Homeskills Inc – ‘8-K’ for 4/4/05

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Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                        26    112K 
 2: EX-10       Material Contract                                      6     26K 
 3: EX-10       Material Contract                                      7     32K 
 4: EX-14       Code of Ethics                                         7     27K 
 5: EX-17       Letter re: Departure of Director                       1      6K 

8-K   —   Current Report
Document Table of Contents

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 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of
 The Securities Exchange Act of 1934

      Date of Report (Date of earliest event reported) April 5, 2005
                                                         (April 4, 2005)

PEGASUS WIRELESS CORP.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Colorado                       000-30807                65-0904572
--------------------------------------------------------------------------------
(State or other jurisdiction   (Commission File Number)     (IRS Employer       
    of incorporation)                                    Identification No.)

48499 Milmont Dr., Freemont, CA                                   94538     
--------------------------------------------------------------------------------
(Address of principal executive offices)                         (Zip Code)     

Registrant's telephone number, including area code (510) 490-8288               

CEO Channel.com, Inc., 11408 Orchard Park, Suite 311, Glen Allen, VA 23059
--------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)

----------------------                                                          
Check  the  appropriate  box  below  if the  Form  8-K  filing  is  intended  to
simultaneously  satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):                      

|_|  Written  communications  pursuant to Rule 425 under the  Securities Act (17
CFR 230.425)                                                          
|_|  Soliciting  material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)                                                           
|_|  Pre-commencement   communications  pursuant  to  Rule  14d-2(b)  under  the
Exchange Act (17 CFR 240.14d-2(b))                                    
|_|  Pre-commencement   communications  pursuant  to  Rule  13e-4(c)  under  the
Exchange Act (17 CFR 240.13e-4(c))                                    

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SECTION 2 - FINANCIAL INFORMATION                                               

Item 2.01 Completion of Acquisition or Disposition of Assets.                   

On April 4, 2005,  Pegasus Wireless,  Corp., (the Company or Pegasus),  acquired
CEO  Channel.com,  Inc.,  (CEOC).  As a result of this  acquisition,  Pegasus is
filing this Form 8-K and future  forms,  as required  under the  Exchange Act of
1934, as amended, as successor to CEOC.                                         

Pursuant  to  this  agreement,  Pegasus  is  issuing  3,000,000  shares  of  its
restricted  common  stock to  settle  in full  convertible  debt of CEOC and the
outstanding  12,200,000  shares of CEOC common stock,  (held by the same parties
holding  the  convertible   debt),  are  being  contributed  back  to  CEOC  for
cancellation.                                                                   

Business                                                                        

OTC Telecom  (the  Company),  that  changed its name to OTC  Wireless in 2000 to
better reflect the nature of the company's core business,  was  incorporated  in
September, 1993 as a California Corporation.  The company began its operation in
November 1993 in Sunnyvale,  California.  OTC Wireless was founded by a group of
experienced  technologists from microwave  communication and computer networking
industries.  The company's major business is in providing wireless communication
technologies  and  products  to serve the  business,  education  and  industrial
application markets.                                                            

The company  introduced its 900MHz spread spectrum  wireless  Ethernet bridge in
1995, the industry's first true  plug-and-play  wireless network  solution.  The
Company also submitted its first patent application based on the spread spectrum
receiver technology developed for this product.                                 

In 1996 the  company  introduced  the  industry's  first  2.4 GHz  plug-and-play
wireless  Ethernet bridge,  AirEZY,  and the 2.4GHz wireless serial radio modem,
ADAM, both based on the Company's direct sequence spread spectrum technology.   

