UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2011~~2012

Commission file number 333-167451

PEGASUS TEL, INC.

(Exact name of registrant as specified in its charter)

Delaware		41-2039686
State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~2 Corporate Drive,~~116 Court Street, Suite ~~234~~707
~~Shelton, CT~~New Haven, Connecticut		~~06484~~06511
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number including area code (203) ~~404-0450~~823-9136

(Former Name or Former Address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Exchange Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.0001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act

[ ] Yes [X] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

[ ] Yes [X] No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Yes [X] No [ ]

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

Large accelerated filer [ ] Accelerated filer [ ]

Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [X]

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 3,510,496,677 as of ~~May 4, 2012.~~April 16, 2013.

DOCUMENTS INCORPORATED BY REFERENCE

None

PEGASUS TEL, INC.

FORM 10-K

TABLE OF CONTENTS

Item #	Description	Page Numbers

	PART I		3

ITEM 1	BUSINESS		3

ITEM 1A	RISK FACTORS		107

ITEM 1B	UNRESOLVED STAFF COMMENTS		149

ITEM 2	PROPERTIES		1510

ITEM 3	LEGAL PROCEEDINGS		1510

ITEM 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS		1510

	PART II		1611

ITEM 5	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES		1611

ITEM 6	SELECTED FINANCIAL DATA		1813

ITEM 7	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		13
			18
ITEM 7A	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		20
			27
ITEM 8	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		21

ITEM 9	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		2837

ITEM 9A	CONTROLS AND PROCEDURES		4437

ITEM 9B	OTHER INFORMATION		4639

	PART III		4740

ITEM 10	DIRECTORS, EXECUTIVE OFFICERS, CORPORATE GOVERNANCE		4740

ITEM 11	EXECUTIVE COMPENSATION		4942

ITEM 12	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		5144

ITEM 13	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		5245

ITEM 14	PRINCIPAL ACCOUNTANT FEES AND SERVICES		5245

	PART IV		5346

ITEM 15	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES		5346

	SIGNATURES		5447

EXHIBIT31.1	SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER

EXHIBIT31.2	SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER

EXHIBIT 32.1	SECTION 906 CERTIFICATION OF CHIEF EXECUTIVE OFFICER

EXHIBIT 32.2	SECTION 906 CERTIFICATION OF CHIEF FINANCIAL OFFICER

Table of Content

PART I

ITEM 1. BUSINESS

FORWARD-LOOKING STATEMENTS; This annual report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. In addition, Pegasus Tel, Inc., (the “Company” or “Pegasus”), may from time to time make oral forward-looking statements. Actual results are uncertain and may be impacted by many factors. In particular, certain risks and uncertainties that may impact the accuracy of the forward-looking statements with respect to revenues, expenses and operating results include without imitation; cycles of customer orders, general economic and competitive conditions and changing customer trends, technological advances and the number and timing of new product introductions, shipments of products and components from foreign suppliers, and changes in the mix of products ordered by customers. As a result, the actual results may differ materially from those projected in the forward-looking statements.

Because of these and other factors that may affect the Company’s operating results, past financial performance should not be considered an indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.

History

The Company 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 the Company 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. The Company 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 with the Secretary of State of the State of Delaware 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, the Company filed a Registration Statement on Form 10-SB (File No.: 0-52628), or the Registration Statement, with the U.S. Securities and Exchange Commission (the "SEC") to register the Company's 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 with the Secretary of State of the State of Delaware 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 remained at $.0001 per share.

On August 5, 2008, the Company filed a Certificate of Designations, Powers, Preferences and Rights (the “August 2008 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 the Company 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 the Company. Prior to the filing of the August 2008 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 the Company or the holders thereof into ten (10) fully-paid and non-assessable shares of the Company's Common Stock.

Table of Content

On August 15, 2008, the Company 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. The Company 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 was one (1) share of common stock of our Company 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 our Company's common stock were issued pursuant to the distribution to an aggregate of 167 Sino stockholders. The Company's common stock issued were and remain “restricted securities” (as defined in Rule 144 of the Securities Act of 1933, as amended).

On August 18, 2008 and pursuant to the August 2008 Certificate of Designation, the Company converted an aggregate of 1,800,000 shares of Series A Preferred Stock into an aggregate of 18,000,000 shares of the Company's common stock. The Company 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.

On March 23, 2009, the Company filed a Form 15 (File No. 000-52628) with the SEC pursuant to which the Company de-registered its class of Common Stock under the Securities Exchange Act of 1934, as amended.

On October 15, 2009, the Company filed a Form S-1 Registration Statement with the SEC and on December 28, 2009 the Company’s Registration Statement went effective.

On February 8, 2011, the Company signed and filed on February 10, 2011 a Certificate of Designations, Powers, Preferences and Rights (the “February 2011 Certificate of Designation”) with the Secretary of State of the State of Delaware thereby cancelled the 2,000,000 Series A Preferred Stock and designated 10,000,000 shares of preferred stock as Series B Convertible Preferred Stock, $0.0001 (the “Series B Preferred Stock”). The Certificate of Incorporation of the Company 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 February 2011 Certificate of Designation, there were 2,000,000 shares of preferred stock designated or issued which were herby cancelled. Pursuant to the February 2011 Certificate of Designation, each share of Series B Preferred Stock may be converted at any time by Pegasus or the holders thereof into 1.49025 post-reverse fully-paid and non-assessable shares of the Company's Common Stock.

On June 13, 2011, the Company signed and filed an Amendment to Certificate of Designations, Powers, Preferences and Rights (the “Amended Certificate of Designation”) with the Secretary of State of the State of Delaware thereby and designating 7,000,000 shares of preferred stock as Series B Convertible Preferred Stock, $0.0001 (the “Amended Series B Preferred Stock”). The Certificate of Incorporation of the Company 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 10,000,000 shares of Series B Preferred Stock designated or issued which were herby amended. Pursuant to the Amended Certificate of Designation, each share of Amended Series B Preferred Stock may be converted at any time by Pegasus or the holders thereof into 1,711.156 post-reverse fully-paid and non-assessable shares of the Company's Common Stock.

Table of Content

On June 13, 2011, the Company signed and filed a Certificate of Designations, Powers, Preferences and Rights (the “ June 2011 Certificate of Designation”) with the Secretary of State of the State of Delaware thereby and designating 1,000,000 shares of preferred stock as Series C Convertible Preferred Stock, $0.0001 (the “Series C Preferred Stock”). The Certificate of Incorporation of the Company 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 7,000,000 shares of Amended Series B Preferred Stock designated or issued. Pursuant to the June 2011 Certificate of Designation, each share of Amended Series C Preferred Stock may be converted at any time by Pegasus or the holders thereof into one (1) fully-paid and non-assessable shares of the Company's Common Stock and the voting rights of three hundred fifty (350) shares.

On June 6, 2011, the Company entered into a Asset Purchas Agreement (the "Purchase Agreement") which was superseded on July 14, 2011 (the "Amended Purchase Agreement") with Encounter Technologies, Inc., a Colorado Corporation trading publicly on the Over-the-Counter under the symbol ENTI.PK ("Encounter"). Pursuant to the Amended Purchase Agreement, Pegasus acquired all of Encounter’s rights, title, and interest in and to certain assets and liabilities of Encounter relating to MusicMatrix.com (“MusicMatrix.com”) in consideration of 6,995,206 shares of the Company's Amended Series B Preferred Stock.

On June 30, 2011, the Company signed and filed an July 5, 2011 Amended Certificate of Incorporation with the Secretary of State of the State of Delaware to increase the authorized to twenty billion (20,000,000,000) of which nineteen billion nine hundred ninety million (19,990,000,000) shall be designated as common shares and ten million (10,000,000) shall be designated as preferred shares. The par value remained at $.0001 per share.

On September 26, 2011, the Company signed and filed on September 29, 2011 an Amended Certificate of Incorporation with the Secretary of State of the State of Delaware to declare a four (4%) percent forward stock split for shareholders of record on September 28, 2011. The forward split was never approved by the Financial Industry Regulatory Authority ("FINRA") and was cancelled by the Company on April 9, 2012.

On March 12, 2012, the Company signed and filed on March 15, 2012 an Amendment to Certificate of Designations, Powers, Preferences and Rights (the “March 2012 Amended Certificate of Designation”) with the Secretary of State of the State of Delaware thereby and designating 1,000,000 shares of preferred stock as Series C Convertible Preferred Stock, $0.0001 (the “Amended Series C Preferred Stock”). The Certificate of Incorporation of the Company 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 7,000,000 shares of Amended Series B Preferred Stock designated or issued and 1,000,000 shares of Series C Preferred Stock designated or issued. Pursuant to the March 2012 Amended Certificate of Designation, each share of Amended Series C Preferred Stock may be converted at any time by Pegasus or the holders thereof into one (1) fully-paid and non-assessable shares of the Company's Common Stock and the voting rights of twenty thousand (20,000) shares.

On March 12, 2012 the Company issued an aggregate of 1,000,000 shares of Amended Series C Preferred Stock to Total-Invest International B.V., a Dutch limited liability company ("Total-Invest") pursuant to a Securities Purchase Agreement for $0.0001per share of Series C Preferred Stock. The Company issued the Series C 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 C Preferred Stock were “restricted securities” (as such term is defined in the Securities Act).

On March 21, 2012, the Company entered into a Rescission Agreement with Encounter. The Company and Encounter canceled and rescinded the Purchase Agreement and the Amended Purchase Agreement and declared them to be null and void, ab initio, for all purposes, including, without limitation, for tax purposes. In addition the Company and Encounter agreed that the 6,995,206 shares of the Company's Amended Series B Preferred Stock issued in connection with the Amended Purchase Agreement were cancelled by the Company in accordance with Section 3 of the Amended Certificate of Designation. As a result of the rescissions and cancellations MusicMatrix.com was returned to Encounter and each party was in the same position it was in immediately prior to the consummation of the Amended Purchase Agreement.

Table of Content

On March 21, 2012, the Company signed and filed on March 26, 2011 in accordance with the Rescission Agreement with Encounter, a Certificate of Elimination of Designations, Powers, Preferences and Rights (the “Certificate of Elimination”) with the Secretary of State of the State of Delaware thereby eliminating the 7,000,000,000 Amended Series B Convertible Preferred Stock, The Certificate of Incorporation of the Company 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 Elimination, there were 7,000,000 shares of Amended Series B Preferred Stock designated or issued and 1,000,000 shares of Series C Preferred Stock designated or issued.

On March 21, 2012, the Company signed and filed on March 26, 2012 a Certificate of Designations, Powers, Preferences and Rights (the “ March 2012 Certificate of Designation”) with the Secretary of State of the State of Delaware thereby and designating 3,000,000 shares of preferred stock as Series D Convertible Preferred Stock, $0.0001 (the “Series D Preferred Stock”). The Certificate of Incorporation of the Company 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 were1,000,000 shares of Amended Series C Preferred Stock designated or issued. Pursuant to the March 2012 Certificate of Designation, each share of Amended Series D Preferred Stock may be converted at any time by Pegasus or the holders thereof into twenty thousand (20,000) fully-paid and non-assessable shares of the Company's Common Stock and have no voting rights.

On March 21, 2012, the Company acquired Blue Bull Ventures B.V., a Dutch limited liability company that provides venture capital from European private equity and institutional investors as well as advisory and management resources to emerging companies throughout the world, primarily in Europe, including providing financial advice and resources on mergers, acquisitions, restructuring, financing and capital raising from Total-Invest for 2,436,453 Series D Preferred Stock of the Company.

We are subject to the information reporting requirements of the Exchange Act, and accordingly, are required to file periodic reports, including quarterly and annual reports and other information with the Securities and Exchange Commission. Any person or entity may read and copy our reports with the Securities and Exchange Commission at the SEC's Public Reference Room at 100 F Street N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Room by calling the SEC toll free at 1-800-SEC-0330. The SEC also maintains an Internet site at http://www.sec.gov where reports, proxies and informational statements on public companies may be viewed by the public.

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, 2011, we owned, operated, and managed 11 payphones. 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 Company on March 21, 2012 acquired Blue Bull Ventures B.V., a Dutch limited liability company that provides venture capital from European private equity and institutional investors. In addition, Blue Bull provides advisory and management resources to emerging companies throughout the world, primarily in Europe, including providing financial advice and resources on mergers, acquisitions, restructuring, financing and capital raising. The Company long term strategic plan is to expand this operation both in Europe and the United States.

