an Amended and Restated Certificate of
Incorporation increasing our authorized capital to 110,000,000 shares, of which
100,000,000 shares were designated as Common Stock, par value $0.0001 per share,
and the remaining 10,000,000 as Preferred Stock, par value $0.0001 per
share. The designations and the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of such shares shall be
determined by the Board of Directors from time to time, without stockholder
approval.
On May
15, 2007, the Company filed an Amended Certificate of Incorporation and there
was forward stock split 5,100 to 1. This change is retro-active and
therefore changes the 1,000 shares of common stock issued on December 31, 2003
to 5,100,000 shares of common stock. The par value remains at $.0001
per share.
On August
5, 2008, we filed a Certificate of Designations, Powers, Preferences and Rights
(the “Certificate of Designation”) with the Secretary of State of the State of
Delaware thereby designating 2,000,000 shares of preferred stock as Series A
Convertible Preferred Stock, $0.0001 (the “Series A Preferred
Stock”). Prior to the filing of the Certificate of Designation, there
were no shares of preferred stock designated or issued. Pursuant to the
Certificate of Designation, each share of Series A Preferred Stock may be
converted at any time by Pegasus or the holders thereof into ten (10) fully-paid
and non-assessable shares of Pegasus Common Stock.
23
Common
Stock
There is
currently no market for our common stock. Upon the effectiveness of
this registration statement, we intend to solicit a market-maker to apply with
FINRA (formerly, the NASD) to have our common stock quoted on the OTC Pink
Sheets. As of the date of this prospectus, there are 20,215,136
shares of common stock issued and outstanding.
Pursuant
to our bylaws, our common stock is entitled to one vote per share on all matters
submitted to a vote of the stockholders, including the election of directors.
Except as otherwise required by law, the holders of our common stock possess all
voting power. Generally, all matters to be voted on by stockholders must be
approved by a majority (or, in the case of election of directors, by a
plurality) of the votes entitled to be cast by all shares of our common stock
that are present in person or represented by proxy. A simple majority (51%) of
the capital stock issued and outstanding, represented in person or by proxy,
shall constitute a quorum for the transaction of business at any shareholders’
meeting. A vote by the holders of a majority of our outstanding shares is
required to effectuate certain fundamental corporate changes such as
liquidation, merger or an amendment to our Certificate of Incorporation. Our
Certificate of Incorporation does not provide for cumulative voting in the
election of directors.
The
holders of shares of our common stock will be entitled to such cash dividends as
may be declared from time to time by our board of directors from funds available
therefore.
Upon
liquidation, dissolution or winding up of our company, the holders of shares of
our common stock will be entitled to receive, on a pro rata basis, all assets of
our company available for distribution to such holders.
In the
event of any merger or consolidation of our company with or into another company
in connection with which shares of our common stock are converted into or
exchangeable for shares of stock, other securities or property (including cash),
all holders of our common stock will be entitled to receive the same kind and
amount of shares of stock and other securities and property (including cash), on
a pro rata basis.
Holders
of our common stock have no pre-emptive rights, no conversion rights and there
are no redemption provisions applicable to our common stock.
As of the
date of this prospectus, there are 180 shareholders of record.
Preferred
Stock
On August
15, 2008, Pegasus issued an aggregate of 1,800,000 shares of Series A Preferred
Stock to an aggregate of 17 individuals pursuant to a Securities Purchase
Agreement for $0.0001per share of Series A Preferred Stock. Pegasus issued the
Series A Preferred Stock pursuant to an exemption under Section 4(2) of the
Securities Act due to the fact that it did not involve a public offering of
securities. The shares of Series A Preferred Stock are “restricted securities”
(as such term is defined in the Securities Act).
On August
18, 2008 and pursuant to the Certificate of Designation, Pegasus converted an
aggregate of 1,800,000 shares of Series A Preferred Stock into an aggregate of
18,000,000 shares of Pegasus common stock. Pegasus issued the common
stock pursuant to Section 3(a)(9) of the Securities Act due to the fact that the
securities were exchanged upon conversion of the Series A Preferred Stock held
by existing security holders and there was no commission or other remuneration
paid or given directly or indirectly for soliciting such exchange.
Dividends
We have
never declared dividends. We do not intend to declare any dividends in the
foreseeable future. We presently intend to retain earnings, if any, for the
development and expansion of our business.
Share
Purchase Warrants
We have
not issued and do not have outstanding any warrants to purchase shares of our
common stock.
We do not
have a stock option plan in place nor are there any outstanding exercisable for
shares of our common stock.
Convertible
Securities
We have
not issued and do not have outstanding any securities convertible into shares of
our common stock or any rights convertible or exchangeable into shares of our
common stock.
24
INTEREST
OF NAMED EXPERTS AND COUNSEL
No expert
or counsel named in this prospectus as having prepared or certified any part of
this prospectus or having given an opinion upon the validity of the securities
being registered or upon other legal matters in connection with the registration
or offering of the common stock was employed on a contingency basis, or had, or
is to receive, in connection with the offering, a substantial interest, direct
or indirect, in our company or any of its parents or subsidiaries. Nor was any
such person connected with our company or any of its parents or subsidiaries as
a promoter, managing or principal underwriter, voting trustee, director,
officer, or employee.
EXPERTS
The
Sourlis Law Firm has assisted us in the preparation of this prospectus and
registration statement and will provide counsel with respect to other legal
matters concerning the registration and offering of the common stock. The
Sourlis Law Firm has consented to being named as an expert in our registration
statement. Their consent to being named as Experts is filed as Exhibit 5.1 to
the Registration Statement of which this Prospectus is a part.
Robison,
Hill & Co., our certified public accountants, have audited our financial
statements included in this prospectus and registration statement to the extent
and for the periods set forth in their audit reports. Robison, Hill & Co.
has presented its report with respect to our audited financial statements. The
report of Robison, Hill & Co. is
included in reliance upon their authority as experts in accounting and auditing.
Their consent to being named as Experts is filed as Exhibit 23.1 to the
Registration Statement of which this Prospectus is a part.
DISCLOSURE
OF COMMISSION POSITION OF
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our
Articles of Incorporation provide for indemnification to the full extent
permitted by the laws of the State of Delaware for each person who becomes a
party to any civil or criminal action or proceeding by reason of the fact that
he, or his testator, or intestate, is or was a director or officer of the
corporation or served any other corporation of any type or kind, domestic or
foreign in any capacity at the request of the corporation.
We have
been advised that, in the opinion of the SEC, indemnification for liabilities
arising under the Securities Act is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities is asserted by one of our directors,
officers, or controlling persons in connection with the securities being
registered, we will, unless in the opinion of our legal counsel, submit the
question of whether such indemnification is against public policy to a court of
appropriate jurisdiction.
ORGANIZATION
WITHIN LAST FIVE YEARS
25
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
You
should read the following discussion together with "Selected Historical
Financial Data" and our consolidated financial statements and the related notes
included elsewhere in this prospectus. This discussion contains forward-looking
statements, which involve risks and uncertainties. Our actual results may differ
materially from those we currently anticipate as a result of many factors,
including the factors we describe under "Risk Factors," "Special Note Regarding
Forward-Looking Statements" and elsewhere in this prospectus.
Forward
Looking Statements
Some of
the information in this section contains forward-looking statements that involve
substantial risks and uncertainties. You can identify these statements by
forward-looking words such as "may," "will," "expect," "anticipate," "believe,"
"estimate" and "continue," or similar words. You should read statements that
contain these words carefully because they:
·
|
discuss
our future expectations;
|
·
|
contain
projections of our future results of operations or of our financial
condition; and
|
·
|
state
other "forward-looking"
information.
|
We
believe it is important to communicate our expectations. However, there may be
events in the future that we are not able to accurately predict or over which we
have no control. Our actual results and the timing of certain events could
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including those set forth under "Risk Factors,"
"Business" and elsewhere in this prospectus. See "Risk Factors."
Unless
stated otherwise, the words “we,” “us,” “our,” “the Company” or “Pegasus” in
this prospectus collectively refers to the Company.
General
Pegasus
Tel, Inc., or Pegasus, was incorporated under the laws of the State of Delaware
on February 19, 2002 to enter into the telecommunication business.
On
September 21, 2006, the Company filed Amended and Restated Certificate of
Incorporation increasing its authorized capital to 110,000,000 shares, of which
100,000,000 shares were designated as Common Stock, par value $0.0001 per share,
and the remaining 10,000,000 as Preferred Stock, par value $0.0001 per
share. The designations and the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of such shares shall be
determined by the Board of Directors from time to time, without stockholder
approval.
On May 7,
2007, we filed a Registration Statement on Form 10-SB (File No.: 0-52628), or
the Registration Statement, with the SEC to register the Pegasus common stock
under Section 12(g) of the Securities Exchange Act of 1934, as amended, or the
Exchange Act. The Registration Statement went effective on July 6, 2007 through
the operation of law 60 days after its initial filing. On March 23, 2009, we
filed with the SEC a Form 15 to deregister our common stock under Section 12 of
the Exchange Act and to terminate our status as a reporting company under the
Exchange Act.
On May
15, 2007, the Company filed an Amended Certificate of Incorporation to
effectuate a forward stock split 5,100 to 1. This change is
retro-active and therefore changes the 1,000 shares of common stock issued on
December 31, 2003 to 5,100,000 shares of common stock. The par value
remains at $0.0001 per share.
On August
5, 2008, Pegasus filed a Certificate of Designations, Powers, Preferences and
Rights (the “Certificate of Designation”) with the Secretary of State of the
State of Delaware thereby designating 2,000,000 shares of preferred stock as
Series A Convertible Preferred Stock, $0.0001 (the “Series A Preferred
Stock”). The Certificate of Incorporation of Pegasus authorizes the
designation and issuance of an aggregate of ten million (10,000,000) shares of
preferred stock in one or more series with all rights and privileges determined
by the Board of Directors of Pegasus. Prior to the filing of the
Certificate of Designation, there were no shares of preferred stock designated
or issued. Pursuant to the Certificate of Designation, each share of Series A
Preferred Stock may be converted at any time by Pegasus or the holders thereof
into ten (10) fully-paid and non-assessable shares of Pegasus Common
Stock.
On August
15, 2008, Pegasus issued an aggregate of 1,800,000 shares of Series A Preferred
Stock to an aggregate of 17 individuals pursuant to a Securities Purchase
Agreement for $0.0001per share of Series A Preferred Stock. Pegasus issued the
Series A Preferred Stock pursuant to an exemption under Section 4(2) of the
Securities Act due to the fact that it did not involve a public offering of
securities. The shares of Series A Preferred Stock are “restricted securities”
(as such term is defined in the Securities Act).
26
On August
18, 2008, Sino Gas International Holdings, Inc., a Utah corporation, or Sino,
(OTCBB: SGAS), our former parent company, distributed to its stockholders of
record as of August 15, 2008 100% of the issued and outstanding common stock of
Pegasus. The ratio of distribution of the distribution was one (1)
share of common stock of Pegasus for every twelve (12) shares
of common stock of Sino (1:12). Fractional shares were
rounded up to the nearest whole-number. An aggregate of 2,215,136
shares of Pegasus common stock were issued pursuant to the distribution to an
aggregate of 167 Sino stockholders. The Pegasus common stock issued were and
remain “restricted securities” (as defined in Rule 144 of the Securities Act of
1933, as amended), and were issued pursuant to the exemptions from the
registration requirements of the Securities Act afforded the company under
Section 4(2) of the Securities Act due to the fact that the distribution did not
involve a public offering of securities. There currently is no market
for the Pegasus common stock.
On August
18, 2008 and pursuant to the Certificate of Designation, Pegasus converted an
aggregate of 1,800,000 shares of Series A Preferred Stock into an aggregate of
18,000,000 shares of Pegasus common stock. Pegasus issued the common
stock pursuant to Section 3(a)(9) of the Securities Act due to the fact that the
securities were exchanged upon conversion of the Series A Preferred Stock held
by existing security holders and there was no commission or other remuneration
paid or given directly or indirectly for soliciting such
exchange.
Services
and Products
We own,
operate and manage privately owned public payphones in the County of Delaware,
State of New York. As of December 31, 2008, we owned, operated and managed 13
payphones. We may pay site owners a commission based on a flat monthly rate or
on a percentage of sales. Some of the businesses include, but are not limited
to, retail stores, convenience stores, bars, restaurants, gas stations, colleges
and hospitals. In the alternative, our agreement with business owners may be to
provide the telecommunications services without the payment of any
commissions.
Seasonality
Our
revenues from payphone operation are affected by seasonal variations, geographic
distribution of payphones and type of location. Because we operate in the
northeastern part of the country with many of the payphones located outdoor,
weather patterns affect our revenue streams. Revenues drop off significantly
during winter and conversely show an increase in the spring and summer. Revenues
are generally lowest in the first quarter and highest in the third
quarter.
Our
installed payphone base generates revenue from two principal sources: coin-calls
and non-coin calls.
1. Coin
calls:
Coin
calls represent calls paid for by customers who deposit coins into the
payphones. Coin call revenue is recorded as the actual amount of coins collected
from the payphones.
2. Non-Coin
calls:
Non-coin
revenue includes commissions from operator service telecommunications companies
and a “dial-around” commission of $0.494 per call that the FCC requires sellers
of long distance toll free services to pay payphone owners. The commissions for
operator services are paid 45 days in arrears. These funds are remitted
quarterly through a service provided by the American Public Communication
Council (APCC).
Market
and Competition
The
market in which we do business is highly competitive and constantly evolving. We
face competition from the larger and more established companies -- from
companies that develop new technology, as well as the many smaller companies
throughout the country. The last several years have shown a marked increase in
the use of cellular phones and toll free services which cut into our potential
payphone customer base. Companies that have greater resources, including but not
limited to, a larger sales force, access to more capital, larger manufacturing
capabilities and greater ability to expand their markets also cut into our
potential payphone customers. Many of our competitors have longer operating
histories, significantly greater financial strength, nationwide advertising
coverage and other resources that we do not have. Our competitors might
introduce a less expensive or more improved payphone. These, as well as other
factors can have a negative impact on our income.
The
competition from cellular phones is a very serious threat that can result in
substantially less revenue per payphone. We have attempted to address this issue
by avoiding locations that service business travelers. For many years, these
locations were the most lucrative, but now they are the locations most impacted
by the cellular user.
The large
former Bell companies who provide local service dominate the industry. These
companies have greater financial ability than us, and provide the greatest
competitive challenge. However, we compete with these companies by paying a
commission to the site owner. The commission is an enticement for the site owner
to use our phone on its site. We believe we are able to provide a higher quality
customer service because the phones alert us to any technical difficulties, and
we can service them promptly. The ability to immediately know that a problem
exists with a payphone is very important because down time for a phone means
lost revenue for us.
27
Industry
Trends
We
operate 13 payphones in upstate New York. However, industry trends in
the payphone industry are not specific to upstate New York; but, rather, mirror
what is happening in the industry nationwide. Over the past years,
more and more people are opting to use personal cell phones to communicate as
compared to pay phones. Cell phone technology has advanced over the
recent years and competition has made cell phones and cell phone service plans
more affordable to the average consumer. Pay phones have had a hard
time competing with cell phones and we do not see this changing in the
foreseeable future. Consumers might opt to use pay phones in areas
where cell phone reception is nonexistent or unreliable or when consumers do not
wish to incur charges for minutes used on their cell phone. This is
not specific to upstate New York but apply to the cell phone industry
nationwide.
Costs
related to our operations.
The
principal costs related to the ongoing operation of our payphones include
telecommunication costs, commissions and depreciation. Telecommunication
expenses consist of payments made by us to local exchange carriers and long
distance carriers for access to and use of their telecommunications networks and
service and maintenance costs. Commission expense represents payments to owners
or operators of the premises at which a payphone is located.