In 1998, the Company  introduced the enhanced AiEZY series of wireless radios by
combining the plug- and-play  feature with the WIPP (wireless  internet  polling
protocol)  multiple  access  scheme  developed  by the  Company,  to  provide  a
collision-free,  adjustable bandwidth wireless access solution platform.  In the
same year, the Company also introduced the industry's  first 2.4GHz IEEE 802.11b
wireless bridge.                                                                

In 2000,  the Company  introduced  the  industry's  first  54Mbps  IEEE  802.11g
plug-and-play  indoor and outdoor wireless Ethernet bridge  solutions,  AVCW and
ASR/ACR.                                                                        

In 2002, the Company  introduced a plug-and-play  wireless serial  communication
solution,  WiSER, for connecting the interactive  whiteboard and the computer in
the  classrooms  as well as the  meeting  rooms.  In the same  year the  Company
introduced the 802.11b wireless projector/display solution, WiJET.              

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In 2004, the Company  introduced the new generation of plug-and-play  WiSER, the
WiSER.ip that converts the  conventional  serial  (RS-232)  communication  based
"dumb" industrial  devices into TCP/IP capable,  intelligent  network nodes. The
Company also introduced two new wireless  display  solutions based on the 54Mbps
IEEE 802.11g technology:  WiJET.G, and WiJET.Video that supports streaming MPEG1
and MPEG2  video  files from a computer  to a  projector,  LCD TV or plasma flat
panel display, wirelessly.                                                      

The Company has applied and been awarded patents,  based on the Company's spread
spectrum  receiver  signal  processing  technology,  the  WIPP  technology,  the
plug-and-play technology and the wireless display technology:                   

"Non-coherent  direct sequence spread spectrum  receiver for detecting
bit/symbol chip sequences using threshold comparisons of chip sequence
correlation," US patent no. 5,687,190, awarded 11/11/1997.            

"A robust  system for  wireless  projection  of  computer  display and
rendering  of  motion  video  contents,"  US  patent  application  no.
60/542,247, filed on 2/4/2004, pending.                               

The Company  initialized  the  following  provisional  patent  applications  and
decided not to continue  with formal  applications  due to  obsolesce  caused by
newer technology development:                                                   

"Multiple access scheme for wireless  internet  connection," US patent
application  no.   09/660,285,   filed   9/16/1999.   Japanese  patent
application no. 2000-281792, filed 9/18/2000.                         

"Wired protocol to wireless protocol converter," US patent application
no. 10/209,118, filed 7/30/2002.                                      

"USB-interface  radio," US patent  application no.  60/388,553,  filed
6/12/2002.                                                            

Today, the Company offers the following products in three major application     
areas:                                                                          

For indoor and outdoor wireless networking:                           

AVCW*-AP:                                           
  11Mbps outdoor wireless access point
AVCW*-BRG:                                          
    11Mbps outdoor wireless bridge station
AVCW*-AP-G:                                         
   54 Mbps outdoor wireless access point
AVCW*-BRG-G:                                        
     54 Mbps outdoor wireless bridge station

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ASR:                                                
  11 Mbps indoor wireless access point
ACR:                                                
   11Mbps indoor wireless bridge station
ASR-G:                                              
  54 Mbps indoor wireless access point
ACR-G:                                              
    54 Mbps indoor wireless bridge station

*    All AVCW models offer two integrated antenna options:  9dBi and 15 dBi; and
a third option of a Type-N connector for external antenna connection. 

For industrial wireless networking solutions:                         

WiSER:                                              
11 Mbps wireless serial modem     
WiSER.ip:                                           
  11 Mbps wireless serial TCP/IP modem

For wireless multimedia/video networking solutions:                   

WiJET:                                              
11 Mbps wireless display solution 
WiJET.G:                                            
54 Mbps wireless display solution 
WiJET.Video:                                        
                    54 Mbps wireless display solution with video streaming

OTC  Wireless  has been  delivering  products  to  customers  since  1995,  both
domestically  and  overseas.  In  addition  to  system  integrators,   value-add
resellers  and end users  worldwide,  the Company also offers  products to major
account  customers  who  either  bundle  OTC  Wireless's  solution  to their own
products,  or carry OTC  Wireless's  products  under  their own names by private
labeling or OEM the custom  designed  products from the Company.  Over the years
the  Company's  major account  customers  include our Japanese  partners  CallUS
Computers,   WI,  NTT-ME  and  Showa  Electric  Cable  Company   (SWCC);   Smart
Technologies  of  Canada,  Lexmark  in  the  US and a  major  worldwide  network
equipment provider based in Taiwan.                                             