Table of Content

~~The chart below describes the specific location of each of our 11 payphones respectively and the amount of revenue generated by each payphone for the audited fiscal years ended December 31, 2011.~~

No.: Location 2011
1
Andes Hotel
110 Main St., Andes, NY  13731
$ 198
2
Andes Public Booth
21 Main St., Andes, NY  13731
$ 43
3
Margaretville Central School
415 Main St., Margaretville, NY 12455
$ 191
4
Margaretville Memorial Hospital
42084 State Hwy. 28, Margaretville, NY 12455 (downstairs)
$ 103
5
Margaretville Memorial Hospital
42084 State Hwy. 28, Margaretville, NY 12455 (upstairs)
$ 102
6
Mountainside Residential Care
42158 State Hwy. 28, Margaretville, NY 12455 (1 st Floor)
$ 590
7
Mountainside Residential Care
42158 State Hwy. 28, Margaretville, NY 12455 (2 nd Floor)
$ 590
8
Mountainside Residential Care
42158 State Hwy. 28, Margaretville, NY 12455 (3 rd Floor)
$ 590
9
Town of Middletown
42339 State Hwy. 28, Margaretville, NY 12455
$ 624
10
Hess Mart
42598 State Hwy. 28, Margaretville, NY  12455
$ 848
11
Arkville Country Store
43525 State Hwy. 28, Arkville, NY  12406
$ 20

Total Revenues $ 3,899

~~The chart below describes the specific location of each of our 11 payphones respectively and the amount of revenue generated by each payphone for the audited fiscal years ended December 31, 2010.~~

No.: Location 2010
1
Andes Hotel
110 Main St., Andes, NY  13731
$ 372
2
Andes Public Booth
21 Main St., Andes, NY  13731
$ 140
3
Margaretville Central School
415 Main St., Margaretville, NY 12455
$ 285
4
Margaretville Memorial Hospital
42084 State Hwy. 28, Margaretville, NY 12455 (downstairs)
$ 200
5
Margaretville Memorial Hospital
42084 State Hwy. 28, Margaretville, NY 12455 (upstairs)
$ 120
6
Mountainside Residential Care
42158 State Hwy. 28, Margaretville, NY 12455 (1 st Floor)
$ 598
7
Mountainside Residential Care
42158 State Hwy. 28, Margaretville, NY 12455 (2 nd Floor)
$ 592
8
Mountainside Residential Care
42158 State Hwy. 28, Margaretville, NY 12455 (3 rd Floor)
$ 590
9
Town of Middletown
42339 State Hwy. 28, Margaretville, NY 12455
$ 695
10
Hess Mart
42598 State Hwy. 28, Margaretville, NY  12455
$ 789
11
Arkville Country Store
43525 State Hwy. 28, Arkville, NY  12406
$ 163

Total Revenues $ 4,544

Employees

~~Table of Content~~

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.

~~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.

The large former Bell companies and other 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. 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.

~~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.

~~Table of Content~~

~~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.

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.

~~Table of Content~~

~~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. Jerry Gruenbaum is our Chief Executive Officer, President, Secretary and Director and Nathan Lapkin is our Chief Financial Officer. Besides its officers, management of the Company expects to use consultants, attorneys, and accountants as necessary, and does not anticipate a need to engage any other full-time employees until absolutely necessary for the operations of the Company. The need for employees and their availability will be addressed in connection with the scope and requirements of the operations of the Company.

Trading market

Our common stock is quoted on the OTC Electronic Bulletin Board (OTCBB) under the symbol PTEL.

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.

~~Industry Trends~~

We operate 11 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.

ITEM 1A. RISK FACTORS

In addition to the other information in this report, the following risks should be considered carefully in evaluating our business and prospects:

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 December 31, ~~2011,~~2012, we had ~~$285~~$1,159 in cash on hand and an accumulated deficit of ~~$(19,539,847)~~$(181,273), 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.

107

Table of Content

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, ~~2011,~~2012, we had ~~$285~~$1,159 in cash and cash equivalents on hand and an accumulated deficit of ~~$(19,539,847)~~$(181,273).

As of December 31, ~~2011,~~2012, the Company had Related Party Accounts Payable in the amount of ~~$15,542~~$15,283 due to Lyboldt-Daly, Inc. for Bookkeeping expenses. Joseph Passalaqua (a former officer and director of the company) is President and Sole Director of Lyboldt-Daly, Inc.

As of December 31, 2011, the Company owed $15,912 in Related Party Notes Payable. These notes are owed to Shareholders of the Company, Joseph C. Passalaqua, Mary Passalaqua, and Cobalt Blue of which Mary Passalaqua is President. These notes are accruing simple interest of 10%, 15% and 18% annually. As of December 31, 2011, the Company owed a total principle balance of $15,912 related to these notes and had accrued $46,162 in simple interest.

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 an 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.

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 $75,000 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.

118

Table of Content

~~We compete with the growing cell-phone industry and other well-established companies.~~

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.~~

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.

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, Jerry Gruenbaum and Nathan Lapkin. The loss of either of them would have a material adverse affect on our business and prospects.

We currently have only two executive officers, Jerry Gruenbaum and Nathan Lapkin. Jerry Gruenbaum serves as our Chief Executive Officer, President and Director, and Nathan Lapkin serves as our Chief Financial Officer. The loss of either executive officer could have a material adverse effect on our business and prospects.

~~Table of Content~~

If we cannot attract, retain, motivate and integrate additional skilled personal, our ability to compete will be impaired.

The Company has no employees and many of our current and potential competitors have 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.

~~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.

~~Table of Content~~

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 none reimbursable 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.

We are 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.

ITEM 1B UNRESOLVED STAFF COMMENTS

As a smaller reporting company, we are not required to include disclosure under this item.

149

Table of Content

ITEM 2. PROPERTIES

At the present time we do not own or lease any real property. Our operations are conducted out of Jerry Gruenbaum’s law office, located at ~~Two Corporate Drive, Suite 234, Shelton,~~116 Court Street, Sute 707, New Haven, Connecticut ~~06484.~~06511. Jerry Gruenbaum provides us this office space free of charge.

ITEM 3. LEGAL PROCEEDINGS

Not Applicable. 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.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .

On June 30, 2011, the Company with the approval of a majority of the shareholders, filed Amended Certificate of Incorporation with the Secretary of State of the State of Delaware to increase the authorized to twenty billion (20,000,000,000) of which nineteen billion nine hundred ninety million (19,990,000,000) shall be designated as common shares and ten million (10,000,000) shall be designated as preferred shares. The par value remained at $.0001 per share.None

On September 26, 2011, the Company with the approval of a majority of the shareholders, filed Amended Certificate of Incorporation with the Secretary of State of the State of Delaware to declare a four (4%) percent forward stock split for shareholders of record on September 28, 2011. The forward split was never approved by the Financial Industry Regulatory Authority ("FINRA") and was cancelled by a majority of the shareholders on April 9, 2012.

1510

Table of Content

PART II.

ITEM 5. MARKET FOR REGISTRANTS RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.

(a)	Market Information.

Our common stock is quoted on the OTC Electronic Bulletin Board. We obtained our trading symbol which is PTEL.OB and the right to trade on June 15, 2010. For the periods indicated, the following table sets forth the high and low bid prices per share of common stock. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.

	HIGH		LOW		HIGH		LOW

FISCAL YEAR ENDED DECEMBER 31, 2010

First Quarter	$	n/a	$	n/a
Second Quarter	$	n/a	$	n/a
Third Quarter	$	0.00	$	0.00
Fourth Quarter	$	0.00	$	0.00

FISCAL YEAR ENDED DECEMBER 31, 2011

First Quarter	$	0.25	$	0.25	$	0.25	$	0.25
Second Quarter	$	2.00	$	0.01	$	2.00	$	0.01
Third Quarter	$	0.01	$	0.01	$	0.01	$	0.01
Fourth Quarter	$	0.01	$	0.01	$	0.01	$	0.01

FISCAL YEAR ENDING DECEMBER 31, 2012
FISCAL YEAR ENDED DECEMBER 31, 2012

First Quarter	$	0.01	$	0.01	$	0.0002	$	0.0001
Second Quarter					$	0.0002	$	0.0001
Third Quarter					$	0.0001	$	0.0001
Fourth Quarter					$	0.0001	$	0.0001

FISCAL YEAR ENDING DECEMBER 31, 2013

First Quarter					$	0.0001	$	0.0001

(b)

Holders.

As of ~~May 4, 2011~~April 16, 2013 there were approxmately 228 record holders of 3,510,496,677 shares of the Company's common stock. The closing price for the Company's common stock on ~~May 4, 2011,~~April 16, 2013, was ~~$0.001~~$0.0001 per share.

(c)	Dividend Policy.

We have not declared or paid any cash dividends on our common stock and we do not intend to declare or pay any cash dividend in the foreseeable future. The payment of dividends, if any, is within the discretion of our Board of Directors and will depend on our earnings, if any, our capital requirements and financial condition and such other factors as our Board of Directors may consider.

1611

Table of Content

(d)	Securities Authorized for Issuance Under Equity Compensation Plans.

We have not authorized the issuance of any of our securities in connection with any form of equity compensation plan.

(e)	Recent Sales of Unregistered Securities.

None On June 6, 2011, the Company entered into a Asset Purchas Agreement (the "Purchase Agreement") which was superseded on July 14, 2011 (the "Amended Purchase Agreement") with Encounter Technologies, Inc., a Colorado Corporation trading publicly on the Over-the-Counter under the symbol ENTI.PK ("Encounter"). Pursuant to the Amended Purchase Agreement, Pegasus acquired all of Encounter’s rights, title, and interest in and to certain assets and liabilities of Encounter relating to MusicMatrix.com (“MusicMatrix.com”) in consideration of 6,995,206 shares of the Company's Amended Series B Preferred Stock.

(f)	Transfer Agent

The Company's transfer agent and registrar of the common stock is:

ACTION STOCK TRANSFER COMPANY

2469 E. Fort Union Blvd., Suite 214

Salt Lake City, Utah 84191

Phone: (801) 274-1088

Fax: (801) 274-1099

On March 23, 2012, the Company terminated its stock transfer services with Pacific Stock Transfer Company, its previous transfer agent and appointed Action Stock Transfer Corp. as its new transfer agent.

1712

Table of Content

ITEM 6. SELECTED FINANCIAL DATA .

The table below summarizes our audited balance sheet at December 31, ~~2011 compared to December 31, 2010~~2012 and statement of operations for the fiscal year ended December 31, ~~2011 compared to December 31, 2010.~~2012.

	At December 31,
	2011 (Audited)			2010 (Audited)			December 31, 2012 (Audited)
Balance Sheet:
Cash	$	285		$	289		$	1,159
Total Assets	$	672		$	507		$	16,297
Total Liabilities	$	143,271		$	212,905		$	296,158
Total Stockholders’ Equity (Deficit)	$	(142,599	)	$	(212,398	)	$	(279,861	)

	For the Fiscal Year Ended December 31,
	2011 (Audited)			2010 (Audited)			Fiscal Year ended December 3 1, 2012 (Audited)
Statement of Operations :
Revenue	$	3,899		$	4,544		$	0
Net Loss	$	(19,269,585	)	$	(49,392	)	$	(181,273	)
Net Loss Per Share of Common Stock		--			--			0

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

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."

ORGANIZTION AND BASIS OF PRESENTATION

The following discussion and analysis is based on the audited financial statements for the years ended December 31, ~~2011 and 2010~~2012 of Pegasus Tel, Inc., a Delaware corporation (“Pegasus” the “Company,” “our,” or “we”). All significant inter-company amounts have been eliminated. In the opinion of management, the audited financial statements presented herein reflect all adjustments (consisting only of normal recurring adjustments) necessary for fair presentation. Interim results are not necessary indicative of results to be expected for the entire year.

1813

Table of Content

We prepare our financial statements in accordance with generally accepted accounting principles (GAAP), which require that management make estimates and assumptions that affect reported amounts. Actual results could differ from these estimates.

Certain of the statements contained below are forward-looking statements (rather than historical facts) that are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. We have limited assets of ~~$672~~$16,297 as of December 31, ~~2011. In 2011 the assets consisted of cash held in the bank account and accounts receivable from customers that purchased payphone services.~~2012.

CRITICAL ACCOUNTING POLICIES & ESTIMATES

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. However, future events are subject to change, and the best estimates and judgments routinely require adjustment. The amounts of assets and liabilities reported in our balance sheet, and the amounts of revenues and expenses reported for each of our fiscal periods, are affected by estimates and assumptions which are used for, but not limited to, the accounting for allowance for doubtful accounts, goodwill and intangible asset impairments, restructurings, inventory and income taxes. Actual results could differ from these estimates. The following critical accounting policies are significantly affected by judgments, assumptions and estimates used in the preparation of our consolidated financial statements.

Use of Estimates

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.

Revenue Recognition Policies

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. As of the year ended December 31, ~~2011 and December 31, 2010,~~2012, there was no deferred revenue. 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.

1914

Table of Content

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.

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.

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.

~~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, 2011, we owned, operated and managed 11 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 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).

If we are unable to achieve or sustain profitability, or if operating losses increase in the future, we may not be able to remain a viable company and may have to discontinue operations. Our expenses have historically exceeded our revenues and we have had losses in all fiscal years of operation, including those in fiscal years 2010 and 2011, and the losses are projected to continue in 2012. Our net losses were $(49,392) and $(19,269,585) through the fiscal years ended 2010 and 2011, respectively. We have a cumulative net loss from February 19, 2002 (Date of Inception) to December 31, 2011 of $(19,539,847). We have been concentrating on the development of our products, services and business plan. There is no assurance that we will be successful in implementing our business plan or that we will be profitable now or in the future.

~~Table of Content~~

~~COSTS RELATED TO OUR OPERATION~~

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.

GOING CONCERN QUALIFICATION

In their Independent Auditor's Report for the fiscal years ending December 31, ~~2011 and 2010,~~2012, Robison, Hill & Co. stated that several conditions and events cast substantial doubt about our ability to continue as a “going concern.” At December 31, ~~2011,~~2012, we had ~~$285~~$1,159 cash on hand and ~~$387~~$7,281 in ~~accounts~~other receivable. We have incurred a deficit of ~~$(19,539,847)~~$(181,273) from our inception to December 31, ~~2011.~~2012. See “Liquidity and Capital resources.”