Results
of Operations
At
December 31, 2008, we had $618 cash on hand, as compared to $425 at December 31,
2007. At December 31, 2008, we had a stockholders’ deficit of
$(124,413), as compared to $(83,711) at December 31, 2008. Since our
inception we have incurred $(182,277) in losses as of December 31,
2008.
Our total
revenue decreased by $3,312, from $10,059 for the year ended December 31, 2007
to approximately $6,747 for the year ended December 31, 2008. This decrease was
primarily due to a decline in payphone customers from 2007 to 2008 and a lower
volume of calls. In the fiscal years ended 2007 and 2008, the company lost 2
payphone customer locations. We foresee revenues decreasing further in light of
the growing trend of cell phone use. We anticipate remedying this situation by
strategically placing payphones in key areas, especially where cell phone
reception is not reliable.
Our coin
call decreased by $1,750, from $4,026 for the year ended December 31, 2007 to
approximately $2,276 for year ended December 31, 2008. This increase
was primarily due to a correction in the current year of a previous problem of
disrupted service at the central office of Margaretville Telephony Company, the
Company’s sole dial tone provider.
Our
non-coin call revenue, or commission income, which is comprised primarily of
“dial around” revenue and operator service revenue decreased $1,562 from $6,033
for the year ended December 31, 2007 to $4,471 for the year ended December 31,
2008. This decrease was primarily due to a decline in payphone customers from
2007 to 2008 and a lower volume of calls. In the fiscal years ended 2007 and
2008, the company lost 2 payphone customer locations. The FCC requires the
sellers of long distance toll free services to pay the payphone owner $0.494
cents per “dial-around” call. These funds are remitted quarterly through a
service provided by the American Public Communication Council
(APCC).
Our local
service revenue which is comprised primarily of service for payphone
customers remained the same at $2,520 for the years ended December
31, 2008 and 2007. This is the revenue from 3 monthly invoices billed in 2008 to
payphone customers in which the Company owns the payphone and provides service
to operate the payphone on the premises. As of December 31, 2008 the customers
that made up the local service revenue were: Margaretville Central School,
Margaretville, NY; Mountainside Residential Care Center, Lake Katrine, NY and
A& P Super Mart, Margaretville, NY.
Costs
of services
Our
overall cost of services decreased by $2,061, from $5,904 for the year ended
December 21, 2007, to $3,843 for the year ended December 31,
2007. The principal costs related to the ongoing operation of our
payphones include telecommunication costs, commissions and depreciation.
Telecommunication costs consist of payments made by us to local exchange
carriers and long distance carriers for access to and use of their
telecommunications networks and service and maintenance costs. Commission
expense represents payments to owners or operators of the premises at which a
payphone is located. Telecommunication costs decreased by $110 for the year
ended December 31, 2008 when compared to the same period in
2007. Commissions decreased by $1,442 for the year ended December 31,
2008 when compared to the same period in 2007 due to a lower volume of calls.
Depreciation decreased by $509 for the year ended December 31, 2008 when
compared to the same period in 2007. In 2008 the
payphone equipment was fully depreciated.
Once a
low revenue payphone is identified, we offer the site owner an opportunity to
purchase the equipment. If the site owner does not purchase the payphone, we
remove it from the site. Also a correction was made at the central office of
Margaretville Telephony Company to provide a higher level of uninterrupted
service to increase revenue in the future. We own telephone equipment which
provides a service for a number of years. The term of service is commonly
referred to as the "useful life" of the asset. Because an asset such as
telephone equipment or motor vehicle is expected to provide service for many
years, it is recorded as an asset, rather than an expense, in the year acquired.
A portion of the cost of the long-lived asset is reported as an expense each
year over its useful life and the amount of the expense in each year is
determined in a rational and systematic manner.
28
Operation
and Administrative expenses
Operating
expenses decreased by $30,970, from $66,459 for the year ended December 31, 2007
to $35,489 for the year ended December 31, 2008. Professional fees decreased
from $65,458 for the fiscal year ended December 31, 2007 to $31,970 for the
fiscal year ended December 31, 2008. Professional fees include fees the
Company pays for accountants, bookkeepers and attorneys throughout the year
for performing various tasks. This decrease was primarily due to decrease in
legal fees when comparing the same period ending 2007 and 2008. Outside Services
expenses increased by $942 in 2008. General and Administrative expenses, which
is primarily consists of office expenses, increased from $1,211 for the year
ended December 31, 2007 to $2,577in the fiscal year ended December 31,
2008.
The
six months ended June 30, 2009 compared to the six months ended June 30,
2008.
Results
of Operations
At June
30, 2009, we had $450 cash on hand, as compared to $618 at December 31,
2008. At June 30, 2009, we had a stockholders’ deficit of $
(142,220), as compared to $(124,413) at December 31, 2008. Since our
inception we have incurred $(200,084) in losses as of June 30,
2009.
Our total
revenue decreased by $1,229, from $3,406 for the six months ended June 30, 2008
to approximately $2,177 for the six months ended June 30, 2009. This decrease
was primarily due to a decline in payphone customers from 2008 to 2009 and a
lower volume of calls. In the fiscal year ended 2008 and the quarter ended June
30, 2009 the company has lost payphone customer locations.
We
foresee revenues decreasing further in light of the growing trend of cell phone
use. We anticipate remedying this situation by strategically placing payphones
in key areas, especially where cell phone reception is not
reliable.
Our coin
call decreased by $509, from $1,103 for the six months ended June 30, 2008 to
approximately $594 for six months ended June 30, 2009. This increase
was primarily due to a correction in the current year of a previous problem of
disrupted service at the central office of Margaretville Telephony Company, the
Company’s sole dial tone provider.
Our
non-coin call revenue, or commission income, which is comprised primarily of
“dial around” revenue and operator service revenue decreased $540 from $1,043
for the six months ended June 30, 2008 to $503 for the six months ended June 30,
2009. This decrease was primarily due to a decline in payphone customers in 2008
and 2009 and a lower volume of calls. In the fiscal year ended 2008 and 2009,
the company lost payphone customer locations. The FCC requires the sellers of
long distance toll free services to pay the payphone owner $0.494 cents per
“dial-around” call. These funds are remitted quarterly through a service
provided by the American Public Communication Council (APCC).
Our local
service revenue which is comprised primarily of service for payphone customers
decreased by $180, from $1,260 in the six months ended June 30, 2008 to $1,080
in the six months ended June 30, 2009. This is the revenue from 2 monthly
invoices billed in 2009 to payphone customers in which the Company owns the
payphone and provides service to operate the payphone on the premises. As of
June 30, 2009 the customers that made up the local service revenue were:
Margaretville Central School, Margaretville, NY and
Mountainside
Residential Care Center, Lake Katrine, NY.
Costs
of Services
Our
overall cost of services decreased by $159, from $1,920 for the six months ended
June 30, 2008, to $1,761 for the six months ended June 30, 2009. The
principal costs related to the ongoing operation of our payphones include
telecommunication costs, commissions and depreciation. In 2009, there were no
Commission or Depreciation costs. Telecommunication costs consist of payments
made by us to local exchange carriers and long distance carriers for access to
and use of their telecommunications networks and service and maintenance costs.
Commission expense represents payments to owners or operators of the premises at
which a payphone is located. In 2009, there were no Depreciation costs as the
payphone equipment was fully depreciated. Telecommunication costs decreased by
$61 for the six months ended June 30, 2009 when compared to the same period in
2008. Commissions decreased by $98 for the six months ended June 30,
2009 when compared to the same period in 2008 due to a lower volume of
calls.
Once
a low revenue payphone is identified, we offer the site owner an opportunity to
purchase the equipment. If the site owner does not purchase the payphone, we
remove it from the site. Also a correction was made at the central office of
Margaretville Telephony Company to provide a higher level of uninterrupted
service to increase revenue in the future. We own telephone equipment which
provides a service for a number of years. The term of service is commonly
referred to as the "useful life" of the asset. Because an asset such as
telephone equipment or motor vehicle is expected to provide service for many
years, it is recorded as an asset, rather than an expense, in the year acquired.
A portion of the cost of the long-lived asset is reported as an expense each
year over its useful life and the amount of the expense in each year is
determined in a rational and systematic manner.
29
Operation
and Administrative expenses
Operating
expenses decreased by $16,339, from $29,925 for the six months ended June 30,
2008 to $13,586 for the six months ended June 30, 2009. Professional fees
decreased by $17,783 from $29,545 for the fiscal six months ended June 30, 2008
to $11,762 for the fiscal six months ended June 30, 2009. Professional
fees include fees the Company pays for accountants, bookkeepers and
attorneys throughout the year for performing various tasks. This decrease was
primarily due to decrease in accounting fees when comparing the same six month
period ending 2008 and 2009. Outside Services expenses increased by $1,633 in
2009. General and Administrative expenses, which primarily consists of office
expenses, decreased by $189, from $380 for the six months ended June 30, 2008 to
$191 in the fiscal six months ended June 30, 2009.
Going
Concern Qualification
In their
Independent Auditor's Report for the fiscal years ending December 31, 2007 and
December 31, 2008, Robison, Hill & Co., our auditors, states that we have
incurred annual losses since inception raising substantial doubt about our
ability to continue as a going concern.
Liquidity
and Capital Resources
At June
30, 2009, we had $450 cash on hand and a stockholders’ deficit of
$(142,220). In their 2008 audit report, our auditors have expressed
their doubt as to our ability to continue as a going concern. Our
primary source of liquidity has been from borrowing funds from certain executive
officers and principal stockholders related to certain of our executive
officers. As of December 31, 2008 and 2007, we had $618 and 425 in cash and cash
equivalents respectively. Our net loss for years ended December 31, 2008 and
2007 were $(40,882) and $(65,711) respectively. Our accounts
receivable for the years ended December 31, 2008 and 2007 were $1,542 and
$1,911, respectively. The accumulated deficit as of December 31, 2008
was $ (182,277). As of June 30, 2009, we had $450 in cash and cash equivalents
on hand and a net loss for the six months of $17,807. Our accounts receivable
for the six months ended June 30, 2009 was $110. The accumulated
deficit as of June 30, 2009 is $(200,084).
The
Company has identified both the short-term and long-term issues in order to
reduce its losses and increase liquidity, the plan of management to address
these issues and the likelihood of success as follows:
Short –Term
Issues: The Company’s lack of profits or revenue and limited
cash, which has created a deficit and loss for the Company.
Long – Term Issues:
The Company’s Registration Statement has not been approved and
cleared by the SEC and the capital stock is not a marketable
commodity.
Management’s Plan to address
these issues and the likelihood of success against these
issues: The Company has negotiated with one of its
shareholders, Mary Passalaqua, a pledge of $75,000 in future loans available to
the Company. These loans will be enough to get the Company to
increase the liquidity, and for management to create market awareness in the
private sector. Management finds the likelihood of success very good that this
plan will counteract the short-term and long-term issues. The
specific issue of the Company is primary cash and funding and with the pledge of
future loans from Mary Passalaqua in the amount of $75,000 and future prospect
of the Company to have marketable and tradable shares, Management is
confident that this issue will be resolved.
As of
December 31, 2008 and June 30, 2009, the Company owed $68,487 in Related Party
Notes Payable. These notes are owed to Shareholders of the Company,
Joseph C. Passalaqua and Mary Passalaqua. These notes are accruing
simple interest of 10%, 15% and 18% annually. As of December 31, 2008, the
Company owed a total principle balance of $68,487 related to these notes and had
accrued $11,321 in simple interest. As of June 30, 2009, the Company owed a
total principle balance of $68,487 related to these notes and had accrued 15,858
in simple interest.
As of
December 31, 2008, the Company owed $18,691 in Related Party Accounts Payable.
As of December this balance includes $7,794 due to Lyboldt-Daly Inc. for
bookkeeping expenses and $10,673 due to Joseph C. Passalaqua (a major
shareholder of the Company and brother to John F. Passalaqua, an officer of the
Company) is President and Sole Director of Lyboldt-Daly, Inc. It also
includes $224 owed to Carl Worboys, an officer of the Company. These
amounts are non-interest bearing.
As of
June 30, 2009, the Company owed $18,839 in Related Party Accounts Payable. As of
June 30, 2009 this includes $7,942 payable to Lyboldt-Daly Inc. for bookkeeping
expenses and $10,673 due to Joseph C. Passalaqua (a major shareholder of the
Company and brother to John F. Passalaqua, an officer of the Company) is
President and Sole Director of Lyboldt-Daly, Inc. It also includes
$224 owed to Carl Worboys, an officer of the Company. These amounts are
non-interest bearing
Off-Balance Sheet
Arrangements
We did
not have any off-balance sheet arrangements that have or are reasonably likely
to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to
investors.
Critical
Accounting Policies & Estimates
The
following describes critical accounting policies and estimates:
30
It is
important to note that when preparing the financial statements in conformity
with U.S. generally accepted accounting principles, management is required to
make certain estimates and assumptions that affect the amounts reported and
disclosed in the financial statements and related notes. Actual
results could differ if those estimates and assumptions approve to be
incorrect.
On an
ongoing basis, we evaluate our estimates, including those related to estimated
customer life, used to determine the appropriate amortization period for
deferred revenue and deferred costs associated with licensing fees, the useful
lives of property and equipment and our estimates of the value of common stock
for the purpose of determining stock-based compensation. We base our estimates
on historical experience and on various other assumptions that we believe to be
reasonable, the results of which form the basis for making judgments about the
carrying values of assets and liabilities.
Cash and Cash
Equivalents
For
purposes of the statement of cash flows, the Company considers all highly liquid
debt instruments purchased with a maturity of 90 days or less to be cash
equivalents to the extent the funds are not being held for investment
purposes.
Revenue
Recognition
The
Company derives its primary revenue from the sources described below, which
includes dial-around revenues, operator service revenue, coin collections,
telephone equipment repairs, and sales. Other revenue generated by the company
includes sales commissions.
The Dial
Around revenue is recognized when the billing and collection agent of the
Company, APCC, calculates and compensates the Company for the use of the
payphone on a quarterly basis by billing the actual party’s long distance
carrier that received the calls. The date of the Dial Around revenue
recognition is determined when this compensation is collected and deposited into
the Company’s bank account.
The
Operator Service revenue is recognized when the collection agents of the
Company, Legacy Long Distance and US Intercom calculates and compensates the
Company for the use of operator services on a monthly basis. The date of the
Operator Service revenue recognition is determined when this compensation is
collected and deposited into the Company’s bank account.
Coin
revenues are recorded in an equal amount to the coins collected.
Revenues
on commissions, telephone equipment and sales are realized when the services are
provided and payment for such services is deemed certain.
Recent Accounting
Standards
In
February 2007, the FASB issued SFAS no, 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159
provides companies with an option to report selected financial assets and
liabilities at fair value. The objective of SFAS 159 is to reduce
both complexity in accounting for financial instruments and the volatility in
earnings caused by measuring related assets and liabilities
differently. Generally accepted accounting principles have required
different measurement attributes for different assets and liabilities that can
create artificial volatility in earnings. The FASB has indicated it
believes that SFAS 159 helps to mitigate this type of accounting-induced
volatility by enabling companies to report related assets and liabilities at
fair value, which would likely reduce the need for companies to comply with
detailed rules for hedge accounting. SFAS 159 also establishes
presentation and disclosure requirements designed to facilitate comparisons
between companies that choose different measurement attributes for similar types
of assets and liabilities. SFAS 159 does not eliminate disclosure
requirements included in other accounting standards, including requirements for
disclosures about fair value measurements included in SFAS 157 and SFA No. 107,
“Disclosures about Fair Value of Financial Instruments.”SFAS 159 is effective
for the Company as of the beginning of fiscal year 2008. The adoption
of this pronouncement is not expected to have an impact on the Company’s
financial position, results of operations or cash flows.
In
December 2007, the FASB issued SPAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements - An Amendment of ARB No. 51” (“SFAS 160”).