The AVCW  series  of  outdoor  wireless  Ethernet  bridge  products  are used by
Internet  service  providers (ISPs) to offer high speed Internet access to their
customers  wirelessly.  They are also used by business  customers and schools to
interconnect  computer networks in different buildings.  When used in a point to
point configuration,  a pair of AVCW radios can reach a distance up to 20 miles.
In a point to multiple-  point  configuration,  the radius of a "coverage  cell"
typically  ranges  between  3 to 5  miles.  Working  with its  service  provider
partners, the Company has deployed numerous wireless broadband Internet networks
domestically as well as overseas, including Japan, China and South America.     

The  Company's  ASR and ACR indoor  wireless  products  are used in the wireless
local area networks  (WLAN) by office and home users to  interconnect  computers
without having to deploy cables. Being designed as a true plug-and-play wireless

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solution, OTC Wireless's radios require no installation of software drivers, and
can be used to wirelessly interlink any devices equipped with the RJ-45 Ethernet
port,  not only  computers.  For  example,  they can be used to enable  wireless
printing,  connecting  computers and network printers.  They can also be used to
connect the game  consoles  such as X-Box,  Play  Station or Game Cuble with the
wireless home gateways.                                                         

The  WiSER  series  wireless  serial  radios  are  used by both  industrial  and
education  users.  Teachers in the schools use WiSER to wirelessly  interconnect
the interactive whiteboards to the computers in the classrooms. Industrial users
use the WiSER to  connect  the  central  control  computer  to the  remote  data
collecting and sensing devices.                                                 

The WiJET series  products are used by both  business and  education  customers.
Presenters in a business  meeting or teachers in the classroom can deliver their
Powerpoint  slide shows to the  audience in the most  convenient  location  with
their computers wirelessly connected to the projector without the restriction of
the  tethering  VGA cable.  Home users can use WiJET to deliver  the movie files
stored  in  their  computer  hard  drives  to the LCD or  plasma  flat  panel TV
wirelessly.                                                                     

Continuing its tradition of innovation, the Company has a number of new products
in the  pipeline.  The  Company is planning to  introduce  a new  generation  of
wireless  access point  products  that operate in multiple  frequency  bands and
supports  backbone  and  last-mile  functions  from a  simple,  easy to  install
package. The Company also is developing its next generation wireless multi-media
solution that  delivers  enhanced  video  streaming  and audio  performance  and
computer  presentation  capability  over the wireless  connectivity  between the
computer and the remote display/sound devices.                                  

SECTION 5 - CORPORATE GOVERNANCE AND MANAGEMENT                                 

Item 5.01 Change in Control of Registrant.                                      

With the  issuance  of  3,000,000  shares  of  Common  Stock to  holders  of the
convertible  debt,  and  the  retirement  of  CEOC's  12,200,000  common  shares
completing the  acquisition of CEOC, the former holders of capital stock of CEOC
became minority  holders of the capital stock of Pegasus.  The change of control
of CEOC was  effected  solely  by the  issuance  of newly  issued  shares of the
Company to the former convertible debt-holders and shareholders of CEOC upon the
Acquisition without any other consideration.                                    

Item 5.02  Departure of Directors or Principal Officers; Election of Directors; 
Appointment of Principal Officers.                        

     (a) Effective on April 4, 2005, and upon the Acquisition, the then officers
and  directors  of CEOC  resigned  and were  replaced  by persons  who have been
officers and directors of Pegasus. See 5.02(c) of this report on Form 8-K.      

(b) See 5.02(c) of this report on Form 8-K.                           