~~THE FISCAL YEAR ENDED DECEMBER 31, 2011, COMPARED TO THE FISCAL YEAR ENDED DECEMBER 31, 2010.~~

~~REVENUES~~

Our total revenue decreased by $645, from $4,544 for the year ended December 31, 2010 to $3,899 for the year ended December 31, 2011. This decrease was primarily due to a decline in payphone customers and a lower volume of calls. 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 non-coin call revenue, or commission income, which is comprised primarily of “dial around” revenue, star 88 commission revenue and operator service revenue decreased for the year ended December 31, 2011 primarily due to a decline in payphone customers that made operator assisted calls and a lower volume of total calls. 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 was $2,160 for both of the years ended December 31, 2010 and December 31, 2011, respectively. This is the revenue from monthly invoices billed to payphone customers in which the Company owns the payphone and provides service to operate the payphone on the premises. As of December 31, 2011 two customers made up the local service revenue:

~~Mountainside Residential Care Center, Lake Katrine, New York~~

~~Town of Middletown, Margaretville, New York~~

On March 12, 2012 we acquired Blue Bull Ventures B.V., a Dutch corporation from our control shareholder Total-Invest International B.V. which provides venture capital from European private equity and institutional investors to emerging companies throughout the world. We anticipate this area of our business to grow and generate revenues for us in fiscal year 2012.

~~COST OF SERVICES~~

Our overall cost of services decreased by $452, from $3,567 for the year ended December 31, 2010, to $3,115 for the year ended December 31, 2011. 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 and APCC commission fees related to Dial Around processing. There was no Depreciation expense in 2011 or 2010. As of December 31, 2011 and December 31, 2010, the payphone equipment was fully depreciated.

~~Table of Content~~

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.

~~OPERATION AND ADMINISTATIVE EXPENSES~~

Operating expenses increased by $17,525,452, from $30,705 for the year ended December 31, 2010 to $17,556,157 for the year ended December 31, 2011. Stock for Services increased from $0 for fiscal year ended December 31, 2010 to $17,479,384 for fiscal year ended December 31, 2011. The increase was due to issuing 8,000,000 common shares on April 6, 2011 valued at $0.08 per share, 40,000,000 common shares on June 10, 2011 valued at $0.006 per share and 2,400,000,000 common shares on July 14, 2011 valued at $0.0069 per share to Anthony DiBiase, the Company's president at that time for services rendered to the Company. Professional fees increased from $20,510 for the fiscal year ended December 31, 2010 to $66,567 for the fiscal year ended December 31, 2011. Professional fees include fees the Company pays for accountants, bookkeepers and attorneys throughout the year for performing various tasks. This increase was primarily due to increase in legal fees from $0 for fiscal year ended December 31, 2010 to $33,098 for fiscal year ended December 31, 2011 and an increase in accounting fees from $20,510 for fiscal year ended December 31, 2010 to $33,469 for fiscal year ended December 31, 2011. General and Administrative expenses (G&A) increased by $2,261 in the fiscal year ended December 31, 2011. Outside Services expenses decreased by $2,250 in the fiscal year ended December 31, 2011. Our expenses to date are largely due to issuance of stock for services and to a lesser extent professional fees that include accounting, bookkeeping and legal fees.

LIQUIDITY AND CAPITAL RESOURCES

In their ~~2011~~2012 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, ~~2011 and 2010,~~2012, we had ~~$285 and $289~~$1,159 in cash and cash ~~equivalents respectively.~~equivalents. Our net loss for ~~years~~year ended December 31, ~~2011 and 2010~~2012 were ~~$(49,392) and $(19,269,585) respectively. Our accounts receivable for the years ended December 31, 2011 and 2010 were $387 and $218, respectively.~~$(181,273). The accumulated deficit as of December 31, ~~2010~~2013 was $ ~~(19,539,847)~~(181,273).

As of December 31, ~~2011,~~2012, the Company owed ~~$15,766~~$15,283 in Related Party Accounts Payable. As of December 31, ~~2011~~2012 this balance includes ~~$15,542~~$15,283 due to Lyboldt-Daly Inc. for bookkeeping expenses (of which Joseph C. Passalaqua, our former officer and director is President and Sole Director). These amounts are non-interest bearing.

As of December 31, 2011, the Company owed $15,912 in Related Party Notes Payable. These notes are owed to Cobalt Blue LLC, of which Mary Passalaqua, the wife of Joseph C. Passalaqua, our former officer and director is the President. These notes are accruing simple interest between 10%, 15% and 18% annually. As of December 31, 2011, the Company owed a total principle balance of $15,912 related to these notes and had accrued $46,162 in simple interest.

Net cash used in operating activities was $49,239 during the twelve-month period ended December 31, 2011, mainly representative of the net loss incurred during 2011. This compares to net cash used in operating activities of $71,890 during the twelve-month period ended December 31, 2010.

2215

Table of Content

Net cash provided by investing activities was $0 during twelve-month period ended December 31, 2011. This compares to net cash provided by investing activities of $0 for the twelve-month period ended December 31, 2010.

Net cash provided by financial activities was $49,235 during twelve-month period ended December 30, 2011, representing the proceeds from related party notes in the amount of $49,235. This compares to net cash provided by financing activities of $72,140 during the twelve-month period ended December 31, 2010 due to proceeds from related party notes of $72,585 of which $445 was repaid in 2010.

To date, we have had minimal revenues; and we require additional financing in order to finance our business activities on an ongoing basis. Our future capital requirements will depend on numerous factors including, but not limited to, continued progress in finding a merger candidate and the pursuit of business opportunities. We are actively pursuing alternative financing and have had discussions with various third parties, although no firm commitments have been obtained to date. In the interim, shareholders of the Company have committed to meet our minimal operating expenses. We believe that actions presently being taken to revise our operating and financial requirements provide them with the opportunity to continue as a “going concern,” although no assurances can be given.

COMMON STOCK

Our board of directors is authorized to issue 20,000,000,000 shares of Common stock, with a par value of $0.0001. There are an aggregate of 3,510,496,677 shares of Common Stock issued and outstanding, which are held by 228 stockholders as of the date of this Annual Report. All shares of our common stock have one vote per share on all matters, including election of directors, without provision for cumulative voting. The common stock is not redeemable and has no conversion or preemptive rights. The common stock currently outstanding is validly issued, fully paid and non-assessable. In the event of liquidation of the Company, the holders of common stock will share equally in any balance of the Company's assets available for distribution to them after satisfaction of creditors and preferred stockholders, if any. The holders of our common stock are entitled to equal dividends and distributions per share with respect to the Common Stock when, as and if, declared by the board of directors from funds legally available.

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.

Options

We do not have a stock option plan in place nor are there any outstanding exercisable for shares of our common stock.

Convertible Securities

On March 12, 2012, the Company issued an aggregate of 1,000,000 shares of Amended Series C Preferred Stock to Total-Invest pursuant to a Securiities Purchase Agreement. Each share of Amended Series C Preferred Stock may be converted at any time by Pegasus or the holders thereof into ~~one (1)~~ten (10) fully-paid and non-assessable shares of the Company's Common Stock and the voting rights of twenty thousand (20,000) shares. On March 21, 2012, the Company issued an aggregate of 2,436,453 Series D Preferred Stock to Total-Invest for the acquisition of Blue Bull Ventures B.V., a Dutch limited liability company pursuant to an Acquisition Agreement. Each share of Amended Series D Preferred Stock may be converted at any time by the Company or the holders thereof into twenty thousand (20,000) fully-paid and non-assessable shares of the Company's Common Stock and have no voting rights.

2316

Table of Content

PREFERRED STOCK

Our board of directors is authorized to issue 10,000,000 shares of Common stock, with a par value of $0.0001. There are an aggregate of 3,436,453 shares of Preferred Stock issued and outstanding as of the date of this Annual Report. On March 12, 2012, the Company issued an aggregate of 1,000,000 shares of Amended Series C Preferred Stock to Total-Invest pursuant to a Securiities Purchase Agreement. Each share of Amended Series C Preferred Stock may be converted at any time by Pegasus or the holders thereof into ~~one (1)~~ten (10) fully-paid and non-assessable shares of the Company's Common Stock and the voting rights of twenty thousand (20,000) shares. On March 21, 2012, the Company issued an aggregate of 2,436,453 Series D Preferred Stock to Total-Invest for the acquisition of Blue Bull Ventures B.V., a Dutch limited liability company pursuant to an Acquisition Agreement. Each share of Amended Series D Preferred Stock may be converted at any time by the Company or the holders thereof into twenty thousand (20,000) fully-paid and non-assessable shares of the Company's Common Stock and have no voting rights.

COMMON AND PREFERRED STOCK TRANSACTIONS

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.

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, Sino Gas International Holdings, Inc., a Utah corporation, or Sino Gas, (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 “Spin-off”). 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 pursuant to the distribution to an aggregate of 167 Sino stockholders. The Pegasus common stock issued were “restricted securities” (as defined in Rule 144 of the Securities Act of 1933, as amended).

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.

2417

Table of Content

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.

On October 15, 2009, the Company filed a Form S-1 Registration Statement with the Securities and Exchange Commission to register the Common Stock under the Securities Exchange Act of 1934, as amended, and on December 28, 2009 the Company’s Registration Statement went effective.

2518

Table of Content

2619

Table of Content

ITEM 7A. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk is the risk of loss from adverse changes in market prices and rates. The Company’s market risk arises primarily from the fact that the area 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.

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. Companies who have a larger sales force, more money, larger manufacturing capabilities and greater ability to expand their markets also cut into our potential customers. Many of our competitors have longer operating histories, significantly greater financial strength, nationwide advertising coverage, brand identification and other resources that we do not have. Our competitors might introduce less expensive or more improved merchandise. These, as well as other factors, can negatively impact our business strategy.

Market Price

Our common stock is quoted on the OTC Electronic Bulletin Board. We obtained our trading symbol which is PTEL.OB and the right to trade on June 15, 2010. There has been limited trading of our shares to date.

Options, Warranties and Other Equity Items

There are no outstanding options or warrants to purchase, nor any securities convertible into, the our common shares. Additionally, there are no shares that could be sold pursuant to Rule 144 under the Securities Act or that we had agreed to register under the Securities Act for sale by security holders. Further, there are no common shares of the Company being, or proposed to be, publicly offered by the Company.

2720

Table of Content

ITEM 8. FINANCIAL STATEMENTS

PEGASUS TEL, INC.

(A Development Stage Company)

-:-

INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS’ REPORT

DECEMBER 31, ~~2011 AND 2010~~2012

2821

Table of Content

Contents		Page

Independent Registered Public Accountants’ Report		F - 1

Balance Sheets - December 31, ~~2011 and December 31, 2010~~2012		F - 2

Statements of Operations for the year ended December 31, ~~2011 and~~2012 ~~for the year ended December 31, 2010~~ and the cumulative period from February ~~19, 2002~~1, 2012 (inception) to December 31, ~~2011~~2012		F - 3

Statement of Stockholders' Equity Since February ~~19, 2002~~1, 2012 (inception) to December 31, ~~2011~~2012		F - 4

Statements of Cash Flows for year ended December 31, ~~2011 and~~2012 ~~for the year ended December 31, 2010~~ and the cumulative period from February ~~19, 2002~~1, 2012 (inception) to December 31, ~~2011~~2012		F - 5

Notes to Financial Statements		F – 6

2922

Audit Table of Content



ROBINSON, HILL & CO.				Certified Public Accountants
A PROFESSIONAL CORPORATION

				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. & Subsidiaries

We have audited the accompanying balance sheets of Pegasus Tel, Inc. & subsidiaries (a development stage company) as of December 31, ~~2011 and 2010,~~2012, and the related statements of income, stockholders’ equity and cash flows for ~~each of~~ the ~~years in the two-year~~ period ~~ended~~from February 1, 2012 (inception) to December 31, ~~2011.~~2012. 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. & subsidiaries as of December 31, ~~2011 and 2010,~~2012, and the results of its operations and its cash flows for ~~each of~~ the ~~years in the two-year~~ period ~~ended~~from February 1, 2012 (inception) to December 31, ~~2011~~2012 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred net losses of approximately ~~$19,539,847,~~$57,185, 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.

_________________________

Certified Public Accountants

Salt Lake City, UT

~~May 4, 2012~~April 16, 2013

MEMBER OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
MEMBER OF THE SEC PRACTICE SECTION and THE PRIVATE COMPANIES PRACTICE SECTION

1366 East Murray-Holladay Road, Salt Lake City, Utah 84117-5050
Telephone (801) 272-8045 Facsimile (801) 277-9942

F - 1

Audit Table of Content

PEGASUS TEL, INC.
(A Development Stage Company)
BALANCE SHEETS

December 31,
2011 2010
Assets:
Cash and Cash Equivalents $ 285 $ 289
Accounts Receivable 387 218

      Total Current Assets 672 507

     Total Assets $ 672 $ 507

Liabilities:
Accounts Payable $ 34,808 $ 9,258
Accounts Payable- Related Party 15,766 24,589
Accrued Interest 46,162 38,431
Related Party Notes Payable 15,912 140,627
Notes Payable 30,623 -

     Total Current Liabilities 143,271 212,905

     Total Liabilities 143,271 212,905

Stockholders' Equity:
Preferred Stock,  Par value $0.0001, Authorized 10,000,000 shares
Issued 0 shares - -
Common Stock, Par value $0.0001, Authorized 19,990,000,000 shares
Issued 3,510,496,677 and 20,215,136 shares 351,050 2,022
Paid-In Capital 19,196,198 55,842
Stock Subscription Receivable (150,000 ) -
Deficit Accumulated During Development Stage (19,539,847 ) (270,262 )
     Total Stockholders' Equity (142,599 ) (212,398 )

     Total Liabilities and Stockholders' Equity $ 672 $ 507

The accompanying notes are an integral part of these financial statements.