SFAS 160 establishes accounting and reporting standards for the noncontrolling
interest in a subsidiary (previously referred to as minority interests). SFAS
160 also requires that a retained noncontrolling interest upon the
deconsolidation of a subsidiary be initially measured at its fair value. Upon
adoption of SFAS 160, the Company would be required to report any noncontrolling
interests as a separate component of stockholders’ deficit. The Company would
also be required to present any net income attributable to the stockholders of
the Company separately in its condensed consolidated statement of operations.
SFAS 160 is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008. SFAS 160 requires retroactive
adoption of the presentation and disclosure requirements for existing minority
interests. All other requirements of SFAS 160 shall be applied prospectively.
SFAS 160 would have an impact on the presentation and disclosure of the
noncontrolling interests of any non-wholly owned business acquired in the
future.
31
In
December 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financials Accounting Standards (“SFAS”) No. 141R, “Business
Combinations” (“SFAS 141R”), which replaces SPAS No. 141 “Business
Combinations”. SFAS 141R establishes principles and requirements for determining
how an enterprise recognizes and measures the fair value of certain assets and
liabilities acquired in a business combination, including noncontrolling
interest, contingent consideration, and certain acquired contingencies. SFAS
141R also requires acquisition-related transaction expenses and restructuring
cost be expensed as incurred rather than capitalized a component of the business
combination. SFAS 141R will be applicable prospectively to business combinations
for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. SFAS 141R would have
an impact on accounting for any business acquired after the effective date of
this pronouncement.
In March
2008, the FASB issued No. 161, “Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133. (“SFAS
161"). SFAS 161 requires enhanced disclosures about an entity's
derivative and hedging activities and thereby improves the transparency of
financial reporting. This Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. This Statement encourages, but does
not require, comparative disclosures for earlier periods at initial
adoption. Management is currently evaluating the effects of this
statement, but it is not expected to have any impact on the Company’s financial
statements.
Allowance for Doubtful
Accounts
The
Company recognizes an allowance for doubtful accounts to ensure accounts
receivable are not overstated due to uncollectibility. Bad debt reserves are
maintained for all customers based on a variety of factors, including the length
of time the receivables are past due, significant one-time events and historical
experience. An additional reserve for individual accounts is recorded when the
Company becomes aware of a customer’s inability to meet its financial
obligation, such as in the case of bankruptcy filings or deterioration in the
customer’s operating results or financial position. If circumstances
related to customers change, estimates of the recoverability of receivables
would be further adjusted. As of the periods ending, December 31, 2007 and 2008,
the Company has determined an allowance for doubtful accounts is not
necessary.
Fixed
Assets
Fixed
assets are stated at cost. Depreciation expense for the year ended December 31,
2008 and December 31, 2007, were $0 and $509 respectively. As of
December 31, 2008 the fixed asset has been fully depreciated. Depreciation and
amortization were computed using the straight-line and accelerated methods over
the estimated economic useful lives of the related assets as
follows:
Asset
|
Rate
|
|
Payphone
Equipment
|
5
years
|
|
Maintenance
and repairs are charged to operations; betterments are
capitalized. The cost of property sold or otherwise disposed of and
the accumulated depreciation thereon are eliminated from the property and
related accumulated depreciation accounts, and any resulting gain or loss is
credited or charged to income.
Concentration of Credit
Risk
The
Company has no significant off-balance-sheet concentrations of credit risk such
as foreign exchange contracts, options contracts or other foreign hedging
arrangements.
Pervasiveness of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles required management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those
estimates.
Loss per
Share
Basic
loss per share has been computed by dividing the loss for the period applicable
to the common stockholders’ by the weighted average number of common shares
outstanding during the period. There were no common equivalent shares
outstanding during the periods ended December 31, 2007 and 2008.
Financial
Instruments
The
Company’s financial assets and liabilities consist of cash, inventory, accounts
receivable, property and equipment, and accounts payable. Except as otherwise
noted, it is management’s opinion that the Company is not exposed to significant
interest or credit risks arising from these financial instruments. The fair
values of these financial instruments approximate their carrying values due to
the sort-term maturities of these instruments.
32
Income
Taxes
The
Company accounts for income taxes under the provisions of SFAS No.109,
“Accounting for Income Taxes.” SFAS No.109 requires recognition of
deferred income tax assets and liabilities for the expected future income tax
consequences, based on enacted tax laws, of temporary differences between the
financial reporting and tax bases of assets and liabilities.
Reclassification
Certain
reclassifications have been made in the 2007 financial statements to conform to
the December 31, 2008 presentation.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONSAND CORPORATE GOVERNANCE
As of
December 31, 2008, we had a related party accounts payable to Joseph C.
Passalaqua in the amount of $10,673 and $14,887 in notes payable that are
accruing 10% and 18% interest bearing per annum. As of December 31, 2008,
$14,887 in principle and has accrued $1,143 in simple interest. We also have
notes payable to Mary Passalaqua in the amount of $53,600 that are accruing 10%
and 15% interest bearing per annum. As of December 31, 2008, $53,600 in
principle and has accrued $10,178 in simple interest. Joseph C. Passalaqua is
the brother of John F. Passalaqua, our Chief Financial Officer and Secretary and
husband to Mary Passalaqua. Mary Passalaqua is sister-in-law of John
F. Passalaqua, our Chief Financial Officer, Secretary and Joseph C. Passalaqua’s
wife.
As of
June 30, 2009, we had a related party accounts payable to Joseph C. Passalaqua
in the amount of $10,673 and $14,887 in notes payable that are accruing 10% and
18% interest bearing, respectively, per annum. As of June 30, 2009,
$14,887 in principle and has accrued $2,273 in simple interest. We
also have notes payable to Mary Passalaqua in the amount of $53,600 that are
accruing 10% and 15% interest bearing per annum. As of June 30, 2009, $53,600 in
principle and has accrued $13,585 in simple interest. Joseph C.
Passalaqua is the brother of John F. Passalaqua, our Chief Financial Officer and
Secretary and husband to Mary Passalaqua. Mary Passalaqua is
sister-in-law of John F. Passalaqua, our Chief Financial Officer, Secretary and
Joseph C. Passalaqua’s wife.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There
currently is no trading market for our common stock and we cannot assure that
one will develop or be maintained. In not, your investment might be
illiquid.
There is
currently no market for our common stock. Upon the effectiveness of
this registration statement, we intend to solicit a market-maker to apply with
FINRA (formerly, the NASD) to have our common stock quoted on the OTC Bulletin
Board (OTCBB). We cannot assure that a market will develop or
maintained. In not, your investment might be illiquid.
If
a trading market develops for our common stock, we will be subject to SEC
regulations relating to “penny stock” and the market for our common stock could
be adversely affected.
The SEC
has adopted regulations concerning low-priced stock, or “penny stocks.” The
regulations generally define "penny stock" to be any equity security that has a
market price less than $5.00 per share, subject to certain exceptions. If our
shares are offered at a market price less than $5.00 per share, and do not
qualify for any exemption from the penny stock regulations, our shares may
become subject to these additional regulations relating to low-priced
stocks.
The penny
stock regulations require that broker-dealers, who recommend penny stocks to
persons other than institutional accredited investors make a special suitability
determination for the purchaser, receive the purchaser's written agreement to
the transaction prior to the sale and provide the purchaser with risk disclosure
documents that identify risks associated with investing in penny stocks.
Furthermore, the broker-dealer must obtain a signed and dated acknowledgment
from the purchaser demonstrating that the purchaser has actually received the
required risk disclosure document before effecting a transaction in penny stock.
These requirements have historically resulted in reducing the level of trading
activity in securities that become subject to the penny stock rules. The
additional burdens imposed upon broker-dealers by these penny stock requirements
may discourage broker-dealers from effecting transactions in the common stock,
which could severely limit the market liquidity of our common stock and our
shareholders' ability to sell our common stock in the secondary
market.
Transfer
Agent
Fidelity
Stock Transfer Company
8915
South 700 E.
Suite
102
Sandy,
UT 84070
(801)
562-1300
33
Holders
of Our Common Stock
As of the
date of this prospectus, we had approximately 180 holders of record of our
common stock, and no preferred stockholders.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE
None
WHERE
YOU CAN FIND MORE INFORMATION
We have
filed a registration statement on Form S-1 under the Securities Act with the
Securities and Exchange Commission with respect to the shares of our common
stock offered through this prospectus. This prospectus is filed as a part of
that registration statement, but does not contain all of the information
contained in the registration statement and exhibits. Statements made in the
registration statement are summaries of the material terms of the referenced
contracts, agreements or documents of our company. We refer you to our
registration statement and each exhibit attached to it for a more detailed
description of matters involving our company and the statements we have made in
this prospectus are qualified in their entirety by reference to these additional
materials. You may inspect the registration statement, exhibits and schedules as
well as our reports filed with the Securities and Exchange Commission at the
SEC's principal office in Washington, D.C. Copies of all or any part of the
registration statement may be obtained from the Public Reference Section of the
SEC, Room 1580, 100 F Street NE, Washington D.C. 20549. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the operation of the public reference rooms. The Securities and Exchange
Commission also maintains a website
at http://www.sec.gov that contains reports, proxy
statements and information regarding registrants that file electronically with
the SEC. Our registration statement and the referenced exhibits can also be
found on this site.
34
PEGASUS
TEL, INC.
(A
Development Stage Company)
-:-
INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS’ REPORT
DECEMBER
31, 2008 and 2007
35
CONTENTS
Page
|
|
Independent
Registered Public Accountants’ Report
|
F -
1
|
Balance
Sheets
|
|
December
31, 2008 and
|
|
December
31, 2007
|
F -
3
|
Statements
of Operations for the year ended December 31, 2008 and
|
|
for
the year ended December 31, 2007 and the cumulative period
from
|
|
February
19, 2002 (inception) to December 31, 2008
|
F -
4
|
Statement
of Stockholders' Equity
|
|
Since
February 19, 2002 (inception) to December 31, 2008
|
F -
5
|
Statements
of Cash Flows for year ended December 31, 2008 and
|
|
for
the year ended December 31, 2007 and the cumulative period
from
|
|
February
19, 2002 (inception) to December 31, 2008
|
F –
6
|
Notes
to Financial Statements
|
F –
7
|
36
ROBISON,
HILL & CO.
|
Certified
Public Accountants
|
|||
A
PROFESSIONAL CORPORATION
|
||||
BRENT
M. DAVIES, CPA
|
||||
DAVID
O. SEAL, CPA
|
||||
W.
DALE WESTENSKOW, CPA
|
||||
BARRY
D. LOVELESS, CPA
|
||||
STEPHEN
M. HALLEY, CPA
|
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders
of Pegasus Tel, Inc.
We have
audited the accompanying balance sheets of Pegasus Tel, Inc. (a development
stage company) as of December 31, 2008 and 2007, and the related statements of
operations, stockholders’ equity, and cash flows for each of the years in the
two-year period ended December 31, 2008 and 2007, and the cumulative since
February 19, 2002 (inception) to December 31, 2008. Pegasus Tel, Inc.’s
management is responsible for these financial statements. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our 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 Pegasus Tel, Inc. (a development
stage company) as of December 31, 2008 and 2007, and the results of its
operations and its cash flows for each of the years in the two-year period ended
December 31, 2008, and 2007 and the cumulative since February 19, 2002
(inception) to December 31, 2008, in conformity with accounting principles
generally accepted in the United States of America.
F -
1
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred net losses of approximately
$182,000, has a liquidity problem and has minimal revenues, which raise
substantial doubt about its ability to continue as a going
concern. Management’s plans in regard to these matters are also
described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/
Robison, Hill & Co.
Certified
Public Accountants
Salt Lake
City, Utah
October
6, 2009
F -
2
PEGASUS
TEL, INC.
|
||||||||
(A
Development Stage Company)
|
||||||||
BALANCE
SHEETS
|
||||||||
December
31,
|
||||||||
2008
|
2007
|
|||||||
Assets:
|
||||||||
Cash
and Cash Equivalents
|
$
|
618
|
$
|
425
|
||||
Accounts
Receivable
|
1,542
|
1,911
|
||||||
Total
Current Assets
|
2,160
|
2,336
|
||||||
Property
and Equipment:
|
||||||||
Payphone
Equipment
|
12,600
|
12,600
|
||||||
Less
Accumulated Depreciation
|
(12,600
|
)
|
(12,600
|
)
|
||||
Net
Property and Equipment
|
-
|
-
|
||||||
Total
Assets
|
$
|
2,160
|
$
|
2,336
|
||||
Liabilities:
|
||||||||
Accounts
Payable
|
$
|
28,074
|
$
|
27,650
|
||||
Related
Party Accounts Payable
|
18,691
|
14,656
|
||||||
Accrued
Interest
|
11,321
|
3,441
|
||||||
Related
Party Notes Payable
|
68,487
|
40,300
|
||||||
Total
Current Liabilities
|
126,573
|
86,047
|
||||||
Total
Liabilities
|
126,573
|
86,047
|
||||||
Stockholders'
Equity:
|
||||||||
Preferred
Stock, Par value $0.0001, Authorized 10,000,000
shares
|
||||||||
Issued
0 shares at December 31, 2008 and December 31,
2007
|
-
|
-
|
||||||
Common
Stock, Par value $0.0001, Authorized 100,000,000 shares
|
||||||||
Issued 20,215,136
shares at December 31, 2008 and
|
||||||||
5,100,000
shares issued at December 31, 2007
|
2,022
|
510
|
||||||
Paid-In
Capital
|
55,842
|
57,174
|
||||||
Deficit
Accumulated During Development Stage
|
(182,277
|
)
|
(141,395
|
)
|
||||
Total
Stockholders' Equity
|
(124,413
|
)
|
(83,711
|
)
|
||||
Total
Liabilities and Stockholders' Equity
|
$
|
2,160
|
$
|
2,336
|
||||
The
accompanying notes are an integral part of these financial
statements.
|
F -
3
PEGASUS
TEL, INC.
|
||||||||||||
(A
Development Stage Company)
|
||||||||||||
STATEMENTS
OF OPERATIONS
|
||||||||||||
Cumulative
|
||||||||||||
Since
|
||||||||||||
February
19,
|
||||||||||||
2002
|
||||||||||||
For
the Year Ended
|
Inception
of
|
|||||||||||
December
31,
|
Development
|
|||||||||||
2008
|
2007
|
Stage
|
||||||||||
Revenues
|
$
|
6,747
|
$
|
10,059
|
$
|
60,446
|
||||||
Costs
of Services
|
(3,843
|
)
|
(5,904
|
)
|
(58,786
|
)
|
||||||
Gross
Margin
|
2,904
|
4,155
|
1,660
|
|||||||||
Expenses
|
||||||||||||
Accounting
|
11,525
|
16,200
|
50,327
|
|||||||||
Advertising
|
-
|
-
|
770
|
|||||||||
Related
Party Bookkeeping
|
4,445
|
4,048
|
10,765
|
|||||||||
General
and Administrative
|
2,577
|
1,211
|
11,578
|
|||||||||
Legal
|
16,000
|
45,000
|
74,790
|
|||||||||
Outside
Services
|
942
|
-
|
22,925
|
|||||||||
Operating
Expenses
|
35,489
|
66,459
|
171,155
|
|||||||||
Other
Income (Expense)
|
||||||||||||
Interest,
Net
|
(7,880
|
)
|
(3,347
|
)
|
(11,321
|
)
|
||||||
Net
Loss Before Taxes
|
(40,465
|
)
|
(65,651
|
)
|
(180,816
|
)
|
||||||
Income
and Franchise Tax
|
(417
|
)
|
(60
|
)
|
(1,461
|
)
|
||||||
Net
Loss
|
$
|
(40,882
|
)
|
$
|
(65,711
|
)
|
$
|
(182,277
|
)
|
|||
Loss
per Share, Basic &
|
||||||||||||
Diluted
|
$
|
(0.00
|
)
|
$
|
(0.01
|
)
|
||||||
Weighted
Average Shares
|
||||||||||||
Outstanding
|
10,676,557
|
5,100,000
|
||||||||||
The
accompanying notes are an integral part of these financial
statements.