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     (c) The following  persons  became the executive  officers and directors of
CEOC  on  April  4,  2005.  Prior  to  the  Acquisition,  such  persons  had  no
relationship with CEOC. They are also the officers and directors of Pegasus.    

Name                 Age   Position                                             
------------------  -----  -----------------------------------------------------
Alex Tsao             52   Chief Executive Officer and Chairman of the Board of 
Directors                 
Jasper Knabb          37   President and Director                               
Stephen Durland       50   CFO and Director                                     
Caspar Lee            51   Director                                             
Jerry Shih            56   Director                                             

ALEX TSAO, CHAIRMAN AND CEO                                                     

     Dr.  Tsao  is the  Company's  founding  CEO.  He has  more  than  20  years
experience in the microwave  communication and satellite communication industry.
He has served in both technical and management  positions during his association
with  Globalstar,  Loral Space Systems and Ford Aerospace prior to OTC Wireless.
From 1991 to 1993 he was the technical  manager for the satellite  communication
payload  system  for  Globalstar,  a low  earth  orbit  (LEO)  satellite  mobile
communication  service  provider.  He was  involved  in the  system  design  and
development  for both the space and the ground  segments for the  geosynchronous
earth orbit (GEO)  communication  satellite systems during his tenure with Loral
Space  Systems  between  1988  and  1991.  He  was  involved  in  the  microwave
communication  system  development  while working for Ford Aerospace  during the
1981 to 1988 period.  Dr. Tsao received his Ph.D.  degree from the University of
Illinois,  Champaign-Urbana in 1981 and his Master's degree from Duke University
in 1978,  both in  Electrical  Engineering.  Dr.  Tsao has  been  awarded  11 US
patents.                                                                        

JASPER KNABB, PRESIDENT AND DIRECTOR                                            

     Mr. Knabb has more than 15 years experience in the high tech industry.  His
expansive  involvement in the technology  business  encompasses PC manufacturing
and sales, computer gaming software  development,  Internet service provider and
wireless system development and marketing.  Prior to Pegasus Wireless, Mr. Knabb
was the President of Wireless Frontier from 2003 to 2004 and was responsible for
successfully  bringing the company to public.  Prior to Wireless  Frontier,  Mr.
Knabb  was  a  Managing  Director  at  OTC  Wireless  responsible  for  business
development  from 2001 to 2002.  Prior to OTC  Wireless,  Mr. Knabb  founded and
became the President of Beach Access, an Internet service providing company,  in
1998, and successfully  sold the company in 2000.  Between 1985 and 1998, he was
the owner and the President of Microland,  a PC retailing  business,  and SEI, a
console game developer.                                                         

STEPHEN DURLAND, CFO AND DIRECTOR                                               

     Mr Durland has been the president of Durland & Company,  CPAs, PA, since he
founded it in 1991. Durland & Company has specialized in the audits of micro-cap
public companies since its founding. In addition its clients have had operations
in 18 foreign countries,  giving the firm very heavy  international  experience.
Mr.  Durland has been a Director of  Children's  Place at Homesafe,  Inc.  since

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1998. It is a local non-profit serving the needs of abused and/or terminally ill
children.  He has been a Director  of Medical  Makeover  Corporation  of America
since  June  2004 and Union  Dental  Corp.  since  January  2005.  Both of these
companies are listed on the OTC Bulletin  Board.  He has also been a Director of
ExpressAir Delivery Systems, Inc. since 1999 and Global Eventmakers,  Inc. since
2003. These companies are private companies  expecting to become publicly traded
in  2005.  He was a  Director  of two  other  OTC BB  listed  companies.  He was
CFO/Acting  CFO  for  five  private  companies  and  four  other  OTC BB  listed
companies.  These CFO/Acting CFO positions have primarily been interim in nature
and term to assist these  companies  through  periods when they could either not
afford or did not need a  full-time  CFO.  Prior to  Durland  &  Company  he was
responsible for the back-office operations and accounting for two companies with
investment  portfolios of $800 and $900 million and $36 billion (face amount) of
futures  and  options   transactions.   Prior  to  that  he  was  a   Registered
Representative  for two years.  Mr. Durland  received his BAS in Accounting from
Guilford  College  in  1982  and  has  been a CPA in 14  states.  He has had two
professional articles published.                                                