PEGASUS TEL, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS

	December 31,
	2012

Current Assets:
Cash and Cash Equivalents	$	1,159
Advances		3,337
Other receivable		7,281

Total Current Assets		11,777

Other Asset:
Investment in Kingstar International		4,520
Loan receiveable		118,935
Allowance for doubtful accounts		(118,935	)

Total Other Assets		4,520

Total Assets	$	16,297

Current Liabilities:
Accounts payable and accrued expenses	$	26,427
Accounts Payable- Related Party		15,283
Accrued Interest		49,601
Related Party Notes Payable		36,920
Notes Payable		167,927

Total Current Liabilities		296,158

Total Liabilities		296,158

Stockholders' Equity:
Preferred Stock, Series C Convertible, Par value $0.0001, Authorized 10,000,000 shares Issued 1,000,000 shares at December 31, 2012		100
Preferred Stock, Series C Convertible, Par value $0.0001, Authorized 10,000,000 shares Issued 2,436,453 shares at December 31, 2012		244
Common Stock, Par value $0.0001, Authorized 19,990,000,000 shares Issued 3,510,496,677 shares		351,050
Paid-In Capital		22,700
Stock Subscription Receivable		(150,000	)
Retained Deficit		(322,682	)
Deficit Accumulated During Development Stage		(181,273	)
Total Stockholders' Equity		(279,861	)

Total Liabilities and Stockholders' Equity	$	16,297

The accompanying notes are an integral part of these financial statements.

F-2

Audit Table of Content

PEGASUS TEL, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS

Cumulative
Since
February 19,
2002
For the Year Ended Inception of

December 31,
Development
2011 2010 Stage
Revenues $ 3,899 $ 4,544 $ 73,660
Costs of Services (3,115 ) (3,567 ) (69,100 )

    Gross Margin 784 977 4,560

Expenses
Accounting 33,469 20,510 119,063
General and Administrative 8,356 6,095 51,763
Legal 33,098 - 117,888
Related Party Bookkeeping 1,850 4,100 20,327
Stock for Services 17,479,384 - 17,479,384
   Operating Expenses 17,556,157 30,705 17,788,425

Operating Income (Loss) (17,555,373 ) (29,728 ) (17,783,865 )

Other Income (Expense)
Finance Charge (1,706,000 ) - (1,706,000 )
Interest Expense (7,731 ) (19,016 ) (47,217 )

    Net Loss Before Taxes (19,269,104 ) (48,744 ) (19,537,082 )

Income and Franchise Tax (481 ) (648 ) (2,765 )

    Net Loss $ (19,269,585 ) $ (49,392 ) $ (19,539,847 )

Loss per Share, Basic &
Diluted $ (0.01 ) $ (0.00 )

Weighted Average Shares
Outstanding 1,441,345,177 20,215,136

The accompanying notes are an integral part of these financial statements.

PEGASUS TEL, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Period			Cumulative Since
	from			February 1, 2012
	February 1, 2012			Inception of
	to			Development
	December 31, 2012			Stage
Management Fees	$	3,766		$	3,766

Expenses
Accounting		35,393			35,393
Legal		11,550			11,550
Consulting		13,215			13,215
General and Administrative		7,530			7,530
		118,935			118,935
Operating Expenses		186,623			186,623

Operating Income (Loss)		(182,857	)		(182,857	)

Other Income (Expense)
Dividend income		12,303			12,303
Interest Expense		(10,719	)		(10,719	)
Total Other Income (Loss)		1,584			1,584



Net Loss Before Taxes		(181,273	)		(181,273	)

Income and Franchise Tax		-			-

Net Loss	$	(181,273	)	$	(181,273	)

Loss per Share, Basic &
Diluted	$	(0.00	)

Weighted Average Shares
Outstanding		3,510,496,677

The accompanying notes are an integral part of these financial statements.

F-3

Audit Table of Content

PEGASUS TEL, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY

Deficit
Accumulated
Since
February 19,
2002 Total
Stock Inception of Stockholders'
Preferred Stock Common Stock Paid in Subscription Development Equity
Shares Par Value Shares Par Value Capital Receivable 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 Distrubuted
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 )

Net Loss for the year - - - - - - (38,593 ) (38,593 )
Balance at December 31, 2009 - - 20,215,136 2,022 55,842 - (220,870 ) (163,006 )

Net Loss for the year - - - - - - (49,392 ) (49,392 )
Balance at December 31, 2010 - - 20,215,136 $ 2,022 $ 55,842 - $ (270,262 ) $ (212,398 )

Common Stock issued for services - - 2,579,281,541 257,928 17,221,456 - - 17,479,384
Common Stock issued for debt reduction - - 611,000,000 61,100 1,798,900 - - 1,860,000
Common Stock issued for stock subscription - - 300,000,000 30,000 120,000 (150,000 ) - -
Net loss for the year - - - - - (19,269,585 ) (19,269,585 )
Balance at December 31, 2011 - $ - 3,510,496,677 $ 351,050 $ 19,196,198 $ (150,000 ) $ (19,539,847 ) $ (142,599 )

PEGASUS TEL, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

																						Deficit
																						Accumulated
																						Since
																						February 1,
																						2012			Total
																Stock						Inception of			Stockholders'
	Preferred C		Preferred C		Preferred D		Preferred D		Common Stock				Paid in			Subscription			Retained			Developmemt			Equity
	Shares		Par Value		Shares		Par Value		Shares		Par Value		Capital			Receivable			Deficit			Stage			Deficiency
Balance at 02/01/12 - inception		-	$	-		-	$	-		-	$	-	$	-		$	-		$	-		$	-		$	-
Common shares issued for cash										23,746		2		23,744												23,746
reverse merger		-		-		2,436,453		244		-		-		-			-			-			-			244
Pegasus shares issued as part																										0
of reverse merger		1,000,000		100		-		-		3,510,472,931		351,048		(23,744	)		(150,000	)		(322,682	)		-			(145,278	)
Contributed capital		-		-		-		-		-		-		22,700			-			-			-			22,700
Net loss		-		-		-		-		-		-		-			-			-			(181,273	)		(181,273	)
Balance at 12/31/12		1,000,000	$	100		2,436,453	$	244		3,510,496,677	$	351,050	$	22,700		$	(150,000	)	$	(322,682	)	$	(181,273	)	$	(279,861	)

The accompanying notes are an integral part of these financial statements

F-4

Audit Table of Content

PEGASUS TEL, INC.

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

				Cumulative
				Since
	For the Period			February 1,
	From			2012
	February 1, 2012			Inception of
	to			Development
	December 31, 2012			Stage
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss for the Period	$	(181,273	)	$	(181,273	)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Write off of loan receivable		118,935			118,935
Changes in Operating Assets and Liabilities
Decrease (Increase) in Accounts Receivable		135			135
Increase (Decrease) in Accounts Payable		(8,637	)		(8,637	)
Increase (Decrease) in Other Receivable		(10,618	)		(10,618	)
Increase in Interest Payable		3,439			3,439
Net Cash Used in Operating Activities		(78,019	)		(78,019	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Kingstar		(4,520	)		(4,520	)
Cash acquired from Pegasus in reverse merger		1,210			1,210
Investment in Dailyal		(118,935	)		(118,935	)
Net cash provided by Investing Activities		(122,245	)		(122,245	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock		23,746			23,746
Contributed Capital		22,700			22,700
Proceeds from note payable		137,304			137,304
Proceeeds from Related Party Notes		18,157			18,157
Payments on Related Party Notes		(483	)		(483	)
Net Cash Provided by Financing Activities		201,424			201,425

Net (Decrease) Increase in Cash		1,159			1,159
Cash at Beginning of Period		-			-
Cash at End of Period	$	1,159		$	1,159

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest	$	2,101		$	2,101
Franchise and Income Taxes	$	-		$	-

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
NONE.

Cumulative
Since
February 19,
2002
For the Year Ended Inception of
December 31, Development
2011 2010 Stage
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss for the Period $ (19,269,585 ) $ (49,392 ) $ (19,539,847 )
Adjustments to reconcile net loss to net cash
provided by operating activities:
      Stock for Services 17,479,384 - 17,479,384
      Debt conversion 1,706,000 1,706,000
      Depreciation and Amortization - - 12,600
Changes in Operating Assets and Liabilities
     Decrease (Increase) in Accounts Receivable (169 ) (10 ) (387 )
     Increase (Decrease) in Accounts Payable 25,550 (44,549 ) 34,808
     Increase in Related Party Accounts Payable 1,850 4,100 26,439
     Increase in Interest Payable 7,731 17,961 46,162
    Decrease in Intercompany Dues - - 56,684
Net Cash Used in Operating Activities (49,239 ) (71,890 ) (178,157 )

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
     Payments on Related Party Notes - (445 ) (445 )
     Proceeeds from Related Party Notes 49,235 72,585 190,307
Net Cash Provided by Financing Activities 49,235 72,140 190,042

Net (Decrease) Increase in Cash (4 ) 250 285
Cash at Beginning of Period 289 39 -
Cash at End of Period $ 285 $ 289 $ 285

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: `
Cash paid during the year for:
  Interest $ - $ - $ -
  Franchise and Income Taxes $ 481 $ 648 $ 2,765

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Accounts Payable Satisfied through Contributed Capital
  and Property and Equipment $ - $ - $ 56,684

The accompanying nots are an integral part of these financial statements

F-5

Audit Table of Content

PEGASUS TEL, INC. AND SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

December 31, ~~2011 and 2010~~2012

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~Organization and Basis~~This summary of ~~Presentation~~

~~On February 19, 2002,~~accounting policies for Pegasus Tel, Inc.~~, (the “Company”), a Delaware company, was formed as a wholly owned~~ and subsidiary ~~of American Industries.~~

~~On March 28, 2002, American Industries, Inc.~~is presented to assist in understanding the Company's financial statements. The accounting policies conform to generally accepted accounting principles and ~~Pegasus Tel, Inc. entered into an agreement with Pegasus Communications, Inc., a New York corporation, to acquire 100%~~have been consistently applied in the preparation 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 March 12, 2012 the Company consummated an acquisition agreement to purchase 100% of the outstanding shares of Blue Bull Ventures B.V. for the issuance of 2,436,453 shares of preferred stock series D (referenced in note 11).

~~The Company is in the development stage, and has not commenced planned principal operations.~~

~~Nature of Business~~

The Company is primarily in the business of providing the use of outdoor payphones, and providing telecommunication services. In addition to the principal operations, the Company plans to expand operations through its acquired subsidiary Blue Bull Ventures B.V. (reference note 11). The Company intends to engage in global investment banking, business consulting and business development businessfinancial statements.

Basis of Presentation

The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires 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.

Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company's system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented

~~F-6~~

~~Audit Table of Content~~

~~PEGASUS TEL, INC.~~

~~(A Development Stage Company)~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~December 31, 2011~~Nature of Operations and ~~2010~~

~~NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~ ~~(Continued)~~

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 $(19,539,847) for the period from February 19, 2002 (inception) to December 31, 2011, 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-6

Audit Table of Content

PEGASUS TEL, INC. AND SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

December 31, 2012

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued

On March 21, 2012, the Company signed an acquisition agreement with Total-Invest International B.V. (sole owner of Blue Bull Ventures B.V.) to buy 100% of the outstanding stock of Blue Bull Ventures B.V. In consideration for 100% of the issued and outstanding capital stock of Blue Bull Ventures B.V. the Company issued 2,436,453 series D preferred shares. Blue Bull Ventures B.V. was created on February 1, 2012 and at the date of acquisition the only asset was approximately $23,700 (€18.250) in a bank account.

For accounting purposes, the shares exchange has been treated as a reverse merger since the acquired entity now forms the basis for operations and the transaction resulted in a change of control. Accordingly, a new reporting entity was created and Blue Bull Ventures B.V. is treated as the successor issuer for reporting purposes. The accompanying financial statements have been prepared to reflect the assets, liabilities and operations of Blue Bull Ventures and Pegasus Tel, Inc. For equity purposes, the shares issued to acquire Blue Bull Ventures (2,436,453 series D preferred shares) have been shown to be issued and outstanding since inception, with the previous outstanding (3,510,496,677 common shares and 1,000,000 series C preferred shares) treated as a new issuance as of the date of the merger. The additional paid-in capital and retained deficit shown are those of the new reporting entity.

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 March 21, 2012 the Company consummated an acquisition agreement to purchase 100% of the outstanding shares of Blue Bull Ventures B.V. for the issuance of 2,436,453 shares of preferred stock series D (referenced in note 10).

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 was primarily in the business of providing the use of outdoor payphones, and providing telecommunication services. In addition to the principal operations, the Company plans to expand operations through its acquired subsidiary Blue Bull Ventures B.V. (reference note 12). The Company intends to engage in global investment banking, business consulting and business development business.

F-7

Audit Table of Content

PEGASUS TEL, INC. AND SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

December 31, 2012

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Principles of Consolidation

The consolidated financial statements include the accounts of Pegasus Tel, Inc. and its wholly-owned subsidiary Blue Bull Ventures B.V., a Dutch corporation, that was acquired on March 21, 2012. All significant intercompany accounts and transactions have been eliminated.

Cash and Cash Equivalents

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.

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.

~~F-7~~

~~Audit Table of Content~~

~~PEGASUS TEL, INC.~~

~~(A Development Stage Company)~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~December 31, 2011 and 2010~~

~~NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~ ~~(Continued)~~

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~~collectability 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, ~~2011,~~2012, there was no deferred revenue.

Allowance for Doubtful Accounts

The Company recognizes an allowance for doubtful accounts to ensure accounts receivable and notes are not overstated due to ~~uncollectibility.~~un-collectability. 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, ~~2011,~~2012, the Company has ~~determined an~~recognized a 100% valuation allowance ~~for doubtful accounts is not necessary.~~against its notes receivable.