|
F -
4
PEGASUS
TEL, INC.
|
||||||||||||||||||||||||||||
(A
Development Stage Company)
|
||||||||||||||||||||||||||||
STATEMENT
OF STOCKHOLDERS' EQUITY
|
||||||||||||||||||||||||||||
Deficit
|
||||||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||||||
Since
|
||||||||||||||||||||||||||||
February
19,
|
||||||||||||||||||||||||||||
2002
|
Total
|
|||||||||||||||||||||||||||
Inception
of
|
Stockholders'
|
|||||||||||||||||||||||||||
Preferred
Stock
|
Common
Stock
|
Paid
in
|
Development
|
Equity
|
||||||||||||||||||||||||
Shares
|
Par
Value
|
Shares
|
Par
Value
|
Capital
|
Stage
|
Deficiency
|
||||||||||||||||||||||
Balance
at February 19, 2002
|
-
|
$
|
-
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||||||||
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
(25,809
|
)
|
(25,809
|
)
|
|||||||||||||||||||
Balance
at December 31, 2002
|
-
|
-
|
-
|
-
|
-
|
(25,809
|
)
|
(25,809
|
)
|
|||||||||||||||||||
December
31, 2003, Stock Issued as Intercompany Dues
|
-
|
-
|
1,000
|
1
|
999
|
-
|
1,000
|
|||||||||||||||||||||
Forward
Stock Split 5,100 to 1
|
-
|
-
|
5,099,000
|
509
|
(509
|
)
|
-
|
|||||||||||||||||||||
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
(15,704
|
)
|
(15,704
|
)
|
|||||||||||||||||||
Balance
at December 31, 2003
|
-
|
-
|
5,100,000
|
510
|
490
|
(41,513
|
)
|
(40,513
|
)
|
|||||||||||||||||||
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
(6,508
|
)
|
(6,508
|
)
|
|||||||||||||||||||
Balance
at December 31, 2004
|
-
|
-
|
5,100,000
|
510
|
490
|
(48,021
|
)
|
(47,021
|
)
|
|||||||||||||||||||
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
(11,067
|
)
|
(11,067
|
)
|
|||||||||||||||||||
Balance
at December 31, 2005
|
-
|
-
|
5,100,000
|
510
|
490
|
(59,088
|
)
|
(58,088
|
)
|
|||||||||||||||||||
December
31, 2006, Capital Contributed
|
-
|
-
|
-
|
-
|
56,684
|
-
|
56,684
|
|||||||||||||||||||||
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
(16,596
|
)
|
(16,596
|
)
|
|||||||||||||||||||
Balance
at December 31, 2006
|
-
|
-
|
5,100,000
|
510
|
57,174
|
(75,684
|
)
|
(18,000
|
)
|
|||||||||||||||||||
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
(65,711
|
)
|
(65,711
|
)
|
|||||||||||||||||||
Balance
at December 31, 2007
|
-
|
-
|
5,100,000
|
510
|
57,174
|
(141,395
|
)
|
(83,711
|
)
|
|||||||||||||||||||
August
15, 2008, Spin-Off Completed and all Common Stock not
Distributed
|
||||||||||||||||||||||||||||
to
the Shareholders was Cancelled
|
-
|
-
|
(2,884,864
|
)
|
(288
|
)
|
288
|
-
|
-
|
|||||||||||||||||||
August
15, 2008 Issued Convertible Preferred Class A Stock for
Cash
|
1,800,000
|
180
|
-
|
-
|
-
|
-
|
180
|
|||||||||||||||||||||
August
18, 2008, Convertible Preferred Class A Stock Converted to Common
Stock
|
(1,800,000
|
)
|
(180
|
)
|
18,000,000
|
1,800
|
(1,620
|
)
|
-
|
-
|
||||||||||||||||||
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
(40,882
|
)
|
(40,882
|
)
|
|||||||||||||||||||
Balance
at December 31, 2008
|
-
|
$
|
-
|
20,215,136
|
$
|
2,022
|
$
|
55,842
|
$
|
(182,277
|
)
|
$
|
(124,413
|
)
|
||||||||||||||
The
accompanying notes are an integral part of these financial
statements
|
F -
5
PEGASUS
TEL, INC.
|
||||||||||||
(A
Development Stage Company)
|
||||||||||||
STATEMENTS
OF CASH FLOWS
|
||||||||||||
Cumulative
|
||||||||||||
Since
|
||||||||||||
February
19,
|
||||||||||||
2002
|
||||||||||||
For
the Year Ended
|
Inception
of
|
|||||||||||
December
31,
|
Development
|
|||||||||||
2008
|
2007
|
Stage
|
||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
Net
Loss for the Period
|
$
|
(40,882
|
)
|
$
|
(65,711
|
)
|
$
|
(182,277
|
)
|
|||
Adjustments
to reconcile net loss to net cash
|
||||||||||||
provided
by operating activities:
|
||||||||||||
Depreciation
and Amortization
|
-
|
509
|
12,600
|
|||||||||
Changes
in Operating Assets and Liabilities
|
||||||||||||
Decrease
(Increase) in Accounts Receivable
|
369
|
(1,671
|
)
|
(1,542
|
)
|
|||||||
Increase
(Decrease) in Accounts Payable
|
424
|
24,688
|
28,074
|
|||||||||
Increase
(Decrease) in Related Party Accounts Payable
|
4,035
|
3,759
|
18,691
|
|||||||||
Increase
(Decrease) in Interest Payable
|
7,880
|
3,346
|
11,321
|
|||||||||
Decrease
(Increase) in Intercompany Dues
|
-
|
-
|
56,684
|
|||||||||
Net
Cash Used in Operating Activities
|
(28,174
|
)
|
(35,080
|
)
|
(56,449
|
)
|
||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
Purchase
of Property and Equipment
|
(11,600
|
)
|
||||||||||
Net
cash provided by Investing Activities
|
-
|
-
|
(11,600
|
)
|
||||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
Preferred
Stock Issued for Cash
|
180
|
-
|
180
|
|||||||||
Related
Party Notes Payable
|
28,187
|
35,300
|
68,487
|
|||||||||
Net
Cash Provided by Financing Activities
|
28,367
|
35,300
|
68,667
|
|||||||||
Net
(Decrease) Increase in Cash
|
193
|
220
|
618
|
|||||||||
Cash
at Beginning of Period
|
425
|
205
|
-
|
|||||||||
Cash
at End of Period
|
$
|
618
|
$
|
425
|
$
|
618
|
||||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||||||
Cash
paid during the year for:
|
||||||||||||
Interest
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Franchise
and Income Taxes
|
$
|
417
|
$
|
60
|
$
|
1,461
|
||||||
SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING
|
||||||||||||
AND
FINANCING ACTIVITIES:
|
||||||||||||
Accounts
Payable Satisfied through contributed capital
|
||||||||||||
and
property and equipment
|
$
|
-
|
$
|
-
|
$
|
56,684
|
||||||
The
accompanying notes are an integral part of these financial
statements.
|
F -
6
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This
summary of accounting policies for Pegasus Tel, Inc. is presented to assist in
understanding the Company's financial statements. The accounting
policies conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial
statements.
Nature of Operations and
Going Concern
The
accompanying financial statements have been prepared on the basis of accounting
principles applicable to a “going concern”, which assume that Pegasus Tel., Inc.
(hereto referred to as the “Company”) will continue in operation for at least
one year and will be able to realize its assets and discharge its liabilities in
the normal course of operations.
Several
conditions and events cast doubt about the Company’s ability to continue as a
“going concern.” The Company has incurred net losses of approximately
$182,000 for the period from February 19, 2002 (inception) to December 31, 2008,
has an accumulated deficit, has recurring losses, has minimal revenues and
requires additional financing in order to finance its business activities on an
ongoing basis. The Company is actively pursuing alternative financing
and has had discussions with various third parties, although no firm commitments
have been obtained. In the interim, shareholders of the Company have
committed to meeting its operating expenses. Management believes that
actions presently being taken to revise the Company’s operating and financial
requirements provide them with the opportunity to continue as a “going
concern”.
These
financial statements do not reflect adjustments that would be necessary if the
Company were unable to continue as a “going concern”. While
management believes that the actions already taken or planned, will mitigate the
adverse conditions and events which raise doubt about the validity of the “going
concern” assumption used in preparing these financial statements, there can be
no assurance that these actions will be successful. If the Company
were unable to continue as a “going concern,” then substantial adjustments would
be necessary to the carrying values of assets, the reported amounts of its
liabilities, the reported revenues and expenses, and the balance sheet
classifications used.
Organization and Basis of
Presentation
On
February 19, 2002, Pegasus Tel, Inc., a Delaware company, was formed as a wholly
owned subsidiary of American Industries.
On March
28, 2002, American Industries, Inc. and Pegasus Tel, Inc. entered into an
agreement with Pegasus Communications, Inc., a New York corporation, to acquire
100% of the outstanding shares of Pegasus Communications, Inc. in exchange for
72,721,966 shares of common stock of American Industries,
Inc. Pegasus Tel, Inc. continued as the surviving corporation and
Pegasus Communications, Inc. was merged out of existence.
On
September 21, 2006, the Company filed Amended and Restated Certificate of
Incorporation increasing its authorized capital to 110,000,000 shares, of which
100,000,000 shares were designated as Common Stock, par value $0.0001 per share,
and the remaining 10,000,000 as Preferred Stock, par value $0.0001 per
share. The designations and the preferences, conversion and other
rights, voting powers, restrictions, limitation as to dividends, qualifications,
and terms and conditions of redemption of such shares shall be determined by the
Board of Directors from time to time, without stockholder approval.
On May 7,
2007, we filed a Registration Statement on Form 10-SB (File No.: 0-52628), or
the Registration Statement, with the SEC to register the Pegasus common stock
under Section 12(g) of the Securities Exchange Act of 1934, as amended, or the
Exchange Act. The Registration Statement went effective on July 6, 2007 through
the operation of law 60 days after its initial filing. On March 23, 2009, we
filed with the SEC a Form 15 to deregister our common stock under Section 12(g)
of the Exchange Act and to terminate our status as a reporting company under the
Exchange Act.
F -
7
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Organization and Basis of
Presentation (Continued)
On May
15, 2007, the Company filed an Amended Certificate of Incorporation to
effectuate a forward stock split 5,100 to 1. This change is
retro-active and therefore changes the 1,000 shares of common stock issued on
December 31, 2003 to 5,100,000 shares of common stock. The par value
remains at $.0001 per share.
On August
5, 2008, Pegasus filed a Certificate of Designations, Powers, Preferences and
Rights (the “Certificate of Designation”) with the Secretary of State of the
State of Delaware thereby designating 2,000,000 shares of preferred stock as
Series A Convertible Preferred Stock, $0.0001 (the “Series A Preferred
Stock”). The Certificate of Incorporation of Pegasus authorizes the
designation and issuance of an aggregate of ten million (10,000,000) shares of
preferred stock in one or more series with all rights and privileges determined
by the Board of Directors of Pegasus. Prior to the filing of the
Certificate of Designation, there were no shares of preferred stock designated
or issued. Pursuant to the Certificate of Designation, each share of Series A
Preferred Stock may be converted at any time by Pegasus or the holders thereof
into ten (10) fully-paid and non-assessable shares of Pegasus Common
Stock.
On August
15, 2008, Pegasus issued an aggregate of 1,800,000 shares of Series A Preferred
Stock to an aggregate of 17 individuals pursuant to a Securities Purchase
Agreement for $0.0001per share of Series A Preferred Stock. Pegasus issued the
Series A Preferred Stock pursuant to an exemption under Section 4(2) of the
Securities Act due to the fact that it did not involve a public offering of
securities. The shares of Series A Preferred Stock were “restricted securities”
(as such term is defined in the Securities Act).
On August
18, 2008, Sino Gas International Holdings, Inc., a Utah corporation, or Sino,
(OTCBB: SGAS), our former parent company, distributed to its stockholders of
record as of August 15, 2008, 100% of the issued and outstanding common stock of
Pegasus. The ratio of distribution of the distribution was one (1)
share of common stock of Pegasus for every twelve (12) shares
of common stock of Sino (1:12). Fractional shares were
rounded up to the nearest whole-number. An aggregate of 2,215,136
shares of Pegasus common stock were issued pursuant to the distribution to an
aggregate of 167 Sino stockholders. The Pegasus common stock issued were and
remain “restricted securities” (as defined in Rule 144 of the Securities Act of
1933, as amended), and were issued pursuant to the exemptions from the
registration requirements of the Securities Act afforded the company under
Section 4(2) of the Securities Act due to the fact that the distribution did not
involve a public offering of securities. There currently is no market
for the Pegasus common stock.
On August
18, 2008 and pursuant to the Certificate of Designation, Pegasus converted an
aggregate of 1,800,000 shares of Series A Preferred Stock into an aggregate of
18,000,000 shares of Pegasus common stock. Pegasus issued the common
stock pursuant to Section 3(a)(9) of the Securities Act due to the fact that the
securities were exchanged upon conversion of the Series A Preferred Stock held
by existing security holders and there was no commission or other remuneration
paid or given directly or indirectly for soliciting such exchange.
The
company is in the development stage, and has not commenced planned principal
operations. The Company has a December 31 year end.
Nature of
Business
The
Company is primarily in the business of providing the use of outdoor payphones,
and providing telecommunication services.
Cash and Cash
Equivalents
For
purposes of the statement of cash flows, the Company considers all highly liquid
debt instruments purchased with a maturity of 90 days or less to be cash
equivalents to the extent the funds are not being held for investment
purposes.
Revenue
Recognition
The
Company derives its primary revenue from the sources described below, which
includes dial-around revenues, coin collections, telephone equipment repairs,
and sales. Other revenue generated by the company includes sales
commissions.
F -
8
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Revenue Recognition
(continued)
Coin
revenues are recorded in an equal amount to the coins
collected. Revenues on commissions and telephone equipment and sales
are realized on the date when the telephone repair services are provided or the
telecommunication supplies are received by the customer. Dial Around revenues
are earned when a customer uses the Company’s payphone to gain access to a
different long distance carrier than is already programmed into the phone. The
Dial Around revenue is recognized when the billing and collection agent of the
Company, APCC, calculates and compensates the Company for the use of the
payphone on a quarterly basis by billing the actual party’s long distance
carrier that received the calls. The date of the Dial Around revenue
recognition is determined when this compensation is collected and deposited into
the Company’s bank account.
The
Company recognizes revenues in accordance with the Securities and Exchange
Commission Staff Accounting Bulletin (SAB) number 104, "Revenue
Recognition." SAB 104 clarifies application of U. S. generally
accepted accounting principles to revenue transactions. The Company
recognizes revenue when the earnings process is complete. That is,
when the arrangements of the goods are documented, the pricing becomes final and
collectibility is reasonably assured. An allowance for bad debt is provided
based on estimated losses. For revenue received in advance for goods, the
Company records a current liability classified as either deferred revenue or
customer deposits. As of December 31, 2008 and 2007, there was no deferred
revenue.
Allowance for Doubtful
Accounts
The
Company recognizes an allowance for doubtful accounts to ensure accounts
receivable are not overstated due to uncollectibility. Bad debt reserves are
maintained for all customers based on a variety of factors, including the length
of time the receivables are past due, significant one-time events and historical
experience. An additional reserve for individual accounts is recorded when the
Company becomes aware of a customer’s inability to meet its financial
obligation, such as in the case of bankruptcy filings or deterioration in the
customer’s operating results or financial position. If circumstances
related to customers change, estimates of the recoverability of receivables
would be further adjusted. As of December 31, 2008 and 2007, the Company has
determined an allowance for doubtful accounts is not necessary.