CASPAR LEE, DIRECTOR                                                            

     Mr. Lee has been the  President of Paradigm  Venture  Partners  since 2001.
Paradigm is an Asia based venture  investment  firm Mr. Lee co- founded.  He has
more than 25 years experience in the electronics  industry and high-tech venture
investment  business.  Between  1991  and  2001,  Mr.  Lee was the  Senior  Vice
President of Hotung  International  Investment  Group, an Asia based  investment
firm with more than 170  portfolio  companies in Taiwan,  Singapore,  Hong Kong,
Malaysia,  China, Israel, Canada and U.S. Between 1987 and 1991, Mr. Lee was the
President of Astra Computers,  a motherboard  design and  manufacturing  company
based in Taiwan. Between 1983 and 1987, Mr. Lee was a Hardware Design Manager at
Sytek Corp.,  a Mountain View,  California  based  broadband  local area network
manufacturer.  From 1981 to 1983,  Mr. Lee was a  Hardware  Design  Engineer  at
Ungermann-Bass  Corp., Santa Clara,  California.  Between 1979 and 1981, Mr. Lee
was a CPU Design Engineer at Intel Corp., Santa Clara, California.  From 1978 to
1979, Mr. Lee worked as a SRAM Design  Engineer at Texas  Instruments,  Houston,
Texas.  Mr.  Lee  received  his Master  degree in  Electrical  Engineering  from
University of California, Berkeley in 1978 and his MBA degree from University of
Santa Clara, Santa Clara, California in 1986.                                   

JERRY SHIH, DIRECTOR                                                            

     Mr.  Shih is the founder  and,  since 1985,  the  Chairman  and CEO of AMAX
Engineering  Corporation,  a PC system and peripheral solution provider.  He has
more  than 25  years'  experience  in the  computer  manufacturing  and  channel
distribution  business.  He is also  the  Chairman  and CEO of AMAX  Information
Technologies,  an IT  solution  provider;  President  of  ASKE  Media  Inc.,  an
e-commerce  software  solution  provider and Chairman of Advanced  Semiconductor
Engineering Technologies,  a semiconductor equipment service provider. He was an
Engineering Manager at VLSI Technology between 1984 and 1985. From 1978 to 1984,
he was an Engineering  Manager at Signetics  Corporation.  He was an Engineer at
MostekCorporation  between 1977 and 1978. Mr. Shih received his Master's  degree
in Industrial Engineering from University of Arizona in 1977.                   

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Executive Compensation of Pegasus's Officers                                    

     The  officers of Pegasus  became the officers of the CEOC after the closing
of the  Acquisition.  The  following  table sets forth the  compensation  earned
during the years ended June 30, 2004 and 2003 by Pegasus (OTC Wireless) officers
who, on April 4, 2005, became officers of the Company:                          

                                                                     Long Term
                                                                    Compensation
                                             Annual Compensation      Awards
                                            ------------------------------------
                                                                      Securities
                                                                      Underlying
Name And Principal Position                  Salary($)   Bonus($)      Options  
------------------------------------------------------------------------------- 
Alex Tsao, Chief Executive Officer,   2004   $  120,000  $   0        $       0 
and Director                          2003   $  120,000  $   0        $       0 
                                     2004   $        0  $   0        $       0

Jasper Knabb, President               2003   $        0  $   0        $       0 

Stephen Durland, CFO                  2004   $        0  $   0        $       0 
                                     2003   $        0  $   0        $       0
---------------------------                                                     

Related Party Transactions                                                      

None                                                          

Item 5.03  Amendments to Articles of Incorporation or Bylaws;   Change in Fiscal
Year                                                      

As a result of the  acquisition  of CEO  Channel  by  Pegasus,  CEO  Channel  is
changing its fiscal year end to that of Pegasus,  June 30, effective on April 4,
2005, the date of the acquisition.                                              

Item 5.05  Amendments  to  the  Registrant's  Code  of  Ethics,  or Waiver  of a
Provision of the Code of Ethics.                          