F-8

Audit Table of Content

PEGASUS TEL, INC. AND SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

December 31, 2012

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 ~~$285 and $289~~$1,159 as of December 31, ~~2011 and 2010 all~~2012. Total cash at December 31, 2012 includes cash of ~~which was fully covered~~$159 held by ~~Federal depository insurance.~~Blue Bull Ventures B.V., the Company’s 100% owned subsidiary.

Accounts Receivable

In the past, Accounts Receivable consists of Local Service revenue and Commission Revenue. ~~The Accounts Receivable was $387 and $218 as~~As of December 31, ~~2011 and 2010 respectively.~~2012, the Company has determined there is no accounts receivable.

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.

Foreign Currency Translation

The Company considers the EURO (“€”) to be its functional currency for its wholly owned subsidiary Blue Bull Ventures BV. Assets were translated into US dollars (“US$”) as of March 21, 2012, the date of acquisition exchange rate of €1.00 to US$ 1.3225. At the end of the December 31, 2012 quarter the translation of the Blue Bull Ventures B.V. results are done at an exchange rate of €1.00 to US$1.3215.

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~~As of December 31, ~~2011~~2012, the company has outstanding common stock equivalents of 48,739,060,000, from the conversion of Class C and ~~2010.~~

Class D Preferred shares. The effects of the Company’s common stock equivalents are anti-dilutive for December 31, 2012 and are thus not presented.

~~F-8~~

~~Audit Table of Content~~

~~PEGASUS TEL, INC.~~

~~(A Development Stage Company)~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~December 31, 2011 and 2010~~

~~NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~ ~~(Continued)~~

Financial Instruments

The Company’s financial assets and liabilities consist of cash, accounts receivable, 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 ASC 740 (formerly SFAS ~~No.109,~~No. 109, “Accounting for Income ~~Taxes.” SFAS No.109~~Taxes”). ASC 740 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-9

Audit Table of Content

PEGASUS TEL, INC. AND SUBSIDIARY

(A Development Stage Company)

~~Reclassification~~CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

December 31, 2012

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued

~~Certain reclassifications have been made in the 2010 financial statements to conform to the December 31, 2011 presentation.~~

Recent Accounting Standards

In December 2011, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements. This ASU affects all entities that are required to make disclosures about recurring and nonrecurring fair value measurements under FASB ASC Topic 820, originally issued as FASB Statement No. 157, ~~Fair Value Measurements~~. The ASU requires certain new disclosures and clarifies two existing disclosure requirements. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.Goodwill Impairment

In ~~January~~September 2011, ASC guidance was issued related to goodwill impairment. Under the ~~Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2011-01 (ASU 2011-01) Receivables (Topic 310): Deferral~~updated guidance, an entity will have the option to first assess qualitatively whether it is necessary to perform the current two-step goodwill impairment test. If the Company believes, as a result of its qualitative assessment, that it is more-likely-than-not that the ~~Effective Date~~fair value of ~~Disclosures about Troubled Debt Restructurings in Update No. 2010-20. ASU 2011-01 temporarily delay~~a reporting unit is less than its carrying amount, the ~~effective date of the disclosures about troubled debt restructurings.~~quantitative impairment test is required. Otherwise, no further testing is required. The effective date of the new disclosures about troubled debt restructurings for public entities and the guidance for determining what constitutes a troubled debt restructuring will then be coordinated. Currently, the guidanceupdate is ~~anticipated to be~~ effective for ~~interim and annual period ending after~~the Company’s fiscal year beginning June ~~15, 2011.~~1, 2012 with early adoption permitted. The Company does not expect the ~~provisions~~updated guidance to have an impact its financial position, results of ~~ASU 2011-01~~operations or cash flows.

Comprehensive Income

In June 2011, ASC guidance was issued related to comprehensive income. Under the updated guidance, an entity will have the option to present the total of comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In addition, the update required certain disclosure requirements when reporting other comprehensive income. The update does not change the items reported in other comprehensive income or when an item of other comprehensive income must be reclassified to income. Subsequently, in December 2011, the FASB issued its final standard to defer the new requirement to present components of reclassifications of other comprehensive income on the face of the income statement. Companies will still be required to adopt the other requirements contained in the new standard on comprehensive income. The adoption of this guidance is not expected to have an impact on the Company’s financial position, results of operations or cash flows.

Fair Value Accounting

In May 2011, ASC guidance was issued related to disclosures around fair value accounting. The updated guidance clarifies different components of fair value accounting including the application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity and disclosing quantitative information about the unobservable inputs used in fair value measurements that are categorized in Level 3 of the fair value hierarchy. The update is effective for the Company’s fiscal year beginning June 1, 2012. The Company does not expect the updated guidance to have a ~~material effect~~significant impact on its financial position, results of operations or cash flows.

NOTE 2 - INCOME TAXES

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Net deferred tax assets consist of the following components as of December 31, 2012 and 2011:

	2012			2011
Net Operating Losses	$	132,700		$	114,700
Valuation Allowance		(132,700	)		(114,700	)
	$	-		$	-

~~F-9~~F-10

Audit Table of Content

PEGASUS TEL, INC. AND SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

~~December 31, 2011 and 2010~~

December 31, 2012

NOTE 2 - INCOME TAXES Continued~~(Continued)~~

~~Net deferred tax assets consist of the following components as of December 31, 2011 and 2010:~~

2011 2010
Net Operating Losses $ 114,700 $ 88,740
Valuation Allowance (114,700 ) (88,740 )
$ - $ -

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the period ended December 31, ~~2011~~2012 and ~~2010~~2011 due to the following:

	2012			2011
Book Income	$	(18,000	)	$	(6,551,659	)
Other nondeductible expenses		-			6,525,659
Valuation Allowance		18,000			26,000
	$	-		$	-

2011 2010

Book Income $ (6,551,659 ) $ (16,660 )
Other nondeductible expenses 6,525,659
Valuation allowance 26,000 16,6600
$ - $ -

At December 31, ~~2011,~~2012, the Company had net operating loss carryforwards of approximately ~~$337,000~~$390,000 that may be offset against future taxable income from the year ~~2012~~2013 to ~~2031.~~2032. No tax benefit has been reported in the December 31, ~~2011~~2012 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. The valuation allowance increased by $18,000 during 2012.

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal Income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years.

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.~~ASC 740-10-50, formerly FIN 48, ~~“Accounting~~Accounting for Uncertainty in Income ~~Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”)~~Taxes.. ~~FIN 48~~ASC 740-10-50 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~~ASC 740-10-50 did not have a material impact on the company’s financial position and results of operations. At ~~January 1, 2011,~~December 31, 2012, the company had no liability for unrecognized tax benefits and no accrual for the payment of related interest.

~~F-10~~

~~Audit Table of Content~~

~~PEGASUS TEL, INC.~~

~~(A Development Stage Company)~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~December 31, 2011 and 2010~~

~~NOTE 4 – UNCERTAIN TAX POSITIONS(Continued)~~

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 ~~2011 and 2010.~~2012. 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 2007. The following describes the open tax years, by major tax jurisdiction, as of ~~January 1, 2011:~~

~~United States (a)~~

~~2007– Present~~

December 31, 2012:

United States (a) 2007– Present

(a) Includes federal as well as state or similar local jurisdictions, as applicable.

F-11

Audit Table of Content

PEGASUS TEL, INC. AND SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

December 31, 2012

NOTE 5 - COMMITMENTS

As of December 31, ~~2011,~~2012, 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-11~~

~~Audit Table of Content~~

~~PEGASUS TEL, INC.~~

~~(A Development Stage Company)~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~December 31, 2011 and 2010~~

NOTE 6 - ~~COMMON~~ STOCK TRANSACTIONS~~(Continued)~~

~~On October 15, 2009,~~During the period from February 1, 2012 to December 31, 2012, the Company ~~filed a Form S-1 Registration Statement with~~had the ~~Securities and Exchange Commission to register the Common Stock under the Securities Exchange Act~~following issuances of ~~1934, as amended, and on December 28, 2009 the Company’s Registration Statement went effective.~~stock:

On July 21, 2010 John F. Passalaqua resigned as Director and Secretary of Pegasus Tel and Joseph C. Passalaqua was appointed as Director and Secretary. A stock purchase agreement was filed stating that Joseph C. Passalaqua purchased 2,702,386February 29, 2012, the Company issued 18,000 shares of ~~Pegasus Tel. common~~ stock ~~from John F. Passalaqua~~ for ~~$20,000.~~cash of $23,746.

On March ~~30, 2011,~~21, 2012, the ~~members~~Company signed an acquisition agreement with Total-Invest International B.V. (sole owner of Blue Bull Ventures B.V.) to buy 100% of the ~~board~~outstanding stock of directors (the “Board”) of Pegasus Tel, Inc. (the “Company”) approved by unanimous written consent, and the stockholders of the Company holding a majority in interest of the Company’s voting equity, approved by written consent, the appointment of Mr. Anthony DiBiase as Chief Executive Officer and as a member of the Board, effective as of March 30, 2011. Also on that date of March 30, 2011, Pegasus Tel, Inc. (the “Company”), entered into a Common Stock Purchase Agreement (the “Agreement”) with two shareholders (collectively, the “Majority Shareholders”) who together hold a majorityBlue Bull Ventures B.V. In consideration for 100% of the issued and outstanding ~~shares~~capital stock of the Company’s common stock immediately prior to the consummation of the Sale (as defined herein), and a subscriber for shares of the Company’s common stock (the “Buyer”). Subject to certain conditions set forth in the Agreement, whenBlue Bull Ventures B.V. the Company ~~has received payment in full of $390,000, the Company will issue,~~issued 2,436,453 series D preferred shares which are convertible to 20,000 common shares for each Series D Preferred Stock outstanding. Blue Bull Ventures B.V. was created on February 1, 2012 and ~~the Buyer shall receive, 79,784,864 shares of the Company’s common stock, par value $.0001 per share (the “Shares”), which,~~ at the ~~time~~date of ~~issuance, will constitute 79.78% of~~acquisition the issued and outstanding shares of the Company’s common stock. Pursuant to the Agreement, and upon final payment of the purchase price, the Majority Shareholders shall also receive such number of shares of common stock of the Company as shall constitute 9.9% of the issued and outstanding shares of common stock of the Company on a fully diluted basis. On November 23, 2011, this agreementonly asset was ~~terminated. No shares were issued.~~

On April 4, 2011, Flash Funding, Inc. entered into a Debt Purchase Agreement to purchase $184,623 of debt held in promissory notes in Pegasus Tel. that are owed to Cobalt Blue LLC, Joseph Passalaqua, and Mary Passalaqua for $58,000 to the related parties.

~~On April 6, 2011, 8,000,000 shares were issued to the Company’s president for services valued at market which was $.08 per share, resulting in expense of $640,000.~~

On April 6, 2011, Flash Funding, Inc. converted $25,000 of the debt purchased as outlined in the Debt Purchase Agreement into 2,000,000 shares of Pegasus Tel. Common stock. The market price of the stock was $.08 which resultedapproximately $23,700 in a ~~finance charge of $135,000.~~

~~F-12~~

~~Audit Table of Content~~bank account.

~~PEGASUS TEL, INC.~~

~~(A Development Stage Company)~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~December 31, 2011 and 2010~~

~~NOTE 6 - COMMON STOCK TRANSACTIONS(Continued)~~

On May 2, 2011, Flash Funding, Inc. converted $2,000 of the debt purchased as outlined in the Debt Purchase Agreement into 2,000,000 shares of Pegasus Tel. Common Stock. The market price of the stock was $.07 on that day resulting in a finance charge of $138,000.

~~On June 8, 2011, 2,000,000 shares were issued to convert debt of $2,000. The market price on that day for the stock closed at $.008 resulting in a $14,000 finance fee.~~

~~On June 10, 2011 40,000,000 shares were issued to the Company’s president for services valued at market of $.006 per share, resulting in expense of $240,000.~~

~~On June 23, 2011, 5,000,000 shares were issued resulting in debt reduction of $5,000. The closing price of the stock that day was $.0088 which resulted in a finance cost of $39,000.~~

On June 30, 2011, the Company increased its authority to issue 20,000,000,000 shares. Total common shares authorized increased to 19,990,000,000 shares at $.0001 par value and total preferred stock authorized remained at 10,000,000 shares at $.0001 par value.

On July 12, 2011, 200,000,000 shares were issued to Flash Funding Inc. for the debt reduction of $100,000 in convertible notes payable. The closing price of the stock that day was $0.007 which resulted in a finance expense of $1,300,000.

~~On July 14, 2011, 2,400,000,000 shares were issued to Anthony Dibiase for services valued at market of $.0069 per share, resulting in an expense of $16,560,000.~~

On September 22, 2011, 200,000,000 shares were issued to Flash Funding Inc. for the debt reduction of $10,000 in convertible notes payable. The closing price of the stock that day was $0.00025 which resulted in a finance cost of $40,000.

~~On September 29, 2011, 131,281,541 shares were issued to Belmont Partners LTD, for consulting services valued at market of $.0003 per share, resulting in an expense of $39,384.~~

On October 20, 2011, 200,000,000 shares were issued to Flash Funding Inc. for the reduction of $10,000 in notes payable. The closing price of the stock that day was $0.00025 which resulted in a finance cost of $40,000.

On November 16, 2011, 300,000,000 shares were issued to Flash Funding Inc. for $150,000, as part of a stock purchase agreement. As of December 31, 2011, a stock subscription receivable of $150,000 has been recorded.