F -
9
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Concentration of Credit
Risk
The
Company has no significant off-balance-sheet concentrations of credit risk such
as foreign exchange contracts, options contracts or other foreign hedging
arrangements. The Company had cash and cash equivalents of $618 and
$425 as of December 31, 2008 and 2007 all of which was fully covered by federal
depository insurance.
Accounts
Receivable
Accounts
Receivable consists of Local Service revenue and Commission Revenue. The
Accounts Receivable was $1,542 and $1,911 in 2008 and 2007
respectively.
Fixed
Assets
Fixed
assets are stated at cost. Depreciation expense for the years ended December
2008 and 2007 were $0 and $509 respectively. As of December 31, 2008 the
Payphone Equipment has been fully depreciated. Depreciation and
amortization are computed using the straight-line and accelerated methods over
the estimated economic useful lives of the related assets as
follows:
Asset
|
Rate
|
|
Payphone
Equipment
|
5
years
|
|
Upon sale
or other disposition of property and equipment, the cost and related accumulated
depreciation or amortization are removed from the accounts and any gain or loss
is included in the determination of income or loss. Expenditures for maintenance
and repairs are charged to expense as incurred. Major overhauls and
betterments are capitalized and depreciated over their estimated economic useful
lives.
Maintenance
and repairs are charged to operations; betterments are
capitalized. The cost of property sold or otherwise disposed of and
the accumulated depreciation thereon are eliminated from the property and
related accumulated depreciation accounts, and any resulting gain or loss is
credited or charged to income.
F -
10
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Pervasiveness of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles required management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Loss per
Share
Basic
loss per share has been computed by dividing the loss for the period applicable
to the common stockholders’ by the weighted average number of common shares
outstanding during the period. There were no common equivalent shares
outstanding during the periods ended December 31, 2008 and 2007.
Financial
Instruments
The
Company’s financial assets and liabilities consist of cash, accounts receivable,
property and equipment, and accounts payable. Except as otherwise noted, it is
management’s opinion that the Company is not exposed to significant interest or
credit risks arising from these financial instruments. The fair values of these
financial instruments approximate their carrying values due to the short-term
maturities of these instruments.
Income
Taxes
The
Company accounts for income taxes under the provisions of SFAS No.109,
“Accounting for Income Taxes.” SFAS No.109 requires recognition of
deferred income tax assets and liabilities for the expected future income tax
consequences, based on enacted tax laws, of temporary differences between the
financial reporting and tax bases of assets and liabilities.
Reclassification
Certain
reclassifications have been made in the 2007 financial statements to conform to
the December 31, 2008 presentation.
F -
11
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Stock-Based
Compensation
Effective
January 1, 2006, the company adopted the provisions of SFAS No. 123 (R)
requiring employee equity awards to be accounted for under the fair value
method. Accordingly, share-based compensation is measured at grant date, based
on the fair value of the award. Prior to June 1, 2006, the company accounted for
awards granted to employees under its equity incentive plans under the intrinsic
value method prescribed by Accounting Principles Board (APB) Opinion No. 25,
“Accounting for Stock Issued to Employees” (APB 25), and related
interpretations, and provided the required pro forma disclosures prescribed by
SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS No. 123), as
amended. No stock options were granted to employees during the years ended
December 31, 2008, and 2007 and accordingly, no compensation expense was
recognized under APB No. 25 for the years ended December 31, 2008, and 2007. In
addition, no compensation expense is recognized under provisions of SFAS No. 123
(R) with respect to employees as no stock options were granted to
employees.
Under the
modified prospective method of adoption for SFAS No. 123 (R), the compensation
cost recognized by the company beginning on June 1, 2006 includes (a)
compensation cost for all equity incentive awards granted prior to, but not
vested as of June 1, 2006, based on the grant-dated fair value estimated in
accordance with the original provisions of SFAS No. 123, and (b) compensation
cost for all equity incentive awards granted subsequent to June 1, 2006, based
on the grant-date fair value estimated in accordance with the provisions of SFAS
No, 123 (R). The company uses the straight-line attribution method to recognize
share-based compensation costs over the service period of the award. Upon
exercise, cancellation, forfeiture, or expiration of stock options, or upon
vesting or forfeiture of restricted stock units, deferred tax assets for options
and restricted stock units with multiple vesting dates are eliminated for each
vesting period on a first-in, first-out basis as if each vesting period was a
separate award. To calculate the excess tax benefits available for use in
offsetting future tax shortfalls as of the date of implementation, the company
followed the alternative transition method discussed in FASB Staff Position No.
123 (R)-3. During the periods ended December 31, 2008 and 2007, no
stock options were granted to non-employees. Accordingly, no stock-based
compensation expense was recognized for new stock option grants in the Statement
of Operations and Comprehensive Loss at December 31, 2008 and 2007.
F -
12
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Recent Accounting
Standards
In
December 2007, the FASB issued SPAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements - An Amendment of ARB No. 51” (“SFAS 160”).
SFAS 160 establishes accounting and reporting standards for the noncontrolling
interest in a subsidiary (previously referred to as minority interests). SFAS
160 also requires that a retained noncontrolling interest upon the
deconsolidation of a subsidiary be initially measured at its fair value. Upon
adoption of SFAS 160, the Company would be required to report any noncontrolling
interests as a separate component of stockholders’ deficit. The Company would
also be required to present any net income attributable to the stockholders of
the Company separately in its condensed consolidated statement of operations.
SFAS 160 is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008. SFAS 160 requires retroactive
adoption of the presentation and disclosure requirements for existing minority
interests. All other requirements of SFAS 160 shall be applied prospectively.
SFAS 160 would have an impact on the presentation and disclosure of the
noncontrolling interests of any non-wholly owned business acquired in the
future.
In
December 2007, the Financial Accounting Standards Board ( “FASB”) issued
Statement of Financials Accounting Standards (“SFAS”) No. 141R, “Business
Combinations” (“SFAS 141R”), which replaces SPAS No. 141 “Business
Combinations”. SFAS 141R establishes principles and requirements for determining
how an enterprise recognizes and measures the fair value of certain assets and
liabilities acquired in a business combination, including noncontrolling
interest, contingent consideration, and certain acquired contingencies. SFAS
141R also requires acquisition-related transaction expenses and restructuring
cost be expensed as incurred rather than capitalized a component of the business
combination. SFAS 141R will be applicable prospectively to business combinations
for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. SFAS 141R would have
an impact on accounting for any business acquired after the effective date of
this pronouncement.
F -
13
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Recent Accounting Standards
(Continued)
In March
2008, the FASB issued No. 161, “Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133. (“SFAS
161"). SFAS 161 requires enhanced disclosures about an entity's
derivative and hedging activities and thereby improves the transparency of
financial reporting. This Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. This Statement encourages, but does
not require, comparative disclosures for earlier periods at initial
adoption. Management is currently evaluating the effects of this
statement, but it is not expected to have any impact on the Company’s financial
statements.
In May
2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 162, The Hierarchy of Generally
Accepted Accounting Principles (“GAAP”) (“SFAS 162”). The purpose of the new
standard is to provide a consistent framework for determining what accounting
principles should be used when preparing U.S. GAAP financial statements.
Previous guidance did not properly rank the accounting literature. The new
standard is effective 60 days following the Securities and Exchange Commission’s
approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted
Accounting Principles. The adoption of SFAS 162 is not expected to have a
material effect on the Company’s financial statements.
In April
2008, the FASB released staff position (“FSP”) SFAS No. 142-3, Determination of
the Useful Life of Intangible Assets. The FSP requires entities to
disclose information for recognized intangible assets that enable users of
financial statements to understand the extent to which expected future cash
flows associated with intangible assets are affected by the entity’s intent or
ability to renew or extend the arrangement associated with the intangible
asset. The FSP also amends the factors an entity should consider in
developing the renewal or extension assumptions used in determining the useful
life of recognized intangible assets under SFAS No. 142, Goodwill and Other
Intangible Assets. The FSP will be applied prospectively to
intangible assets acquired after the FSP’s effective date, but the disclosure
requirements will be applied prospectively to all intangible assets recognized
as of, and after, the FSP’s effective date. The FSP is effective for
fiscal years beginning after December 15, 2008, with early adoption
prohibited. The adoption of SFAS No. 142-3 is not expected to have a
material effect on the Company’s financial statements.
F -
14
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 2 -
INCOME TAXES
As of
December 31, 2008, the Company had a net operating loss carry forward for income
tax reporting purposes of approximately $173,000 that may be offset against
future taxable income through 2025. Current tax laws limit the amount
of loss available to be offset against future taxable income when a substantial
change in ownership occurs. Therefore, the amount available to offset
future taxable income may be limited. No tax benefit has been
reported in the financial statements, because the Company believes there is a
50% or greater chance the carry-forwards will expire
unused. Accordingly, the potential tax benefits of the loss
carry-forwards are offset by a valuation allowance of the same
amount.
2008
|
2007
|
|||||||
Net
Operating Losses
|
$
|
58,820
|
$
|
45,029
|
||||
Valuation
Allowance
|
(58,820
|
)
|
(45,029
|
)
|
||||
$
|
-
|
$
|
-
|
The
provision for income taxes differ from the amount computed using the federal US
statutory income tax rate as follows:
2008
|
2007
|
|||||||
Provision
(Benefit) at US Statutory Rate
|
$
|
13,900
|
$
|
22,342
|
||||
Other
Adjustments
|
(109
|
)
|
87
|
|||||
Increase
(Decrease) in Valuation Allowance
|
(13,791
|
)
|
(22,429
|
)
|
||||
$
|
-
|
$
|
-
|
The
Company evaluates its valuation allowance requirements based on projected future
operations. When circumstances change and causes a change in
management's judgment about the recoverability of deferred tax assets, the
impact of the change on the valuation is reflected in current
income.
F -
15
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 3-
DEVELOPMENT STAGE COMPANY
The
Company has not begun principal operations and as is common with a development
stage company, the Company will have recurring losses during its development
stage. The Company's financial statements are prepared using
generally accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. However, the Company does not have
significant cash or other material assets, nor does it have an established
source of revenues sufficient to cover its operating costs and to allow it to
continue as a going concern. In the interim, shareholders of the
Company have committed to meeting its minimal operating expenses.
NOTE 4 –
UNCERTAIN TAX POSITIONS
Effective
January 1, 2007, the Company adopted the provisions of FASB Interpretation No.
48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB
Statement No. 109” (“FIN 48”). FIN 48 prescribes a recognition threshold and a
measurement attribute for the financial statement recognition and measurement of
tax positions taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more-likely-than-not to be sustained
upon examination by taxing authorities. The adoption of the provisions of FIN 48
did not have a material impact on the company’s financial position and results
of operations. At January 1, 2008, the company had no liability for unrecognized
tax benefits and no accrual for the payment of related interest.
Interest
costs related to unrecognized tax benefits are classified as “Interest expense,
net” in the accompanying statements of operations. Penalties, if any, would be
recognized as a component of “Selling, general and administrative expenses”. The
Company recognized $0 of interest expense related to unrecognized tax benefits
during 2008. In many cases the company’s uncertain tax positions are
related to tax years that remain subject to examination by relevant tax
authorities.
With few
exceptions, the company is generally no longer subject to U.S. federal, state,
local or non-U.S. income tax examinations by tax authorities for years before
2005. The following describes the open tax years, by major tax jurisdiction, as
of January 1, 2008:
United
States (a)
|
2005–
Present
|
(a)
Includes federal as well as state or similar local jurisdictions, as
applicable.
F -
16
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 5 -
COMMITMENTS
As of
December 31, 2008, all activities of the Company have been conducted by
corporate officers from either their homes or business
offices. Currently, there are no outstanding debts owed by the
company for the use of these facilities and there are no commitments for future
use of the facilities.
NOTE 6 -
COMMON STOCK TRANSACTIONS
On
December 31, 2003, the Company issued 1,000 shares of common stock in exchange
for cash valued at $1,000.
On
September 21, 2006, the Company filed an Amended Certificate of Incorporation
and the par value of the common stock was changed to $ .0001 per
share. This change is retro-active and therefore changes the 1,000
share of Common Stock issued on December 31, 2003 to the par value of $ .0001
per share.
On May
15, 2007, the Company filed an Amended Certificate of Incorporation and there
was forward stock split 5,100 to 1. This change is retro-active and
therefore changes the 1,000 shares of Common Stock issued on December 31, 2003
to 5,100,000 shares of Common Stock. The par value remains at $ .0001
per share.
On August
18, 2008, Sino Gas International Holdings, Inc., a Utah corporation (“Sino”)
(OTCBB: SGAS), consummated a distribution of shares of the Company, a then
wholly-owned subsidiary of Sino to Sino’s stockholders of record as of August
15, 2008. The Ratio of Distribution was one (1) share of common stock
of Pegasus for every twelve (12) shares of common stock of Sino
(1:12). Fractional shares were rounded up to the nearest
whole-number. An aggregate of 2,215,136 shares of Pegasus common
stock were issued to an aggregate of 167 Sino stockholders. The distributed
shares of Pegasus common stock are “restricted securities” (as defined in Rule
144 of the Securities Act of 1933, as amended (the “Securities Act”)), and were
issued pursuant to Section 4(2) of the Securities Act due to the fact that the
distribution did not involve a public offering of securities. Sino cancelled all
the Pegasus Common Stock not distributed to the shareholders. The
amount cancelled was 2,884,864 shares of Common Stock.
F -
17
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 7 -
PREFERRED STOCK TRANSACTIONS
On August
5, 2008, Pegasus filed a Certificate of Designations, Powers, Preferences and
Rights (the “Certificate of Designation”) with the Secretary of State of the
State of Delaware thereby designating 2,000,000 shares of preferred stock as
Series A Convertible Preferred Stock, $0.0001 (the “Series A Preferred
Stock”). The Certificate of Incorporation of Pegasus authorizes the
designation and issuance of an aggregate of ten million (10,000,000) shares of
preferred stock in one or more series with all rights and privileges determined
by the Board of Directors of Pegasus. Prior to the filing of the
Certificate of Designation, there were no shares of preferred stock designated
or issued. Pursuant to the Certificate of Designation, a copy of which is filed
as an exhibit hereto, each share of Series A Preferred Stock may be converted at
any time by Pegasus or the holders thereof into ten (10) fully-paid and
non-assessable shares of Pegasus Common Stock.
On August
15, 2008, Pegasus issued an aggregate of 1,800,000 shares of Series A Preferred
Stock to an aggregate of 17 individuals pursuant to a Securities Purchase
Agreement for $0.0001per share of Series A Preferred Stock. Pegasus issued the
Series A Preferred Stock pursuant to Section 4(2) of the Securities Act due to
the fact that it did not involve a public offering of securities. The shares of
Series A Preferred Stock are “restricted securities” (as such term is defined in
Rule 144 of the Securities Act.
On August
18, 2008 and pursuant to the Series A Preferred Stock Certificate of Designation
and Securities Purchase Agreement, Pegasus converted an aggregate of 1,800,000
shares of Series A Preferred Stock into an aggregate of 18,000,000 shares of
Pegasus common stock. Pegasus issued the common stock pursuant to
Section 4(2) of Securities Act due to the fact that it did not involve a public
offering of securities. The shares of common stock are “restricted
securities.”
NOTE 8 –
RELATED PARTY ACCOUNTS PAYABLE
As of
December 31, 2008 and December 31, 2007, the Company had Related Party Accounts
Payable in the amounts of $7,794 and $3,759 due respectively to Lyboldt-Daly,
Inc. for Bookkeeping expenses. Joseph C. Passalaqua (a major
shareholder of the Company and brother to John F. Passalaqua, an officer of the
Company) is President and Sole Director of Lyboldt-Daly, Inc. Total
bookkeeping services accrued during the years ended December 31, 2008 and 2007
were $4,445 and $4,048 respectively.