Effective on April 4, 2005,  the Company  adopted a Code of Ethics (filed hereto
as Exhibit  14.1).  Prior  thereto,  the Company had no formal,  written code of
ethics.                                                                         

SECTION 8 - OTHER EVENTS                                                        

Item 8.01 Other Events.                                                         

A. Certificate of Incorporation and By-laws.                                    

SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS                                   

Item 9.01 Financial Statements and Exhibits                                     

A. Financial Statements of Business Acquired                          

     OTC Wireless,  Inc.Financial  Statements  for the years ended June 30, 2004
and  2003  and for the six  months  ended  December  31,  2004  and  2003,  with
independent auditors report (including Balance Sheets,  Statement of Operations,
Statements  of  Shareholders'  Equity,  Statement  of Cash  Flows,  and Notes to
Consolidated Financial Statements) filed hereto as Exhibit to this Form 8-K.    

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B. Pro Forma Financial Information                                    

     Unaudited Pro Forma  Condensed  Financial  Statements  of Pegasus,  OTC and
United (including Balance Sheet,  Statement of Operations and Notes to Financial
Statements)  as of and for the quarter  ended  December 31, 2004 filed hereto as
Exhibit 99.2 to this Form 8-K.                                                  

C. Exhibits                                                           

Exhibit No.    Description                                                      
----------------------------------------------------------------------          
10.1 *         Share and Exchange  Agreement,  dated as of April 4, 2005, by and
               among the Company,  Pegasus and the convertible  debt-holders and
shareholders of CEOC.                             

10.2 *         Share and Exchange  Agreement,  dated as of November 5, 2004,  by
               and among Pegasus (f/k/a Homeskills,  Inc.), and the shareholders
of OTC Wireless, Inc.                             

14.1 *         Code of Ethics                                                   

17.1 *         Letter of Resignation of Larry Creeger.                          
-------------------                                                             
* Filed herewith.                                                               

SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.                                           

PEGASUS WIRELESS CORP.

April 5, 2005                 By:  /s/ Stephen Durland                          
         -------------------------
     Name: Stephen Durland
Title: CFO      

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 INDEX TO FINANCIAL STATEMENTS

Independent Auditors' Report.................................................F-2

Balance Sheets...............................................................F-3

Statement of Operations......................................................F-4

Statement of Stockholders' Equity............................................F-5

Statement of Cash Flows......................................................F-6

Notes to Financial Statement.................................................F-7

 F-1

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 Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders                                         
OTC Wireless, Inc.                                                              
Freemont, California                                                            

We have audited the accompanying balance sheet of Smart Technology,  Inc., as of
June 30, 2004, and the related  statements of income,  changes in  stockholders'
equity  and cash  flows for each of the two years in the  period  ended June 30,
2004.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.                                                 

We  conducted  our audit in  accordance  with  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.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.                                               

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of OTC Wireless,  Inc. as of June
30, 2004 and 2003, and the results of its operations and its cash flows for each
of the two years in the period  ended June 30,  2004,  in  conformity  with U.S.
generally accepted accounting principles.                                       

                                       /s/Pollard-Kelley Auditing Services, Inc.
                                          Pollard-Kelley Auditing Services, Inc.