~~Additional Disclosure~~

The previous period (7/1/11-9/30/11) Notes to Financial Statements noted, “On July 28, 2011 200,000,000 shares were issued to Flash Funding, Inc. to settle the $76,750 note payable to Spire. The fair market value of the stock at issuance is $.0059 per share, resulting in a finance expense of $1,180,000.” The Spire note payable was acquired as part of the Encounter Technologies, Inc. purchase agreement. That agreement was rescinded on March 21, 2012. These shares have been rescinded and the corresponding entries have been reversed. (See Note 11).

~~F-13~~

~~Audit Table of Content~~

~~PEGASUS TEL, INC.~~

~~(A Development Stage Company)~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~December 31, 2011 and 2010~~

~~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 executing the ~~filing of~~reverse merger, 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~~Company issued an aggregate of ~~1,800,000~~1,000,000 shares of Series AC Preferred Stock to ~~an aggregate of 17 individuals~~Total-Invest B.V. a Dutch limited liability company located in Amsterdam in the Netherlands pursuant to a Securities Purchase Agreement for $0.0001 per share of Series ~~A Preferred Stock. Pegasus issued the Series A~~C Preferred Stock ~~pursuant~~which are convertible to ~~Section 4(2)~~10 common shares for each Series C Preferred Stock outstanding. The shares were sold for $1,000. These shares have been treated as shares issued as of the ~~Securities Act due to~~merger date since Blue Bull Ventures is 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.~~surviving company for reporting purposes.

~~On August 18, 2008 and pursuant~~Prior to executing 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 issuedreverse merger, 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~~Company 3,510,496,677 shares of common stock ~~are “restricted securities.”~~issued and outstanding. These shares have been treated as shares issued as of the merger date since Blue Bull Ventures is the surviving company for reporting purposes. On March 21, 2012, the Company issued 3,510,496,677 shares of common stock to the previous shareholders of Pegasus Tel, Inc.

As of June 30, 2012, the company had a stock subscription receivable for $150,000. Prior to the executing the reverse merger, the Compay had issued 300,000,000 for $150,000 as part of a stock purchase agreement. These shares are included in the 3,510,496,677 total shares outstanding. On ~~June 13, 2011~~February 24, 2012, a stop order was placed by the Company ~~amended its certificate of designation for preferred~~on these shares ~~and created out of the 10,000,000 shares authorized 7,000,000 shares designated as “preferred B” and 1,000,000 as “preferred C” with a par value of $0.0001.~~because they have not been paid for.

~~The preferred B shares have a conversion feature rate of 1:1,711.156.~~

The series C preferred stock has voting rights of 350 times that number of votes on all matters submitted to shareholders and can be converted into 10 times the amount of common shares.

~~Additional Disclosure~~

~~The previous period (7/1/11-9/30/11) Notes to Financial Statements noted, “On June 6, 2011~~On April 9, 2012, the Company ~~acquired certain assets~~canceled the Amendment to Article IV of its Certificate of Incorporation, titled Article IV-A, which declared a 4% forward stock split of its outstanding shares as of September 28, 2011.

On May 9, 2012, the Company filed a Schedule 14A with the Securities and ~~liabilities~~Exchange Commission requesting a Special Meeting of ~~Encounter Technologies,~~the Shareholders to take place on June 11, 2012 to amend the Certificate of Incorporation to reflect a change of name to Blue Bull Ventures, Inc. ~~for 6,995,206~~, to effect a 20,000 to 1 reverse split of all outstanding shares and a reduction of ~~series B preferred stock. The total assumed liabilities were $321,250.” The agreement was rescinded on March 21, 2012. These preferred~~the authorized common shares ~~have been rescinded and canceled. (See Note 11).~~from 19,990,000,000 to 90,000,000.

F-12

Audit Table of Content

PEGASUS TEL, INC. AND SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

December 31, 2012

NOTE 87 – ACCOUNTS PAYABLE- RELATED PARTY

The Company had a related party accounts payable balance as of December 31, ~~2011 and 2010~~2012 in the amount of ~~$15,766 and $24,589.~~$15,283. The ~~2011 balance is~~balances are comprised of ~~$15,542~~$15,059 due to Lyboldt-Daly, Inc. for bookkeeping expenses and $224 due to shareholder advances. The 2010 balance is comprised of $13,692 due to Lyboldt-Daly, Inc. for bookkeeping expenses and $10,897 due to shareholder advances. On April 4, 2011, $10,673 of shareholder advances was sold to Flash Funding.

~~F-14~~

~~Audit Table of Content~~

~~PEGASUS TEL, INC.~~

~~(A Development Stage Company)~~

~~NOTES TO FINANCIAL STATEMENTS~~

At December 31, ~~2011 and 2010~~2012, Blue Bull had borrowed $17,059 from Total Invest. Total Invest is a related party.

~~NOTE 9 –NOTES PAYABLE~~

December 31, 2011 December 31, 2010

Note Payable- Flash Funding, Inc. 30,623 -
Note Payable- Cobalt Blue LLC 15,912 70,785
Note Payable- Joseph Passalaqua - 16,242
Note Payable- Mary Passalaqua - 53,600
Accrued interest 46,162 38,431

$ 92,697 $ 179,058

~~Note Payable- Mary Passalaqua~~NOTE 8 –NOTES PAYABLE

In 2006, 2007, 2008, and 2011 a Shareholder and Officer of the Company, Mary Passalaqua, advanced the Company $5,000, $30,300, $18,300, and $18,100 respectively. The notes are accruing between 10%, 15%, and 18% simple interest per annum and are payable in full upon demand. As of March 31, 2011, the Company owed a total principal balance of $71,700 related to these notes and has accrued $25,681 in simple interest. On April 4, 2011, the principal amount of the notes payable balance of $71,700 was sold to Flash Funding.

	December 31, 2012

Not Notes Payable- Flash Funding, Inc.		30,623
Not Notes Payable-Cobalt Blue LLC		19,861
AccAccrued interest		49,601

	$	100,085

~~Note Payable- Joseph Passalaqua~~

In 2007, 2008 and 2010, a Shareholder of the Company, Joseph Passalaqua advanced the company $5,000, $9,887, and $1,800 respectively. The notes are accruing between 10% and 18% in simple interest per annum and is payable in full upon demand. On January 21, 2010, $1,500 was paid to Joseph Passalaqua as a partial repayment, with $1,055 paid to loan interest and $445 paid to loan principal by the Company. As of March 31, 2011, the Company owed a total principle balance of $16,242 related to these notes and has accrued $5,475 in simple interest. On April 4, 2011, the principal amount of the notes payable balance of $16,242 was sold to Flash Funding.

~~Note Payable- Cobalt Blue LLC~~

In 2010 and 2011, Cobalt Blue LLC advanced the Company $70,785 and $15,223 respectively. Mary Passalaqua is the Managing Member of Cobalt Blue LLC and is a Shareholder of the Company. These notes are accruing 18% in simple interest per annum and are payable in full upon demand. As of March 31, 2011, the Company owed a total principle balance of $86,008 related to these notes and has accrued $13,197 in simple interest. On April 4, 2011, the outstanding principal of the notes payable balance of $86,008 was sold to Flash Funding.

On May 13, 2011, Cobalt Blue LLC advanced the Company $15,912. This note is accruing simple interest at 18% per annum and is payable in full on demand.

On February 29, 2012, Cobalt Blue LLC advanced the Company $2,850. This note is accruing simple interest at 18% per annum and is payable in full on demand.

On April 3, 2012, Cobalt Blue LLC advanced the Company $835. This note is accruing simple interest at 18% per annum and is payable in full on demand.

On June 21, 2012, Cobalt Blue LLC advanced the Company $264. This note is accruing simple interest at 18% per annum and is payable in full on demand.

As of December 31, ~~2011,~~2012, the Company owed a total principal balance of ~~$15,912~~$19,861 related to ~~this note~~these notes and has accrued ~~$1,809~~$5,248 in simple interest.

~~F-15~~

~~Audit Table of Content~~

~~PEGASUS TEL, INC.~~

~~(A Development Stage Company)~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~December 31, 2011 and 2010~~

~~NOTE 9 –NOTES PAYABLE(Continued)~~

Note Payable- Flash Funding, Inc.

On April 4, 2011 Flash Funding, Inc. entered into a Debt Purchase Agreement to purchase $184,623 of debt held in promissory notes in Pegasus Tel. that are owed to Cobalt Blue LLC, Joseph Passalaqua, and Mary Passalaqua. The acquired note has an annual simple interest rate of 18%, payable on demand.

On April 6, 2011 Flash Funding, Inc. converted $25,000 of the debt purchased into 2,000,000 shares of common stock.

On May 2, 2011 Flash Funding, Inc. converted $2,000 of the debt purchased into 2,000,000 shares of common stock.

On June 8, 2011 Flash Funding, Inc. converted $2,000 of the debt purchased into 2,000,000 shares of common stock.

F-13

Audit Table of Content

PEGASUS TEL, INC. AND SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

December 31, 2012

NOTE 8 –NOTES PAYABLE (Continued)

On June 23, 2011 Flash Funding, Inc. converted $5,000 of the debt purchased into 5,000,000 shares of common stock.

On July 12, 2011 200,000,000 shares were issued to Flash Funding Inc. for the debt reduction of $100,000.

On September 22, 2011 200,000,000 shares were issued to Flash Funding Inc. for the debt reduction of $10,000.

On October 20, 2011 200,000,000 shares were issued to Flash Funding Inc. for the reduction of $10,000.

At December 31, ~~2011,~~2012 , $30,623 was due on this note.

~~NOTE 10~~Note Payable – ~~SPIN OFF~~Blue Bull Ventures

~~As reported by Pegasus Tel, Inc., Delaware corporation (“Pegasus”), on Form 8-K (File No. 000-5268) filed~~On April 1, 2012, Blue Bull Ventures, BV signed a €100,000 one year 8% interest note with Mr. Dubarry. At December 31, 2012, the ~~Securities~~note converted to $132,150 US dollars. Interest of $2,101 was paid during the second quarter, 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~~interest of $5,154 was accrued for the third and ~~issued shares of Pegasus to Sino’s stockholders of record as of August 15, 2008 (“Spin-off”)~~fourth quarters . 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-16~~

~~Audit Table of Content~~

~~PEGASUS TEL, INC.~~

~~(A Development Stage Company)~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~December 31, 2011 and 2010~~

NOTE 109 – ~~SPIN OFF~~ RESCINDED PURCHASE AGREEMENT~~(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.

~~NOTE 11 – SUBSEQUENT EVENTS~~

~~Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855 and has determined that other than listed below, no material subsequent events exist.~~

~~RESCINDED PURCHASE AGREEMENT~~

On March 21, 2012 the Company and Encounter Technologies, Inc. signed a rescission agreement which canceled their previous purchase agreement entered into on June 6, 2011 (amended on July 14, 2011). All consideration relating to the agreement has been returned to the original parties resulting in both parties being in the same position prior to the agreement. This includes the cancelation and rescission of 6,995,206 shares of preferred stock series B. The Company reversed all Encounter Technologies, Inc. assets and liabilities which were included in the previous interim period financial statements.

NOTE 10 - ACQUISITION AGREEMENT

~~ACQUISITION AGREEMENT~~

NOTE 11 - CHANGE OF CONTROL

~~CHANGE OF CONTROL~~

A change of control of the Company occurred on March 12, 2012 when Total-Invest acquired from Mr. Joseph C. Passalaqua, the former majority stockholder of the Company, 2,448,000,000 restricted shares of common stock for future services, par value $0.0001 per share of the Company that Mr. Passalaqua acquired from Mr. Anthony Dibiase on March 8, 2012. Mr. Passalaqua acquired the shares from Mr. Dibiase as part of a “Release Agreement” dated March 8, 2012 between Mr. Passalaqua and Mr. Dibiase, whereby the 2,448,000,000 shares issued to Mr. Dibiase during 2011 were returned to Pacific Stock Transfer Company, the escrow agent.

NOTE 12 – INVESTMENTS

On April 27, 2012, the Company’s subsidiary Blue Bull Ventures, B.V. acquired a 19.9% interest in Dailyal BV, a Dutch limited liability company. Blue Bull Ventures acquired the interest in Dailyal BV in return for an investment of $2,117 (€1.600), a loan of $119,061 (€90.000) and a $132,290 (€100.000) in direct investment from independent sources that Blue Bull secured for Dailyal BV. Dailyal (www.dailyal.nl) is an internet platform with 13 high quality 100% natural health products (dietary supplements) that are offered under the brand name Dailyal. All these 13 products are manufactured under ISO 22000:2005 quality standard with a food safety certificate. Dailyal is targeting for the high end market. The range of Dailyal products is projected to be available online in various countries. At December 31, 2012, the Company recorded a 100% valuation allowance against the loan receivable.

On July 24, 2012, the Company’s subsidiary Blue Bull Ventures, B.V. acquired a 19% interest in Kingstart International BV, a Dutch limited limited liability company. Blue Bull Ventures acquired the interest in Kingstart in return $4,520 (3,420 euros). At December 31, 2012, Blue Bull had a dividend receivable from Kingstart of $7,281. The dividend was received by Blue Bull in January 2013.

~~F-17~~F-14

~~Audit Table of Content~~

~~PEGASUS TEL, INC.~~

~~(A Development Stage Company)~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~December 31, 2011 and 2010~~

~~NOTE 11 – SUBSEQUENT EVENTS~~ ~~(Continued)~~

~~DISCLOSURE AND OTHER SUBSEQUENT EVENTS~~

On March 12, 2012, the Company issued an aggregate of 1,000,000 shares of Series C Preferred Stock to Total-Invest B.V. a Dutch limited liability company located in Amsterdam in the Netherlands pursuant to a Securities Purchase Agreement for $0.0001 per share of Series C Preferred Stock.