F -
18
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 8 –
RELATED PARTY ACCOUNTS PAYABLE (Continued)
During
2006, a Shareholder of the Company, Joseph C. Passalaqua, has advanced the
company $10,673. This is an accounts payable. As of December 31, 2008 and 2007
the Company owes $10,673.
During
2006, an Officer of the Company, Carl Worboys, has advanced the Company $224.
This is an accounts payable. As of December 31, 2008 and 2007 the Company owes $
224.
NOTE 9 –
RELATED PARTY NOTES PAYABLE
During
2008, 2007, and 2006 a Shareholder of the Company, Mary Passalaqua, advanced the
Company $18,300, $30,300, and $5,000, respectively. The notes are
accruing between 10% and 15% simple interest per annum and are payable in full
upon demand. As of December 31, 2008, the Company owed a total principle balance
of $53,600 related to these notes and has accrued $10,178 in simple
interest. As of December 31, 2007, the Company owed a total principle
balance of $35,300 related to these notes and had accrued $3,416 in simple
interest.
During
2008 and 2007, a Shareholder of the Company, Joseph C. Passalaqua has advanced
the company $9,887 and $5,000, respectively. The notes are accruing between 10%
and 18% in simple interest per annum and is payable in full upon
demand. As of December 31, 2008, the Company owed a total principle
balance of $14,887 related to these notes and has accrued $1,143 in simple
interest. As of December 31, 2007, the Company owed a total principle
balance of $5,000 related to these notes and has accrued $25 in simple
interest.
NOTE 10 –
SPIN OFF
As
reported by Pegasus Tel, Inc., Delaware corporation (“Pegasus”), on Form 8-K
(File No. 000-5268) filed with the Securities and Exchange Commission on August
27, 2008, on August 18, 2008, Sino Gas International Holdings, Inc., a Utah
corporation (“Sino”) (OTCBB: SGAS), declared a dividend and issued shares of
Pegasus to Sino’s stockholders of record as of August 15, 2008
(“Spin-off”). The ratio of distribution of the Pegasus shares was one
(1) share of common stock of Pegasus for every twelve (12) shares
of common stock of Sino (1:12). Fractional shares were
rounded up to the nearest whole-number. An aggregate of 2,215,136
shares of Pegasus common stock were issued to an aggregate of 167 Sino
stockholders. The Pegasus common stock issued in distribution are “restricted
securities” (as defined in Rule 144 of the Securities Act of 1933, as amended
(the “Securities Act”)), and were issued pursuant to Section 4(2) of the
Securities Act due to the fact that the distribution did not involve a public
offering.
F -
19
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 10 –
SPIN OFF (Continued)
On August
5, 2008, Pegasus filed a Certificate of Designations, Powers, Preferences and
Rights (the “Certificate of Designation”) with the Secretary of State of the
State of Delaware thereby designating 2,000,000 shares of preferred stock as
Series A Convertible Preferred Stock, $0.0001 (the “Series A Preferred
Stock”). The Certificate of Incorporation of Pegasus authorizes the
designation and issuance of an aggregate of ten million (10,000,000) shares of
preferred stock in one or more series with all rights and privileges determined
by the Board of Directors of Pegasus and without stockholder
approval. Prior to the filing of the Certificate of Designation,
there were no shares of preferred stock designated or issued. Pursuant to the
Certificate of Designation, each share of Series A Preferred Stock may be
converted at any time by Pegasus or the holders thereof into ten (10) fully-paid
and non-assessable shares of Pegasus Common Stock.
On August
15, 2008, Pegasus issued an aggregate of 1,800,000 shares of Series A Preferred
Stock to an aggregate of 17 individuals pursuant to a Securities Purchase
Agreement for $0.0001per share of Series A Preferred Stock. Pegasus issued the
Series A Preferred Stock pursuant to Section 4(2) of the Securities Act due to
the fact that it did not involve a public offering of securities. The shares of
Series A Preferred Stock were restricted securities.
On August
18, 2008 and pursuant to the Certificate of Designation, Pegasus converted an
aggregate of 1,800,000 shares of Series A Preferred Stock into an aggregate of
18,000,000 shares of Pegasus common stock. Pegasus issued the common
stock pursuant to Section 4(2) of Securities Act due to the fact that it did not
involve a public offering of securities. The shares of common stock are
restricted securities.
On March
23, 2009, Pegasus filed a Form 15 (File No. 000-52628) with the Securities and
Exchange Commission pursuant to which the Company de-registered its class of
Common Stock under the Securities Exchange Act of 1934, as amended.
NOTE 11 –
SUBSEQUENT EVENTS
On March
23, 2009, Pegasus filed a Form 15 (File No. 000-52628) with the Securities and
Exchange Commission pursuant to which the Company de-registered its class of
Common Stock under the Securities Exchange Act of 1934, as amended.
F -
20
PEGASUS
TEL, INC.
(A
Development Stage Company)
-:-
June
30, 2009
F -
21
CONTENTS
Page
|
|
Balance
Sheet
|
|
June
30, 2009
|
F –
23
|
Statements
of Operations
|
|
For
the three months ended June 30, 2009 and June 30, 2008 and
|
|
For
the six months ended June 30, 2009 and June 30, 2008 and
|
|
the
cumulative period from February 19, 2002 (inception) to June 30,
2009
|
F –
24
|
Statements
of Cash Flows
|
|
For
the six months ended June 30, 2009 and June 30, 2008 and
|
|
the
cumulative period from February 19, 2002 (inception) to June 30,
2009
|
F –
25
|
Notes
to Financial Statements
|
F –
26
|
F -
22
PEGASUS
TEL, INC.
|
||||
(A
Development Stage Company)
|
||||
BALANCE
SHEET
|
||||
Unaudited
|
||||
June
30,
|
||||
2009
|
||||
Assets:
|
||||
Cash
and Cash Equivalents
|
450
|
|||
Accounts
Receivable
|
110
|
|||
Total
Current Assets
|
560
|
|||
Property
and Equipment:
|
||||
Payphone
Equipment
|
12,600
|
|||
Less
Accumulated Depreciation
|
(12,600
|
)
|
||
Net
Property and Equipment
|
-
|
|||
Total
Assets
|
560
|
|||
Liabilities:
|
||||
Accounts
Payable
|
39,596
|
|||
Related
Party Accounts Payable
|
18,839
|
|||
Accrued
Interest
|
15,858
|
|||
Related
Party Notes Payable
|
68,487
|
|||
Total
Current Liabilities
|
142,780
|
|||
Total
Liabilities
|
142,780
|
|||
Stockholders'
Equity:
|
||||
Preferred
Stock, Par value $0.0001, Authorized 10,000,000
shares
|
||||
Issued
0 shares at June 30, 2009
|
-
|
|||
Common
Stock, Par value $0.0001, Authorized 100,000,000 shares
|
||||
Issued
20,215,136 shares at June 30, 2009
|
2,022
|
|||
Paid-In
Capital
|
55,842
|
|||
Deficit
Accumulated During Development Stage
|
(200,084
|
)
|
||
Total
Stockholders' Equity
|
(142,220
|
)
|
||
Total
Liabilities and Stockholders' Equity
|
560
|
|||
The
accompanying notes are an integral part of these financial
statements.
|
F -
23
PEGASUS
TEL, INC.
|
||||||||||||||||||||
(A
Development Stage Company)
|
||||||||||||||||||||
STATEMENTS
OF OPERATIONS
|
||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||
Cumulative
|
||||||||||||||||||||
Since
|
||||||||||||||||||||
February
19,
|
||||||||||||||||||||
2002
|
||||||||||||||||||||
For
the Three Months Ended
|
For
the Six Months Ended
|
Inception
of
|
||||||||||||||||||
June
30,
|
June
30,
|
Development
|
||||||||||||||||||
2009
|
2008
|
2009
|
2008
|
Stage
|
||||||||||||||||
Revenues
|
$
|
1,127
|
$
|
1,754
|
$
|
2,177
|
$
|
3,406
|
$
|
62,623
|
||||||||||
Costs
of Services
|
(943
|
)
|
(965
|
)
|
(1,761
|
)
|
(1,920
|
)
|
(60,547
|
)
|
||||||||||
Gross
Margin
|
184
|
789
|
416
|
1,486
|
2,076
|
|||||||||||||||
Expenses
|
||||||||||||||||||||
Accounting
|
-
|
10,850
|
-
|
10,850
|
50,327
|
|||||||||||||||
Advertising
|
-
|
-
|
-
|
-
|
770
|
|||||||||||||||
Related
Party Bookkeeping
|
800
|
938
|
1,762
|
2,695
|
12,527
|
|||||||||||||||
General
and Administrative
|
14
|
116
|
191
|
380
|
11,769
|
|||||||||||||||
Legal
|
10,000
|
-
|
10,000
|
16,000
|
84,790
|
|||||||||||||||
Outside
Services
|
150
|
-
|
1,633
|
-
|
24,558
|
|||||||||||||||
Operating
Expenses
|
10,964
|
11,904
|
13,586
|
29,925
|
184,741
|
|||||||||||||||
Operating
Income (Loss)
|
(10,780
|
)
|
(11,115
|
)
|
(13,170
|
)
|
(28,439
|
)
|
(182,665
|
)
|
||||||||||
Other
Income (Expense)
|
||||||||||||||||||||
Interest,
Net
|
(2,281
|
)
|
(1,837
|
)
|
(4,537
|
)
|
(3,548
|
)
|
(15,858
|
)
|
||||||||||
Net
Loss Before Taxes
|
(13,061
|
)
|
(12,952
|
)
|
(17,707
|
)
|
(31,987
|
)
|
(198,523
|
)
|
||||||||||
Income
and Franchise Tax
|
-
|
-
|
(100
|
)
|
(417
|
)
|
(1,561
|
)
|
||||||||||||
Net
Loss
|
$
|
(13,061
|
)
|
$
|
(12,952
|
)
|
$
|
(17,807
|
)
|
$
|
(32,404
|
)
|
$
|
(200,084
|
)
|
|||||
Loss
per Share, Basic &
|
||||||||||||||||||||
Diluted
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.01
|
)
|
||||||||
Weighted
Average Shares
|
||||||||||||||||||||
Outstanding
|
20,215,136
|
5,100,000
|
20,215,136
|
5,100,000
|
||||||||||||||||
The
accompanying notes are an integral part of these financial
statements.
|
F -
24
PEGASUS
TEL, INC.
|
||||||||||||
(A
Development Stage Company)
|
||||||||||||
STATEMENTS
OF CASH FLOWS
|
||||||||||||
(Unaudited)
|
||||||||||||
Cumulative
|
||||||||||||
Since
|
||||||||||||
February
19,
|
||||||||||||
2002
|
||||||||||||
For
the Six Months Ended
|
Inception
of
|
|||||||||||
June
30,
|
Development
|
|||||||||||
2009
|
2008
|
Stage
|
||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
Net
Loss for the Period
|
$
|
(17,807
|
)
|
$
|
(32,404
|
)
|
$
|
(200,084
|
)
|
|||
Adjustments
to reconcile net loss to net cash
|
||||||||||||
provided
by operating activities:
|
||||||||||||
Depreciation
and Amortization
|
-
|
-
|
12,600
|
|||||||||
Changes
in Operating Assets and Liabilities
|
||||||||||||
Decrease
(Increase) in Accounts Receivable
|
1,432
|
264
|
(110
|
)
|
||||||||
Increase
(Decrease) in Accounts Payable
|
11,522
|
6,443
|
39,596
|
|||||||||
Increase
(Decrease) in Related Party Accounts Payable
|
148
|
4,035
|
18,839
|
|||||||||
Increase
(Decrease) in Interest Payable
|
4,537
|
3,548
|
15,858
|
|||||||||
Decrease
(Increase) in Intercompany Dues
|
-
|
-
|
56,684
|
|||||||||
Net
Cash Used in Operating Activities
|
(168
|
)
|
(18,114
|
)
|
(56,617
|
)
|
||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
Purchase
of Property and Equipment
|
(11,600
|
)
|
||||||||||
Net
cash provided by Investing Activities
|
-
|
-
|
(11,600
|
)
|
||||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
Common
Stock Issued for Cash
|
-
|
-
|
180
|
|||||||||
Related
Party Notes Payable
|
-
|
18,300
|
68,487
|
|||||||||
Net
Cash Provided by Financing Activities
|
-
|
18,300
|
68,667
|
|||||||||
Net
(Decrease) Increase in Cash
|
(168
|
)
|
186
|
450
|
||||||||
Cash
at Beginning of Period
|
618
|
425
|
-
|
|||||||||
Cash
at End of Period
|
$
|
450
|
$
|
611
|
$
|
450
|
||||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||||||
Cash
paid during the year for:
|
||||||||||||
Interest
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Franchise
and Income Taxes
|
$
|
100
|
$
|
417
|
$
|
1,561
|
||||||
SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING
|
||||||||||||
AND
FINANCING ACTIVITIES:
|
||||||||||||
Accounts
Payable Satisfied through contributed capital
|
||||||||||||
and
property and equipment
|
$
|
-
|
$
|
-
|
$
|
56,684
|
||||||
The
accompanying notes are an integral part of these financial
statements.
|
F -
25
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This
summary of accounting policies for Pegasus Tel, Inc. is presented to assist in
understanding the Company's financial statements. The accounting
policies conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial
statements.
Interim
Financial Statements
The
unaudited financial statements as of June 30, 2009 and the six months then
ended, reflect, in the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to fairly state the financial
position and results of the operations for all six months. Operating
results for interim periods are not necessarily indicative of the results which
can be expected for full years.
Nature of
Operations and Going Concern
The
accompanying financial statements have been prepared on the basis of accounting
principles applicable to a “going concern”, which assume that Pegasus Tel., Inc.
(hereto referred to as the “Company”) will continue in operation for at least
one year and will be able to realize its assets and discharge its liabilities in
the normal course of operations.
Several
conditions and events cast doubt about the Company’s ability to continue as a
“going concern.” The Company has incurred net losses of approximately
$(200,000) for the period from February 19, 2002 (inception) to June 30, 2009,
has an accumulated deficit, has recurring losses, has minimal revenues and
requires additional financing in order to finance its business activities on an
ongoing basis. The Company is actively pursuing alternative financing
and has had discussions with various third parties, although no firm commitments
have been obtained. In the interim, shareholders of the Company have
committed to meeting its operating expenses. Management believes that
actions presently being taken to revise the Company’s operating and financial
requirements provide them with the opportunity to continue as a “going
concern”.
These
financial statements do not reflect adjustments that would be necessary if the
Company were unable to continue as a “going concern”. While
management believes that the actions already taken or planned, will mitigate the
adverse conditions and events which raise doubt about the validity of the “going
concern” assumption used in preparing these financial statements, there can be
no assurance that these actions will be successful. If the Company
were unable to continue as a “going concern,” then substantial adjustments would
be necessary to the carrying values of assets, the reported amounts of its
liabilities, the reported revenues and expenses, and the balance sheet
classifications used.
F -
26
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Organization
and Basis of Presentation
On
February 19, 2002, Pegasus Tel, Inc., a Delaware company, was formed as a wholly
owned subsidiary of American Industries.
On March
28, 2002, American Industries, Inc. and Pegasus Tel, Inc. entered into an
agreement with Pegasus Communications, Inc., a New York corporation, to acquire
100% of the outstanding shares of Pegasus Communications, Inc. in exchange for
72,721,966 shares of common stock of American Industries,
Inc. Pegasus Tel, Inc. continued as the surviving corporation and
Pegasus Communications, Inc. was merged out of existence.
The
company is in the development stage, and has not commenced planned principal
operations. The Company has a December 31 year end.
Nature of
Business
The
Company is primarily in the business of providing the use of outdoor payphones,
and providing telecommunication services.
Cash and
Cash Equivalents
For
purposes of the statement of cash flows, the Company considers all highly liquid
debt instruments purchased with a maturity of 90 days or less to be cash
equivalents to the extent the funds are not being held for investment
purposes.