Fairlawn, Ohio                                                                  
August 4, 2004                                                                  

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                                                        [Enlarge/Download Table]

                               OTC Wireless, Inc.                                                                       
                                  Balance Sheet                                                                         

                                                                                    December 31,                        
                                                                                       2004            June 30, 2004    
                                                                                ------------------- ------------------- 
                                                                                     (unaudited)                        
                                                                                                                        
                                     ASSETS                                                                             
CURRENT ASSETS                                                                                                          
  Cash                                                                          $           828,931 $           298,045 
  Accounts receivable                                                                       505,128             421,916 
  Inventory                                                                                 429,458             265,146 
 Prepaid expenses                                                                            24,713              11,475 
                                                                                ------------------- ------------------- 

          Total current assets                                                            1,788,230             996,582 
                                                                                ------------------- ------------------- 
FIXED ASSETS                                                                                                            
          Total fixed assets, net                                                           176,488             226,819 
                                                                                ------------------- ------------------- 
OTHER ASSETS                                                                                                            
   Deposits                                                                                  16,186              31,186 
                                                                                ------------------- ------------------- 
                                                                                             16,186              31,186 
                                                                                ------------------- ------------------- 

Total Assets                                                                    $         1,980,904 $         1,254,587 
                                                                                =================== =================== 

                      LIABILITIES AND STOCKHOLDERS' EQUITY                                                              
CURRENT LIABILITIES                                                                                                     
  Accounts payable                                                              $           443,871 $           514,258 
  Accrued expenses                                                                           62,349             102,508 
  Customer deposits                                                                           6,688              63,858 
  Short-term note                                                                         1,554,980                   0 
                                                                                ------------------- ------------------- 

          Total current liabilities                                                       2,067,888             680,624 
                                                                                ------------------- ------------------- 
LONG-TERM DEBT                                                                                                          
  Note payable - related party                                                                    0             504,231 
                                                                                ------------------- ------------------- 

          Total long-term liabilities                                                             0             504,231 
                                                                                ------------------- ------------------- 

Total liabilities                                                                         2,067,888           1,184,855 
                                                                                ------------------- ------------------- 
STOCKHOLDERS' EQUITY                                                                                                    
  Preferred stock, no par value, authorized 35,000,000 shares; Series A -                                               
     3,816,000, Series B-3,052,632, Series C- 1,379,310, Series D- 2,999,264,                                           
     Series E-3,308,000, Series F- 740,000 issued and outstanding, respectively          12,663,209          12,663,209 
  Common stock, no par value, authorized 50,000,000 shares;                                                             
      5,645,287 issued and outstanding, respectively                                        416,865             416,865 

  Accumulated deficit                                                                   (13,167,057)        (13,010,342)
                                                                                ------------------- ------------------- 

          Total stockholders' equity                                                        (86,983)             69,732 
                                                                                ------------------- ------------------- 

Total Liabilities and  Stockholders' Equity                                     $         1,980,905 $         1,254,587 
                                                                                =================== =================== 

 The accompanying notes are an integral part of the financial statements

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                               OTC Wireless, Inc.                                                                          
                             Statement of Operations                                                                       

                                                  Six Months            Six Months                                         
                                                    Ended                  Ended                                           
                                                 December 31,          December 30,         Year Ended        Year Ended   
                                                     2004                  2003            June 31, 2004     June 30, 2003 
                                           --------------------  --------------------- ----------------- ----------------- 
                                                (unaudited)           (unaudited)                                          
                                                                                                                           

REVENUES                                   $          1,859,335  $           1,893,187 $       3,136,817 $       4,339,706 

COST OF SALES                                         1,003,501                869,491         1,565,592         2,627,215 
                                           --------------------  --------------------- ----------------- ----------------- 

     GROSS MARGIN                                       855,834              1,023,696         1,571,225         1,712,491 

OPERATING EXPENSES                                                                                                         
   General and administrative expenses                  940,671              1,342,843         2,385,841         3,373,989 
   Depreciation                                          56,775                 83,078           155,196           197,706 
                                           --------------------  --------------------- ----------------- ----------------- 

        Total expenses                                  997,446              1,425,921         2,541,037         3,571,695 
                                           --------------------  --------------------- ----------------- ----------------- 

Income (loss) from operations                          (141,612)              (402,225)         (969,812)       (1,859,204)