~~On March 21, 2012, the Company eliminated, canceled, and rescinded all 7,000,000 shares of Series B Preferred Stock.~~

~~On March 26, 2012, the Company designated 3,000,000 shares of preferred stock as Series D Convertible Preferred Stock at $0.0001 par.~~

On April 9, 2012, the Company canceled the Amendment to Article IV of its Certificate of Incorporation, titled Article IV-A, which declared a 4% forward stock split of its outstanding shares as of September 28, 2011.

~~F-18~~

Table of Content

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUTING AND FINANCIAL DISCLOSURE

Not Applicable. There are not and have not been any disagreements between the Registrant and its accountants on any matter of accounting principles, practices or financial statement disclosure.

ITEM 9A. CONTROLS AND PROCEDURES

Management is responsible for establishing and maintaining adequate controls over financial reporting. The Company’s disclosure controls and procedures are designed to ensure (i) that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act of 1934, as amended (the “Exchange Act”), are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (ii) that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and may find it difficult to properly segregate duties. Often, one or two individuals control every aspect of the Company's operation and are in a position to override any system of internal control. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.

Pursuant to rules adopted by the SEC as directed by Section 302 of the Sarbanes-Oxley Act of 2002, the Company’s management, with the participation of the Chief Executive Officer and Chief Financial, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules13a-15(e)) as of December 31, ~~2011.~~2012. In making this assessment, our Chief Executive Officer and Chief Financial Officer used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our control over financial reporting based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this revaluation under the criteria established in Internal Control – Integrated Framework, our management concluded that our internal control over financial reporting was not effective as of December 31, 2011.

Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of that date, the Company’s disclosure controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15, were not effective at a reasonable assurance level. Management’s assessment identified the following material weaknesses:

·	As of December 31, ~~2011,~~2012, there were insufficient written policies and procedures to insure the correct application of accounting and financial reporting with respect to the current requirements of GAAP and SEC disclosure requirements.

·	As of December 31, ~~2011,~~2012, there was a lack of segregation of duties, in that we only had one person performing all accounting-related duties.

·	As of December 31, ~~2011,~~2012, there were no independent directors and no independent audit committee.

·	As of December 31, ~~2011,~~2012, there was a failure in the operating effectiveness over controls related to accounting for convertible debt and embededded derivative liabilities.

4437

Table of Content

Notwithstanding the existence of these material weaknesses in our internal control over financial reporting, our management believes that the financial statements included in its reports fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented. We continue to evaluate the effectiveness of internal controls and procedures on an on-going basis. We plan to further address these issues once we commence operations and are able to hire additional personnel in financial reporting.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the SEC rule that permit us to provide only management’s report in this Annual Report on Form 10-K.

During the most recent completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

For purposes of this Item 9A, the term disclosure controls and procedures means controls and other procedures of the Company (i) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (15 U.S.C. 78a et seq. and hereinafter the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “Commission”), and (ii) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures do not yet comply with the requirements in (i) and (ii) above.

Our Chief Executive Officer and Chief Financial Officer have reviewed the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) as of the end of the period covered by this report and have concluded that (i) the Company’s disclosure controls and procedures are not effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Commission, and (ii) the Company’s controls and procedures have not been designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

There was no change in our internal control over financial reporting identified in connection with our evaluation that occurred during our last quarter (our fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of Company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, our internal control over financial reporting does not provide assurance that a misstatement of our financial statements would be prevented or detected.

4538

Table of Content

The Registrant’s management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, ~~2010,~~2012, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, which assessment identified material weaknesses in internal control over financial reporting. A material weakness is a control deficiency, or a combination of deficiencies in internal control over financial reporting that creates a reasonable possibility that a material misstatement in annual or interim financial statements will not be prevented or detected on a timely basis. Since the assessment of the effectiveness of our internal control over financial reporting did identify a material weakness, management considers its internal control over financial reporting to be ineffective.

Our independent public accountant, Robison, Hill & Company has not conducted an audit of our controls and procedures regarding internal control over financial reporting. Consequently, Robison, Hill & Company expresses no opinion with regards to the effectiveness or implementation of our controls and procedures with regards to internal control over financial reporting.

INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS

The Company's management does not expect that its disclosure controls or its internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

ITEM 9B. OTHER INFORMATION.

None.

4639

Table of Content

PART III

ITEM 10. DIRECTORS EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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
Jerry Gruenbaum (1)	57	Chief Executive Offices, President and Director	2012
Nathan P. Lapkin (2)	45	Chief Financial Officer	2012
Anthony DiBiase (3)	48	Chief Executive Officer, President and Director	2011
Carl E. Worboys (4)	68	Chief Executive Officer, President and Director	2004
Joseph C. Passalaqua(5)	61	Chief Financial Officer, Secretary and Director	2010

(1) Jerry Gruenbaum was elected as sole director on March 12, 2012 and was appointed that same date as the Company's Chief Executive Officer, President, Secretary and Director
(2) Nathan P. Lapkin was appointed on March 12, 2012 as the Company's Chief Financial Officer
(3) Anthony DiBiase who served as the Chief Executive Officer, President and sole director of the Company from March 30, 2011 was removed from his position on November 23, 2011 by the shareholders and directors of the Company.
(4) Carl E. Worboys resigned his position as Chief Executive Officer, President and Director of the Company on June 3, 2011.
(5) Joseph C. Passalaqua resigned his position as Chief Financial Officer, Secretary and Director of the Company on June 3, 2011 and became the Chief Executive Office, Chief Financial Officer, Secretary and sole director of the Company again from November 23, 2011 to March 12, 2012.

Biographies

Jerry Gruenbaum is a practicing securities and corporate attorney in Shelton, Connecticut and has been admitted to practice law in various state and federal courts since 1979. He currently serves as an officer and/or member of the board of directors of various publicly traded companies. He is the former President and a Chairman of the Board of Directors of a multinational manufacturing publicly traded company with operations in the United States, Hong Kong and the Netherlands. He is the former CEO and a Chairman of the Board of Directors of a 100 million Euros commercial real estate publicly traded company in the Netherlands. He worked as a CPA in the tax departments at KPMG Peat Marwick LLP and Arthur Anderson & Co. He has been the CEO and FINOP of First Union Securities, Inc.an SEC licensed securities brokerage firm where he was instrumental in raising over $160 million for various investment ventures. He has served as the Compliance Director for CIGNA Securities, a division of CIGNA Insurance, an SEC licensed securities brokerage firm where he was respnsible for over a thousand brokers in over 100 branch offices throughout the United States. He has lectured and taught as a member of the faculty at various Colleges and Universities throughout the United States in the areas of Industrial and financial Accounting, taxation, business law, and investments. Attorney Gruenbaum graduated with a B.S. degree from Brooklyn College - C.U.N.Y. Brooklyn, New York; has a M.S. degree in Accounting from Northeastern University Graduate School of Professional Accounting, Boston, Massachusetts; has a J.D. degree from Western New England University School of Law, Springfield, Massachusetts; and an LL.M. in Tax Law from the University of Miami School of Law, Coral Gables, Florida.

4740

Table of Content

Nathan P. Lapkin has over fifteen year experience in corporate finance, institutional trading, institutional sales and investment banking. He currently serves as an officer and/or member of the board of directors of a publicly traded company. Mr. Lapkin served as President of First Union Securities, Inc. an SEC licensed securities brokerage firm where he was instrumental in raising over $160 million for various investment ventures. He served as Vice President of Benchmark Securities, Inc. an SEC licensed securities brokerage firm specializing in taking Chinese companies public in the United States. He is the former President and a member of the Board of Directors of a 100 million Euros commercial real estate publicly traded company in the Netherlands. He previously worked for Thompson Financial in New York City, and sat on Morgan Stanley's domestic and international trading desks and HSBC's International trading desk. He worked in the domestic U.S. Institutional sales desk at UBS Warburg, where he was given direct responsibility and co-responsibility for large institutional accounts, including several hedge funds. He previously was employed in the corporate finance department of LensCrafters' Canadian headquarters in Toronto where he was involved in a CDN $20 million sales retail optical chain acquisition, in addition to the capital and operational budgeting. As a financial analyst, Mr. Lapkin wrote the monthly management discussion and analysis used for corporate reporting. Mr. Lapkin graduated with honors from Syracuse University with a Master’s in Business Administration (concentrations in Finance and Statistics) and the University of Manitoba, with a Bachelor in Commerce with concentrations in finance and economics.

Anthony DiBiase has served as Chief Executive Officer of Encounter Technologies, Inc., a public company which focuses on end to end platform development for internet streaming businesses, from August, 2010 through the present. Mr. DiBiase has served as a director of RTR Media, Inc. a media and video development company and subsidiary of Encounter Technologies from January, 2010 to present and also has served as director of Mobile2Earth, Inc. a private, mobile phone application company from July, 2010 through the present. Mr. DiBiase has served as director of Scientific News International (“SNI”), a private, medical news company which has become an international leader in rapid print and online delivery of trademarked medical reports and webcasts to doctors, from 1997 through the present. Mr. DiBiase served as director of Strategic Rare Earth Metals, Inc., a company specializing in mobile applications and social network platforms from July, 2010 through November, 2010. Mr. DiBiase also served as a director of MEV Healthcom, Inc. (“MEV”), a private, full service medical communications and publishing company which developed continuing medical education programs with print and electronic publications for healthcare professionals, from 1993 through 2009.

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.

Joseph C. Passalaqua was the owner of Laqua’s Chevrolet franchise and Laqua’s 481 Pontiac Buick, GMC Truck Center dealerships until July 2008. Mr. Passalaqua was President of 3EEE, Inc. from March 2006 until May 2008. He was the Secretary of Digital Utilities Ventures, Inc. from March 2009 through July 2010. He became the President of Plantation Lifecare Developers, Inc. in January of 2010. He is the sole owner of Greenwich Holdings, LLC.

Family Relationships amongst Directors and Officers:

None of the Officers or Directors are related.

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.

4841

Table of Content

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Exchange Act requires the Company’s directors and officers, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of beneficial ownership and changes in beneficial ownership of the Company’s securities with the SEC of forms 3, 4 and 5. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Item 405 of Regulation S-B requires every small business issuer that has a class of equity securities registered pursuant to Section 12 of the Exchange Act to identify each person who, at any time during the fiscal year, was a director, officer or beneficial owner of more than 10 percent of any class of equity securities registered pursuant to Section 12 of the Exchange Act that failed to file on a timely basis, as disclosed in the above forms as well as other information. 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 October 15, 2009, the Company filed a Form S-1 Registration Statement with the SEC to register our common stock pursuant to Section 12 of the Exchange Act. On December 28, 2009 the Company’s Registration Statement went effective.

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 adopted a Code of Business Conduct and Ethics on April 5, 2012 that applies to its principal executive officer, principal financial officer, and principal accounting officer that is reasonably designed to deter wrongdoing and to promote:

·	honest and ethical conduct, including ethical handling of actual or apparent conflicts of interest between personal and professional relationship.

·	Full, fair, accurate, timely and understandable disclosure in SEC reports and in other public communications;

·	Compliance with applicable governmental laws, rules and regulations;

·	Prompt internal reporting of violations of the code of ethics to appropriate person or persons identified in the code of ethics; and

·	Accountability for adherence to the code of ethics.

ITEM 11. EXECUTIVE COMPENSATION

Compensation for our executive officers is determined by our compensation committee, which has historically been comprised solely of independent directors. Recently, a compensation committee member has resigned and, as a result, our board of directors has been handling all compensation matters. Our philosophy is to provide a compensation package that attracts and retains executive talent. We strive to provide our named executive officers, who are the officers listed in the summary compensation table, with a competitive base salary that is in line with their roles and responsibilities when compared to peer companies of comparable size in similar locations.

Although the principal compensation of our executive officers will be salary, we may provide officers with equity-based incentives. The base salary level and the nature and amount of equity-based incentives is established and reviewed by the compensation committee based on the level of responsibilities, the experience and tenure of the individual and the current and potential contributions of the individual. In determining base salary, we give consideration to persons holding similar positions within comparable peer companies and consideration is given to the executive’s relative experience in his or her position. Base salaries are reviewed periodically and at the time of promotion or other changes in responsibilities.

The following table provides summary information for the years 2011 and 2010 concerning cash and non-cash compensation paid or accrued by us to or on behalf of the president and the only other employee(s) to receive compensation in excess of $100,000.

4942

Table of Content

SUMMARY COMPENSATION TABLE	SUMMARY COMPENSATION TABLE																		SUMMARY COMPENSATION TABLE


Name & Principal Position		Year	Salary		Bonus		Stock Awards		Option Awards		Non-Equity Incentive Plan Compensation		Change in Pension Value and Non-Qualified Deferred Compensation Earnings		All Other Compensation		Total			Year	Salary		Bonus		Stock Awards		Option Awards		Non-Equity Incentive Plan Compensation		Change in Pension Value and Non-Qualified Deferred Compensation Earnings		All Other Compensation		Total
Jerry Gruenbaum (1)			$		$		$		$		$		$		$		$			2012	$		$		$		$		$		$		$		$
Chief Executive Officer and Director

Nathan Lapkin (2)																				2012
Chief Financial Officer

Anthony DiBiase (3)		2011		-		-		17,479,384		-		-		-		-		17,479,384		2011		-		-		17,479,384		-		-		-		-		17,479,384
Chief Executive Officer and Director

Carl E. Worboys (4)		2011		-		-		-		-		-		-		-		-		2011		-		-		-		-		-		-		-		-
Chief Executive Officer and Director		2010		-		-		-		-		-		-		-		-		2010		-		-		-		-		-		-		-		-

Joseph Passalaqua (5)		2011		-		-		-		-		-		-		-		-		2011		-		-		-		-		-		-		-		-
Chief Financial Officer and Director		2010		-		-		-		-		-		-		-		-		2010		-		-		-		-		-		-		-		-

(1) Chief Executive Officer and Director effective March 12, 2012

(2) Chief Financial Officer effective effective March 12, 2012

(3) Chief Executive Officer and Director from March 30, 2011 to November 23, 2011. The Company issued 8,000,000 common shares on April 6, 2011 valued at $0.08 per share, 40,000,000 common shares on June 10, 2011 valued at $0.006 per share and 2,400,000,000 common shares on July 14, 2011 valued at $0.0069 per share to Mr. DiBiase during the time he served as the Company's president for services rendered to the Company

(4) Chief Executive Officer and Director from 2004 to to June 3, 2011

(5) Chief Financial Officer and Director from 2010 to June 3, 2011 and became the Chief Executive Officer, Chief Finacial Officer, Secretary and sole director of the Company again from November 23, 2011 to March 12, 2012.