Revenue
Recognition
The
Company derives its primary revenue from the sources described below, which
includes dial-around revenues, coin collections, telephone equipment repairs,
and sales. Other revenue generated by the company includes sales
commissions.
F -
27
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Revenue
Recognition (continued)
Coin
revenues are recorded in an equal amount to the coins
collected. Revenues on commissions and telephone equipment and sales
are realized on the date when the telephone repair services are provided or the
telecommunication supplies are received by the customer. Dial Around revenues
are earned when a customer uses the Company’s payphone to gain access to a
different long distance carrier than is already programmed into the phone. The
Dial Around revenue is recognized when the billing and collection agent of the
Company, APCC, calculates and compensates the Company for the use of the
payphone on a quarterly basis by billing the actual party’s long distance
carrier that received the calls. The date of the Dial Around revenue
recognition is determined when this compensation is collected and deposited into
the Company’s bank account.
The
Company recognizes revenues in accordance with the Securities and Exchange
Commission Staff Accounting Bulletin (SAB) number 104, "Revenue
Recognition." SAB 104 clarifies application of U. S. generally
accepted accounting principles to revenue transactions. The Company
recognizes revenue when the earnings process is complete. That is,
when the arrangements of the goods are documented, the pricing becomes final and
collectibility is reasonably assured. An allowance for bad debt is provided
based on estimated losses. For revenue received in advance for goods, the
Company records a current liability classified as either deferred revenue or
customer deposits. As of June 30, 2009, there was no deferred
revenue.
Allowance
for Doubtful Accounts
The
Company recognizes an allowance for doubtful accounts to ensure accounts
receivable are not overstated due to uncollectibility. Bad debt reserves are
maintained for all customers based on a variety of factors, including the length
of time the receivables are past due, significant one-time events and historical
experience. An additional reserve for individual accounts is recorded when the
Company becomes aware of a customer’s inability to meet its financial
obligation, such as in the case of bankruptcy filings or deterioration in the
customer’s operating results or financial position. If circumstances
related to customers change, estimates of the recoverability of receivables
would be further adjusted. As of June 30, 2009, the Company has determined an
allowance for doubtful accounts is not necessary.
F -
28
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Concentration
of Credit Risk
The
Company has no significant off-balance-sheet concentrations of credit risk such
as foreign exchange contracts, options contracts or other foreign hedging
arrangements. The Company had cash and cash equivalents of $450 as of
June 30, 2009 all of which was fully covered by federal depository
insurance.
Accounts
Receivable
Accounts
Receivable consists of Local Service revenue and Commission Revenue. The
Accounts Receivable was $110 as of June 30, 2009.
Fixed
Assets
Fixed
assets are stated at cost. Depreciation expense for the three months ended June
30, 2009 and June 30, 2008 were $0 respectively for both periods. As of June 30,
2009 the Payphone Equipment has been fully depreciated. Depreciation
and amortization are computed using the straight-line and accelerated methods
over the estimated economic useful lives of the related assets as
follows:
Asset
|
Rate
|
|
Payphone
Equipment
|
5
years
|
|
Upon sale
or other disposition of property and equipment, the cost and related accumulated
depreciation or amortization are removed from the accounts and any gain or loss
is included in the determination of income or loss. Expenditures for maintenance
and repairs are charged to expense as incurred. Major overhauls and
betterments are capitalized and depreciated over their estimated economic useful
lives.
Maintenance
and repairs are charged to operations; betterments are
capitalized. The cost of property sold or otherwise disposed of and
the accumulated depreciation thereon are eliminated from the property and
related accumulated depreciation accounts, and any resulting gain or loss is
credited or charged to income.
F -
29
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Pervasiveness
of Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles required management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Loss per
Share
Basic
loss per share has been computed by dividing the loss for the period applicable
to the common stockholders’ by the weighted average number of common shares
outstanding during the period. There were no common equivalent shares
outstanding during the periods ended June 30, 2009 and June 30,
2008.
Financial
Instruments
The
Company’s financial assets and liabilities consist of cash, accounts receivable,
property and equipment, and accounts payable. Except as otherwise noted, it is
management’s opinion that the Company is not exposed to significant interest or
credit risks arising from these financial instruments. The fair values of these
financial instruments approximate their carrying values due to the short-term
maturities of these instruments.
Income
Taxes
The
Company accounts for income taxes under the provisions of SFAS No.109,
“Accounting for Income Taxes.” SFAS No.109 requires recognition of
deferred income tax assets and liabilities for the expected future income tax
consequences, based on enacted tax laws, of temporary differences between the
financial reporting and tax bases of assets and liabilities.
F -
30
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Reclassification
Certain
reclassifications have been made in the 2008 financial statements to conform to
the June 30, 2009 presentation.
Stock
Based Compensation
Effective
January 1, 2006, the company adopted the provisions of SFAS No. 123 (R)
requiring employee equity awards to be accounted for under the fair value
method. Accordingly, share-based compensation is measured at grant date, based
on the fair value of the award. Prior to June 1, 2006, the company accounted for
awards granted to employees under its equity incentive plans under the intrinsic
value method prescribed by Accounting Principles Board (APB) Opinion No. 25,
“Accounting for Stock Issued to Employees” (APB 25), and related
interpretations, and provided the required pro forma disclosures prescribed by
SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS No. 123), as
amended. No stock options were granted to employees during the years ended
December 31, 2008, and 2007 and accordingly, no compensation expense was
recognized under APB No. 25 for the years ended December 31, 2008, and 2007. In
addition, no compensation expense is recognized under provisions of SFAS No. 123
(R) with respect to employees as no stock options were granted to
employees.
Under the
modified prospective method of adoption for SFAS No. 123 (R), the compensation
cost recognized by the company beginning on June 1, 2006 includes (a)
compensation cost for all equity incentive awards granted prior to, but not
vested as of June 1, 2006, based on the grant-dated fair value estimated in
accordance with the original provisions of SFAS No. 123, and (b) compensation
cost for all equity incentive awards granted subsequent to June 1, 2006, based
on the grant-date fair value estimated in accordance with the provisions of SFAS
No, 123 (R). The company uses the straight-line attribution method to recognize
share-based compensation costs over the service period of the award. Upon
exercise, cancellation, forfeiture, or expiration of stock options, or upon
vesting or forfeiture of restricted stock units, deferred tax assets for options
and restricted stock units with multiple vesting dates are eliminated for each
vesting period on a first-in, first-out basis as if each vesting period was a
separate award. To calculate the excess tax benefits available for use in
offsetting future tax shortfalls as of the date of implementation, the company
followed the alternative transition method discussed in FASB Staff Position No.
123 (R)-3. During the periods ended December 31, 2008 and 2007, no
stock options were granted to non-employees. Accordingly, no stock-based
compensation expense was recognized for new stock option grants in the Statement
of Operations and Comprehensive Loss at December 31, 2008 and 2007.
F -
31
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Recent
Accounting Standards
In
December 2007, the FASB issued SPAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements - An Amendment of ARB No. 51” (“SFAS 160”).
SFAS 160 establishes accounting and reporting standards for the noncontrolling
interest in a subsidiary (previously referred to as minority interests). SFAS
160 also requires that a retained noncontrolling interest upon the
deconsolidation of a subsidiary be initially measured at its fair value. Upon
adoption of SFAS 160, the Company would be required to report any noncontrolling
interests as a separate component of stockholders’ deficit. The Company would
also be required to present any net income attributable to the stockholders of
the Company separately in its condensed consolidated statement of operations.
SFAS 160 is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008. SFAS 160 requires retroactive
adoption of the presentation and disclosure requirements for existing minority
interests. All other requirements of SFAS 160 shall be applied prospectively.
SFAS 160 would have an impact on the presentation and disclosure of the
noncontrolling interests of any non-wholly owned business acquired in the
future.
In
December 2007, the Financial Accounting Standards Board ( “FASB”) issued
Statement of Financials Accounting Standards (“SFAS”) No. 141R, “Business
Combinations” (“SFAS 141R”), which replaces SPAS No. 141 “Business
Combinations”. SFAS 141R establishes principles and requirements for determining
how an enterprise recognizes and measures the fair value of certain assets and
liabilities acquired in a business combination, including noncontrolling
interest, contingent consideration, and certain acquired contingencies. SFAS
141R also requires acquisition-related transaction expenses and restructuring
cost be expensed as incurred rather than capitalized a component of the business
combination. SFAS 141R will be applicable prospectively to business combinations
for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. SFAS 141R would have
an impact on accounting for any business acquired after the effective date of
this pronouncement.
F -
32
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Recent
Accounting Standards (Continued)
In March
2008, the FASB issued No. 161, “Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133. (“SFAS
161"). SFAS 161 requires enhanced disclosures about an entity's
derivative and hedging activities and thereby improves the transparency of
financial reporting. This Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. This Statement encourages, but does
not require, comparative disclosures for earlier periods at initial
adoption. Management is currently evaluating the effects of this
statement, but it is not expected to have any impact on the Company’s financial
statements.
In May
2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 162, The Hierarchy of Generally
Accepted Accounting Principles (“GAAP”) (“SFAS 162”). The purpose of the new
standard is to provide a consistent framework for determining what accounting
principles should be used when preparing U.S. GAAP financial statements.
Previous guidance did not properly rank the accounting literature. The new
standard is effective 60 days following the Securities and Exchange Commission’s
approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted
Accounting Principles. The adoption of SFAS 162 is not expected to have a
material effect on the Company’s financial statements.
In April
2008, the FASB released staff position (“FSP”) SFAS No. 142-3, Determination of
the Useful Life of Intangible Assets. The FSP requires entities to
disclose information for recognized intangible assets that enable users of
financial statements to understand the extent to which expected future cash
flows associated with intangible assets are affected by the entity’s intent or
ability to renew or extend the arrangement associated with the intangible
asset. The FSP also amends the factors an entity should consider in
developing the renewal or extension assumptions used in determining the useful
life of recognized intangible assets under SFAS No. 142, Goodwill and Other
Intangible Assets. The FSP will be applied prospectively to
intangible assets acquired after the FSP’s effective date, but the disclosure
requirements will be applied prospectively to all intangible assets recognized
as of, and after, the FSP’s effective date. The FSP is effective for
fiscal years beginning after December 15, 2008, with early adoption
prohibited. The adoption of SFAS No. 142-3 is not expected to have a
material effect on the Company’s financial statements.
F -
33
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 2 -
INCOME TAXES
As of
December 31, 2008, the Company had a net operating loss carry forward for income
tax reporting purposes of approximately $173,000 that may be offset against
future taxable income through 2025. Current tax laws limit the amount
of loss available to be offset against future taxable income when a substantial
change in ownership occurs. Therefore, the amount available to offset
future taxable income may be limited. No tax benefit has been
reported in the financial statements, because the Company believes there is a
50% or greater chance the carry-forwards will expire
unused. Accordingly, the potential tax benefits of the loss
carry-forwards are offset by a valuation allowance of the same
amount.
2008
|
2007
|
|||||||
Net
Operating Losses
|
$
|
58,820
|
$
|
45,029
|
||||
Valuation
Allowance
|
(58,820
|
)
|
(45,029
|
)
|
||||
$
|
-
|
$
|
-
|
The
provision for income taxes differ from the amount computed using the federal US
statutory income tax rate as follows:
2008
|
2007
|
|||||||
Provision
(Benefit) at US Statutory Rate
|
$
|
13,900
|
$
|
22,342
|
||||
Other
Adjustments
|
(109
|
)
|
87
|
|||||
Increase
(Decrease) in Valuation Allowance
|
(13,791
|
)
|
(22,429
|
)
|
||||
$
|
-
|
$
|
-
|
The
Company evaluates its valuation allowance requirements based on projected future
operations. When circumstances change and causes a change in
management's judgment about the recoverability of deferred tax assets, the
impact of the change on the valuation is reflected in current
income.
F -
34
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 3-
DEVELOPMENT STAGE COMPANY
The
Company has not begun principal operations and as is common with a development
stage company, the Company will have recurring losses during its development
stage. The Company's financial statements are prepared using
generally accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. However, the Company does not have
significant cash or other material assets, nor does it have an established
source of revenues sufficient to cover its operating costs and to allow it to
continue as a going concern. In the interim, shareholders of the
Company have committed to meeting its minimal operating expenses.
NOTE 4 –
UNCERTAIN TAX POSITIONS
Effective
January 1, 2007, the Company adopted the provisions of FASB Interpretation No.
48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB
Statement No. 109” (“FIN 48”). FIN 48 prescribes a recognition threshold and a
measurement attribute for the financial statement recognition and measurement of
tax positions taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more-likely-than-not to be sustained
upon examination by taxing authorities. The adoption of the provisions of FIN 48
did not have a material impact on the company’s financial position and results
of operations. At January 1, 2008, the company had no liability for unrecognized
tax benefits and no accrual for the payment of related interest.
Interest
costs related to unrecognized tax benefits are classified as “Interest expense,
net” in the accompanying statements of operations. Penalties, if any, would be
recognized as a component of “Selling, general and administrative expenses”. The
Company recognized $0 of interest expense related to unrecognized tax benefits
during 2008. In many cases the company’s uncertain tax positions are
related to tax years that remain subject to examination by relevant tax
authorities.
With few
exceptions, the company is generally no longer subject to U.S. federal, state,
local or non-U.S. income tax examinations by tax authorities for years before
2005. The following describes the open tax years, by major tax jurisdiction, as
of January 1, 2009:
United
States (a)
|
2005–
Present
|
(a)
Includes federal as well as state or similar local jurisdictions, as
applicable.
F -
35
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 5 -
COMMITMENTS
As of
June 30, 2009, all activities of the Company have been conducted by corporate
officers from either their homes or business offices. Currently,
there are no outstanding debts owed by the company for the use of these
facilities and there are no commitments for future use of the
facilities.
NOTE 6 -
COMMON STOCK TRANSACTIONS
On
December 31, 2003, the Company issued 1,000 shares of common stock in exchange
for cash valued at $1,000.
On
September 21, 2006, the Company filed an Amended Certificate of Incorporation
and the par value of the common stock was changed to $ .0001 per
share. This change is retro-active and therefore changes the 1,000
share of Common Stock issued on December 31, 2003 to the par value of $ .0001
per share.
On May
15, 2007, the Company filed an Amended Certificate of Incorporation and there
was forward stock split 5,100 to 1. This change is retro-active and
therefore changes the 1,000 shares of Common Stock issued on December 31, 2003
to 5,100,000 shares of Common Stock. The par value remains at $ .0001
per share.
On August
18, 2008, Sino Gas International Holdings, Inc., a Utah corporation (“Sino”)
(OTCBB: SGAS), consummated a distribution of shares of the Company, a then
wholly-owned subsidiary of Sino to Sino’s stockholders of record as of August
15, 2008. The Ratio of Distribution was one (1) share of common stock
of Pegasus for every twelve (12) shares of common stock of Sino
(1:12). Fractional shares were rounded up to the nearest
whole-number. An aggregate of 2,215,136 shares of Pegasus common
stock were issued to an aggregate of 167 Sino stockholders. The distributed
shares of Pegasus common stock are “restricted securities” (as defined in Rule
144 of the Securities Act of 1933, as amended (the “Securities Act”)), and were
issued pursuant to Section 4(2) of the Securities Act due to the fact that the
distribution did not involve a public offering of securities. Sino cancelled all
the Pegasus Common Stock not distributed to the shareholders. The
amount cancelled was 2,884,864 shares of Common Stock.
F -
36
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 7 -
PREFERRED STOCK TRANSACTIONS
On August
5, 2008, Pegasus filed a Certificate of Designations, Powers, Preferences and
Rights (the “Certificate of Designation”) with the Secretary of State of the
State of Delaware thereby designating 2,000,000 shares of preferred stock as
Series A Convertible Preferred Stock, $0.0001 (the “Series A Preferred
Stock”). The Certificate of Incorporation of Pegasus authorizes the
designation and issuance of an aggregate of ten million (10,000,000) shares of
preferred stock in one or more series with all rights and privileges determined
by the Board of Directors of Pegasus. Prior to the filing of the
Certificate of Designation, there were no shares of preferred stock designated
or issued. Pursuant to the Certificate of Designation, a copy of which is filed
as an exhibit hereto, each share of Series A Preferred Stock may be converted at
any time by Pegasus or the holders thereof into ten (10) fully-paid and
non-assessable shares of Pegasus Common Stock.
On August
15, 2008, Pegasus issued an aggregate of 1,800,000 shares of Series A Preferred
Stock to an aggregate of 17 individuals pursuant to a Securities Purchase
Agreement for $0.0001per share of Series A Preferred Stock. Pegasus issued the
Series A Preferred Stock pursuant to Section 4(2) of the Securities Act due to
the fact that it did not involve a public offering of securities. The shares of
Series A Preferred Stock are “restricted securities” (as such term is defined in
Rule 144 of the Securities Act.
On August
18, 2008 and pursuant to the Series A Preferred Stock Certificate of Designation
and Securities Purchase Agreement, Pegasus converted an aggregate of 1,800,000
shares of Series A Preferred Stock into an aggregate of 18,000,000 shares of
Pegasus common stock. Pegasus issued the common stock pursuant to
Section 4(2) of Securities Act due to the fact that it did not involve a public
offering of securities. The shares of common stock are “restricted
securities.”
NOTE 8 –
RELATED PARTY ACCOUNTS PAYABLE
As of
June 30, 2009, the Company had Related Party Accounts Payable in the amount of
$7,942 due to Lyboldt-Daly, Inc. for Bookkeeping expenses. Joseph C.
Passalaqua (a major shareholder of the Company and brother to John F.
Passalaqua, an officer of the Company) is President and Sole Director of
Lyboldt-Daly, Inc.
During
2006, a Shareholder of the Company, Joseph C. Passalaqua, has advanced the
company $10,673. This is a Related Party Accounts Payable. As of June 30, 2009
the Company owes $10,673.
During
2006, an Officer of the Company, Carl Worboys, has advanced the Company $224.
This is a Related Party Accounts Payable. As of June 30, 2009, the Company owes
$ 224.
F -
37
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE
9 – RELATED PARTY NOTES PAYABLE
During
2008, 2007, and 2006 a Shareholder of the Company, Mary Passalaqua, advanced the
Company $18,300, $30,300, and $5,000, respectively. The notes are
accruing between 10% and 15% simple interest per annum and are payable in full
upon demand. As of June 30, 2009, the Company owed a total principle balance of
$53,600 related to these notes and has accrued $13,584 in simple
interest.
During
2008 and 2007, a Shareholder of the Company, Joseph C. Passalaqua has advanced
the company $9,887 and $5,000, respectively. The notes are accruing between 10%
and 18% in simple interest per annum and is payable in full upon
demand. As of June 30, 2009, the Company owed a total principle
balance of $14,887 related to these notes and has accrued $2,274 in simple
interest.
NOTE 10 –
SPIN OFF
As
reported by Pegasus Tel, Inc., Delaware corporation (“Pegasus”), on Form 8-K
(File No. 000-5268) filed with the Securities and Exchange Commission on August
27, 2008, on August 18, 2008, Sino Gas International Holdings, Inc., a Utah
corporation (“Sino”) (OTCBB: SGAS), declared a dividend and issued shares of
Pegasus to Sino’s stockholders of record as of August 15, 2008
(“Spin-off”). The ratio of distribution of the Pegasus shares was one
(1) share of common stock of Pegasus for every twelve (12) shares
of common stock of Sino (1:12). Fractional shares were
rounded up to the nearest whole-number. An aggregate of 2,215,136
shares of Pegasus common stock were issued to an aggregate of 167 Sino
stockholders. The Pegasus common stock issued in distribution are “restricted
securities” (as defined in Rule 144 of the Securities Act of 1933, as amended
(the “Securities Act”)), and were issued pursuant to Section 4(2) of the
Securities Act due to the fact that the distribution did not involve a public
offering.
On August
5, 2008, Pegasus filed a Certificate of Designations, Powers, Preferences and
Rights (the “Certificate of Designation”) with the Secretary of State of the
State of Delaware thereby designating 2,000,000 shares of preferred stock as
Series A Convertible Preferred Stock, $0.0001 (the “Series A Preferred
Stock”). The Certificate of Incorporation of Pegasus authorizes the
designation and issuance of an aggregate of ten million (10,000,000) shares of
preferred stock in one or more series with all rights and privileges determined
by the Board of Directors of Pegasus and without stockholder
approval. Prior to the filing of the Certificate of Designation,
there were no shares of preferred stock designated or issued. Pursuant to the
Certificate of Designation, each share of Series A Preferred Stock may be
converted at any time by Pegasus or the holders thereof into ten (10) fully-paid
and non-assessable shares of Pegasus Common Stock.
F -
38
PEGASUS
TEL, INC.
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
(Continued)
NOTE 10 –
SPIN OFF (Continued)
On August
15, 2008, Pegasus issued an aggregate of 1,800,000 shares of Series A Preferred
Stock to an aggregate of 17 individuals pursuant to a Securities Purchase
Agreement for $0.0001per share of Series A Preferred Stock. Pegasus issued the
Series A Preferred Stock pursuant to Section 4(2) of the Securities Act due to
the fact that it did not involve a public offering of securities. The shares of
Series A Preferred Stock were restricted securities.
On August
18, 2008 and pursuant to the Certificate of Designation, Pegasus converted an
aggregate of 1,800,000 shares of Series A Preferred Stock into an aggregate of
18,000,000 shares of Pegasus common stock. Pegasus issued the common
stock pursuant to Section 4(2) of Securities Act due to the fact that it did not
involve a public offering of securities. The shares of common stock are
restricted securities.
On March
23, 2009, Pegasus filed a Form 15 (File No. 000-52628) with the Securities and
Exchange Commission pursuant to which the Company de-registered its class of
Common Stock under the Securities Exchange Act of 1934, as amended.
F -
39
TABLE
OF CONTENTS
Until
ninety days after the date this registration statement is declared effective,
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 dealer's obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
Page
|
||
Summary
|
5 | |
Risk
Factors
|
7 | |
Description
of Business
|
11 | |
Description
of Properties
|
15 | |
Legal
Proceedings
|
15 | |
Use
of Proceeds
|
15 | |
Determination
of Offering Price
|
15 | |
Dilution
|
15 | |
Selling
Stockholders
|
16 | |
Plan
of Distribution
|
19 | |
Directors,
Executive Officers, Promoters and Control Persons
|
21 | |
Security
Ownership of Certain Beneficial Owners and Management
|
23 | |
Description
of Securities
|
23 | |
Interest
of Named Experts and Counsel
|
25 | |
Experts
|
25 | |
Disclosure
of Commission Position of Indemnification for Securities Act
Liabilities
|
25 | |
Organization
Within Last Five Years
|
25 | |
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
26 | |
Certain
Relationships and Related Transactions and Corporate
Governance
|
33 | |
Market
for Common Equity and Related Stockholder Matters
|
33 | |
Changes
in and Disagreements with Accountants and Financial
Disclosure
|
34 | |
Where
You Can Find More Information
|
34 | |
Financial
Statements
|
35 |
75
PART
II
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
ITEM
13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The
estimated costs of this offering are as follows:
Expenses(1)
|
Amount
US($)
|
|||
SEC
Registration Fee
|
$
|
36
|
||
Transfer
Agent Fees
|
$
|
960
|
||
Accounting
Fees and Expenses
|
$
|
20,000
|
||
Legal
Fees and Expenses
|
$
|
50,000
|
||
Printers
|
$
|
0
|
||
Miscellaneous
|
$
|
0
|
||
Total
|
$
|
70,996
|
(1) All
amounts are estimates, other than the SEC's registration fee.
We are
paying all expenses of the offering listed above. No portion of these expenses
will be paid by the Selling Stockholders. The Selling Stockholders, however,
will pay any other expenses incurred in selling their common stock, including
any brokerage commissions or costs of sale.
ITEM
14.INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our
Articles of Incorporation provide for indemnification to the full extent
permitted by the laws of the State of Delaware for each person who becomes a
party to any civil or criminal action or proceeding by reason of the fact that
he, or his testator, or intestate, is or was a director or officer of the
corporation or served any other corporation of any type or kind, domestic or
foreign in any capacity at the request of the corporation.
We have
been advised that, in the opinion of the SEC, indemnification for liabilities
arising under the Securities Act is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities is asserted by one of our directors,
officers, or controlling persons in connection with the securities being
registered, we will, unless in the opinion of our legal counsel, submit the
question of whether such indemnification is against public policy to a court of
appropriate jurisdiction.
We have
no other indemnification provisions in our Certificate of Incorporation, Bylaws
or otherwise specifically providing for indemnification of directors, officers
and controlling persons against liability under the Securities Act.
76
ITEM 15. RECENT SALES OF UNREGISTERED
SECURITIES
On August
15, 2008, Pegasus issued an aggregate of 1,800,000 shares of Series A Preferred
Stock to an aggregate of 17 individuals pursuant to a Securities Purchase
Agreement for $0.0001per share of Series A Preferred Stock. Each purchaser was
an accredited investor as defined in the Securities Act. Pegasus
issued the Series A Preferred Stock pursuant to an exemption under Section 4(2)
of the Securities Act due to the fact that it did not involve a public offering
of securities. The shares of Series A Preferred Stock are “restricted
securities” (as such term is defined in the Securities Act).
Purchaser
|
Amount
of
Series
A
Preferred
Stock
|
Total
Purchase Price
($0.0001)
|
||||||
Sarah
Beckley
|
20,000
|
$
|
2.00
|
|||||
Pattiane
Carbona
|
40,000
|
4.00
|
||||||
John
Catricola
|
20,000
|
2.00
|
||||||
Mary
K. Evans
|
40,000
|
4.00
|
||||||
Amanda
Godin
|
40,000
|
4.00
|
||||||
Kevin
Kopaunik
|
90,000
|
9.00
|
||||||
Anthony
E. Lombardo
|
40,000
|
4.00
|
||||||
Rebecca
McGuinness
|
40,000
|
4.00
|
||||||
John
F. Passalaqua
|
270,000
|
27.00
|
||||||
Joseph
C. Passalaqua
|
500,000
|
50.00
|
||||||
Joseph
J. Passalaqua
|
50,000
|
5.00
|
||||||
Mary
Passalaqua
|
250,000
|
25.00
|
||||||
Hope
Savage
|
40,000
|
4.00
|
||||||
Stephanie
Scortino
|
50,000
|
5.00
|
||||||
Inna
Sheveleva
|
40,000
|
4.00
|
||||||
Margaret
L. Sollish
|
20,000
|
2.00
|
||||||
Carl
E. Worboys
|
250,000
|
25.00
|
||||||
TOTAL
|
1,800,000
|
$
|
180.00
|
On August
18, 2008 and pursuant to the Certificate of Designation, Pegasus converted an
aggregate of 1,800,000 shares of Series A Preferred Stock into an aggregate of
18,000,000 shares of Pegasus common stock. Pegasus issued the common
stock pursuant to Section 3(a)(9) of the Securities Act due to the fact that the
securities were exchanged upon conversion of the Series A Preferred Stock held
by existing security holders and there was no commission or other remuneration
paid or given directly or indirectly for soliciting such
exchange.
77
ITEM
16.EXHIBITS
Exhibit
No.
|
Description
|
3.1(1)
|
Articles
of Incorporation, dated February 19, 2002
|
3.2(1)
|
Amended
Articles of Incorporation, dated September 21, 2006
|
3.3(1)
|
Amendment
to the Articles of Incorporation, dated September 18,
2006.
|
3.4(2)
|
Amendment
to Articles of Incorporation, date May 15, 2007
|
3.5(3)
|
Certificate
of the Designations, Powers Preferences and Rights of the Series A
Convertible Preferred Stock
|
3.5(1)
|
By-laws
|
4.1(1)
|
Form
of Common Stock Certificate
|
5.1
|
Legal
Opinion of The Sourlis Law Firm
|
10.1
(3)
|
Series
A Preferred Stock Purchase Agreement
|
10.2
|
$1,205
18% Promissory Note, dated December 2, 2008, for the benefit of Joseph C.
Passalaqua
|
10.3
|
$8,682
18% Promissory Note, dated August 13, 2008, for the benefit of
Joseph C. Passalaqua
|
10.4
|
$5,000
10% Promissory Note, dated December 13, 2007, for the benefit of Joseph C.
Passalqua
|
10.5
|
$400
10% Promissory Note, dated March 21, 2008, for the benefit of Mary
Passalaqua
|
10.6
|
$17,900
10% Promissory Note, dated January 24, 2008, for the benefit of Mary
Passalaqua
|
10.7
|
$15,300
15% Promissory Note, dated June 11, 2007, for the benefit of Mary
Passalaqua
|
10.8
|
$15,000
15% Promissory Note, dated April 26, 2007, for the benefit of Mary
Passalaqua
|
10.9
|
$5,000
10% Promissory Note, dated October 24, 2006, for the benefit of Mary
Passalaqua
|
23.1
|
Consent
of The Sourlis Law Firm (included in Exhibit 5.1)
|
23.2
|
Consent
of Robinson & Hill, Co.
|
(1) Filed
as an exhibit to the Company’s Form 10-SB (File No.: 000-52628) filed with the
SEC on May 7, 2007 and incorporated by reference herein.
(2) Filed
as an exhibit to the Company’s Form 10-SB Amendment No. 1 (File No.: 000-52628)
filed with the SEC on October 5, 2007 and incorporated by reference
herein.
(3) Filed
as an exhibit to the Company’s Form 8-K (File No.: 000-52628) filed on August
27, 2008and incorporated by reference herein.
78
ITEM
17. UNDERTAKINGS
a.
|
Rule 415 Offering.
Include the following if the securities are registered pursuant to Rule
415 under the Securities Act:
|
The
undersigned registrant hereby
undertakes:
|
Provided
however, That:
79
5.
|
80
iv.
|
Any
other communication that is an offer in the offering made by the
undersigned registrant to the
purchaser.
|
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers and controlling persons pursuant to the
provisions above, or otherwise, 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, and is, therefore,
unenforceable.
In the
event that a claim for indemnification against such liabilities, other than the
payment by us of expenses incurred or paid by one of our directors, officers, or
controlling persons in the successful defense of any action, suit or proceeding,
is asserted by one of our directors, officers, or controlling persons in
connection with the securities being registered, we 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 is
against public policy as expressed in the Securities Act, and we will be
governed by the final adjudication of such issue.
81
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, as amended, the
Company certifies that it has reasonable grounds to believe that it meets all of
the requirements of filing on Form S-1 and authorized this registration
statement to be signed on its behalf by the undersigned, in Weston, Florida,
United States, on November 13, 2009.
PEGASUS
TEL, INC.
|
||
|
|
|
By:
|
/s/ CARL
E. WORBOYS
|
|
Carl
E. Worboys
|
||
President
and Director
|
||
(Principal
Executive Officer)
|
||
By:
|
/s/
JOHN F. PASSALAQUA
|
|
John
F. Passalaqua
Chief
Financial Officer, Secretary and Director
((Principal
Financial Officer
and
Principal Accounting 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
|
Title
|
Date
|
||
/s/ CARL
E. WORBOYS
|
President,
and Director
(Principal
Executive Officer
|
November
13, 2009
|
||
Carl
E. Worboys
|
||||
/s/
JOHN F. PASSALAQUA
|
Chief
Financial Officer, Secretary and Director
(Principal
Financial Officer
and
Principal Accounting Officer)
|
November
13, 2009
|
||
John
F. Passalaqua
|
||||
82