5043

Table of Contents

During the last fiscal year ended December 31, 2011, no compensation has been awarded to, earned by or paid to our officers or directors. Management has agreed to act without compensation until authorized by the Board of Directors, which is not expected to occur until we have generated revenues from operations. As of the date of this registration statement, 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.

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, ~~2010,~~2012, no director expenses were reimbursed.

Employment Agreements

The Company is not a party to any employment agreements.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

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., Two Corporate Drive, Suite 234, Shelton, Connecticut 06484.

Beneficial Owner	Title of Class	Amount and Nature of Beneficial Ownership As of the Record Date		Percentage of Beneficial Ownership

Jerry Gruenbaum Chief Executive Officer, President and Director (Principal Executive Officer)			0		0	%

Nathan Lapkin Chief Financial Officer (Principal Financial Officer)			0		0	%

All Officers and Directors as a group (without naming them) (2 persons)			0		0	%

5144

Table of Contents

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPDENCE

As of December 31, ~~2011,~~2012, the Company had related party accounts payable in the amount of $15,766. This includes a related party payable owed to to Lyboldt-Daly of which Joseph C. Passalaqua, our former officer and director is the President in the amount of $15,542.

As of December 31, ~~2011,~~2012, the Company had related party notes payable in the amount of $15,912 and $46,162 in related interest. These notes are accruing between 10%, 15% and 18% simple interest per annum. This includes related party notes payable owedto Joseph C. Passalaqua, our former officer and director and Cobalt Blue LLC, of which Mary Passalaqua is the President.

~~Joseph C. Passalaqua was the Chief Financial Officer and Secretary~~As of ~~the Company from 2010 through June 3, 2011 and was the Chief Executive Officer, Chief Financial Officer, Secretary and sole director from November 23, 2011~~December 31, 2012, Blue Bull had a related party notes payable of $17,099 due to ~~March 12, 2012. Mr. Passalaua~~total Invest. Total Invest is ~~the husband of Mary Passalaqua. Carl Worboys was the Chief Executive Officer and President of the Company from 2004 to June 3, 2011.~~a related party.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

We became a reporting Company when our original registration statement became effective on December 18, 2006. Robison Hill & Company ("RHC") is the Company's independent registered public accountant.

Audit Fees and Audit Related Fees

Aggregate fees billed by the Company's principal accountants, Robison, Hill & Company, for audit services related to the most recent two fiscal years, and for other professional services billed in the most recent two fiscal years, were as follows:

	FISCAL YEAR 2011		FISCAL YEAR 2010		FISCAL YEAR 2012		FISCAL YEAR 2011
Audit Fees (1)	$	22,788	$	20,010	$	27,653	$	22,788
Tax Fees (2)	$	817	$	500	$	800	$	817
All Other Fees	None		None		None		None

(1) Comprised of the audit of the Company's annual financial statements and reviews of the Company's quarterly financial statements, as well as consents related to and reviews of other documents filed with the Securities and Exchange Commission.

(2) Comprised of preparation of all federal and state corporate income tax returns for the Company and its subsidiaries. Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by the Company's independent accountants must now be approved in advance by the Audit Committee to assure that such services do not impair the accountants' independence from the Company. The Company does not have an Audit Committee, therefore, the Board of Directors reviews and approves audit and permissible non-audit services performed by Robinson, Hill & Company, as well as the fees charged by Robinson, Hill & Company for such services.

We do not currently have a standing audit committee. The services described above were approved by our Board of Directors.

5245

Table of Contents

PART IV

ITEM 15. EXHIBITS

EXHIBIT INDEX

		Incorporated by
		Reference
			Filing Date/
Exhibit			Period End
Number	Exhibit Description	Form	Date

3.1	Certificate of Incorporation as filed with the Delaware Secretary of State dated February 19, 2002.	10-SB	5/7/2007

3.2	Amended Certificate of Incorporation as filed with the Delaware Secretary of State dated September 21, 2006	10-SB	5/7/2007

3.3	Amendment to Certificate of Incorporation as filed with the Delaware Secretary of State dated May 15, 2007	10-SB	5/7/2007

3.4	Certificate of the Designations, Powers Preferences and Rights of the Series A Convertible Preferred Stock as filed with the Delaware Secretary of State dated August 5, 2008	8-K	8/27/2008

3.5*	Certificate of the Designations, Powers Preferences and Rights of the Series B Convertible Preferred Stock and cancellation of the Series A Convertible Preferred Stock as filed with the Delaware Secretary of State dated February 10, 2011	10-K	5/4/2012

3.6	Amended Certificate of the Designations, Powers Preferences and Rights of the Series B Convertible Preferred Stock as filed with the Delaware Secretary of State dated June 13, 2011	8-K	6/16/2011

3.7	Certificate of the Designations, Powers Preferences and Rights of the Series C Convertible Preferred Stock as filed with the Delaware Secretary of State dated June 13, 2011	8-K	6/16/2011

3.8*	Amendment to Certificate of Incorporation as filed with the Delaware Secretary of State dated July 5, 2011	10-K	5/4/2012

3.9*	Amendment to Certificate of Incorporation as filed with the Delaware Secretary of State dated September 29, 2011	10-K	5/4/2013

3.10	Amended Certificate of the Designations, Powers Preferences and Rights of the Series C Convertible Preferred Stock as filed with the Delaware Secretary of State dated March 15, 2012	8-K	3/16/2012

3.11	Cancellation of the Series B Convertible Preferred Stock as filed with the Delaware Secretary of State dated March 26, 2012	8-K/A	4/10/2012

3.12	Certificate of the Designations, Powers Preferences and Rights of the Series D Convertible Preferred Stock as filed with the Delaware Secretary of State dated March 26, 2011	8-K	3/26/2012

3.13	By-laws	8-K	4/5/2012

10.1	Series C Preferred Stock Purchase Agreement dated March 12, 2012	8-K	3/16/2012

10.2	Acquisition Agreement of Blue Bull Ventures B.V. from Total-Invest International B.V. dated March 21, 2012	8-K	3/26/2012

14.1	Code of Ethics	8-K	4/5/2012

21.1*	Subsidiaries

~~31.1~~31.1**	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

~~31.2~~31.2**	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

~~32.1~~32.1**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

~~32.2~~32.2**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

5346

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	PEGASUS TEL, INC.
Date: ~~May 4, 2012~~April 15, 2013
	By:	/s/ JERRY GRUENBAUM
		Jerry Gruenbaum
		President, Director, Chief Executive Officer
		(Principal Executive Officer)

Date: ~~May 4, 2012~~April 15, 2013	By:	/s/ NATHAN LAPKIN
		Nathan Lapkin
		Chief Financial Officer
		(Principal Financial Officer
		and Principal Accounting Officer)

Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ JERRY GRUENBAUM	President, Director, Secretary and Chief Executive Officer	Date: ~~May 4, 2012~~April 16, 2013
Jerry Gruenbaum	(Principal Executive Officer)

/s/ NATHAN LAPKIN	Chief Financial Officer	Date: ~~May 4 ,2012~~April 16, 2013
Nathan Lapkin	(Principal Financial Officer
	and Principal Accounting Officer)

5447

No.:		Location	2011
	1	Andes Hotel 110 Main St., Andes, NY 13731	$	198
	2	Andes Public Booth 21 Main St., Andes, NY 13731	$	43
	3	Margaretville Central School 415 Main St., Margaretville, NY 12455	$	191
	4	Margaretville Memorial Hospital 42084 State Hwy. 28, Margaretville, NY 12455 (downstairs)	$	103
	5	Margaretville Memorial Hospital 42084 State Hwy. 28, Margaretville, NY 12455 (upstairs)	$	102
	6	Mountainside Residential Care 42158 State Hwy. 28, Margaretville, NY 12455 (1 st Floor)	$	590
	7	Mountainside Residential Care 42158 State Hwy. 28, Margaretville, NY 12455 (2 nd Floor)	$	590
	8	Mountainside Residential Care 42158 State Hwy. 28, Margaretville, NY 12455 (3 rd Floor)	$	590
	9	Town of Middletown 42339 State Hwy. 28, Margaretville, NY 12455	$	624
	10	Hess Mart 42598 State Hwy. 28, Margaretville, NY 12455	$	848
	11	Arkville Country Store 43525 State Hwy. 28, Arkville, NY 12406	$	20

		Total Revenues	$	3,899

PEGASUS TEL, INC.
(A Development Stage Company)
BALANCE SHEETS


	December 31,
	2011			2010
Assets:
Cash and Cash Equivalents	$	285		$	289
Accounts Receivable		387			218

Total Current Assets		672			507

Total Assets	$	672		$	507

Liabilities:
Accounts Payable	$	34,808		$	9,258
Accounts Payable- Related Party		15,766			24,589
Accrued Interest		46,162			38,431
Related Party Notes Payable		15,912			140,627
Notes Payable		30,623			-

Total Current Liabilities		143,271			212,905

Total Liabilities		143,271			212,905

Stockholders' Equity:
Preferred Stock, Par value $0.0001, Authorized 10,000,000 shares
Issued 0 shares		-			-
Common Stock, Par value $0.0001, Authorized 19,990,000,000 shares
Issued 3,510,496,677 and 20,215,136 shares		351,050			2,022
Paid-In Capital		19,196,198			55,842
Stock Subscription Receivable		(150,000	)		-
Deficit Accumulated During Development Stage		(19,539,847	)		(270,262	)
Total Stockholders' Equity		(142,599	)		(212,398	)

Total Liabilities and Stockholders' Equity	$	672		$	507

The accompanying notes are an integral part of these financial statements.

PEGASUS TEL, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS

							Cumulative
							Since
							February 19,
							2002
	For the Year Ended						Inception of
	December 31,						Development
	2011			2010			Stage
Revenues	$	3,899		$	4,544		$	73,660
Costs of Services		(3,115	)		(3,567	)		(69,100	)

Gross Margin		784			977			4,560

Expenses
Accounting		33,469			20,510			119,063
General and Administrative		8,356			6,095			51,763
Legal		33,098			-			117,888
Related Party Bookkeeping		1,850			4,100			20,327
Stock for Services		17,479,384			-			17,479,384
Operating Expenses		17,556,157			30,705			17,788,425

Operating Income (Loss)		(17,555,373	)		(29,728	)		(17,783,865	)

Other Income (Expense)
Finance Charge		(1,706,000	)		-			(1,706,000	)
Interest Expense		(7,731	)		(19,016	)		(47,217	)

Net Loss Before Taxes		(19,269,104	)		(48,744	)		(19,537,082	)

Income and Franchise Tax		(481	)		(648	)		(2,765	)

Net Loss	$	(19,269,585	)	$	(49,392	)	$	(19,539,847	)

Loss per Share, Basic &
Diluted	$	(0.01	)	$	(0.00	)

Weighted Average Shares
Outstanding		1,441,345,177			20,215,136

The accompanying notes are an integral part of these financial statements.

PEGASUS TEL, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY

																			Deficit
																			Accumulated
																			Since
																			February 19,
																			2002			Total
																Stock			Inception of			Stockholders'
	Preferred Stock						Common Stock						Paid in			Subscription			Development			Equity
	Shares			Par Value			Shares			Par Value			Capital			Receivable			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 Distrubuted
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	)

Net Loss for the year		-			-			-			-			-			-			(38,593	)		(38,593	)
Balance at December 31, 2009		-			-			20,215,136			2,022			55,842			-			(220,870	)		(163,006	)

Net Loss for the year		-			-			-			-			-			-			(49,392	)		(49,392	)
Balance at December 31, 2010		-			-			20,215,136		$	2,022		$	55,842			-		$	(270,262	)	$	(212,398	)

Common Stock issued for services		-			-			2,579,281,541			257,928			17,221,456			-			-			17,479,384
Common Stock issued for debt reduction		-			-			611,000,000			61,100			1,798,900			-			-			1,860,000
Common Stock issued for stock subscription		-			-			300,000,000			30,000			120,000			(150,000	)		-			-
Net loss for the year		-			-			-			-			-						(19,269,585	)		(19,269,585	)
Balance at December 31, 2011		-		$	-			3,510,496,677		$	351,050		$	19,196,198		$	(150,000	)	$	(19,539,847	)	$	(142,599	)

	December 31, 2011		December 31, 2010

Note Payable- Flash Funding, Inc.		30,623			-
Note Payable- Cobalt Blue LLC		15,912			70,785
Note Payable- Joseph Passalaqua		-			16,242
Note Payable- Mary Passalaqua		-			53,600
Accrued interest		46,162			38,431

	$	92,697		$	179,058