OTHER INCOME (EXPENSE)                                                                                                     
   Interest income                                            0                  6,016             6,751            25,581 
   Interest expense                                     (15,503)                     0           (25,000)          (10,550)
   Other income (expense)                                     0                      0                 0            44,249 
                                           --------------------  --------------------- ----------------- ----------------- 

        Total other income (expense)                    (15,503)                 6,016           (18,249)           59,280 
                                           --------------------  --------------------- ----------------- ----------------- 

Income (loss) before income taxes                     (157,115)              (396,209)         (988,061)       (1,799,924) 

 Provision for income taxes                                 400                    400             (800)             (800) 
                                           --------------------  --------------------- ----------------- ----------------- 

Comprehensive loss                         $           (156,715) $            (395,809)$        (988,861)$      (1,800,724)
                                           ====================  ===================== ================= ================= 

Loss per weighted average common share     $           (0.03)    $             (0.08)  $         (0.19)  $         (0.35)  
                                           ====================  ===================== ================= ================= 

Number of weighted average common shares                                                                                   
outstanding                                           5,645,287              5,124,784         5,177,987         5,124,784 
                                           ====================  ===================== ================= ================= 

 The accompanying notes are an integral part of the financial statements

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                               OTC Wireless, Inc.                                                                              
                        Statement of Stockholders' Equity                                                                      

                                                                                                                    Total      
                                          Number of Shares                 Value of Stock                        Stockholders' 
                                       -------------------------  -----------------------------   Accumulated        Equity    
                                         Pfd         Common          Pfd            Common          Deficit       (Deficiency) 
                                       ------------ ------------  --------------  -------------  -------------   ------------- 
                                                                                                                               
BEGINNING BALANCE, June 30,                                                                                                    
2002                                     15,195,206    5,124,784  $   12,413,209  $     108,538  $ (10,220,757)  $   2,300,990 
Issuance of preferred stock                 100,000            0         250,000              0              0         250,000 
Net loss                                          0            0               0              0     (1,800,724)     (1,800,724)
                                       ------------ ------------  --------------  -------------  -------------   ------------- 

BALANCE, June 30, 2003                   15,295,206    5,124,784      12,663,209        108,538    (12,021,481)        750,266 
Issuance of common stock for services             0      212,811               0        108,327              0         108,327 
Common stock issued for cash                      0      307,692               0        200,000              0         200,000 
Net income (loss)                                 0            0               0              0       (988,861)       (988,861)
                                       ------------ ------------  --------------  -------------  -------------   ------------- 
BALANCE, June 30, 2004                   15,295,206    5,645,287      12,663,209        416,865    (13,010,342)         69,732 
                                                                                        =======                                
Net income (loss)                                 0            0               0              0       (156,715)       (156,715)
                                       ------------ ------------  --------------  -------------  -------------   ------------- 
ENDING BALANCE, December 30,                                                                                                   
2004 (unaudited)                         15,295,206    5,645,287  $   12,663,209  $     416,865  $ (13,167,057)  $     (86,983)
                                       ============ ============  ==============  =============  =============   ============= 

 The accompanying notes are an integral part of the financial statements

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                               OTC Wireless, Inc.                                                                              
                             Statement of Cash Flows                                                                           

                                                           Six Months         Six Months                                       
                                                             Ended              Ended          Year Ended        Year Ended    
                                                          December 31,       December 30,        June 30,          June 30,    
                                                             2004               2003              2004              2003       
                                                       -----------------  ----------------- -----------------  --------------- 
                                                           (unaudited)        (unaudited)                                      
                                                                                                                               
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                          
Net income (loss)                                      $        (156,715) $        (395,809)$        (988,861) $    (1,800,724)
Adjustments to reconcile net loss to net cash used by                                                                          
operating activities:                                                                                                          
   Depreciation and amortization                                  56,775             83,078           155,196          197,706 
   Loss on disposal of assets                                          0                  0            18,541              404 
   Stock issued for services                                           0                  0           108,327                0 
Changes in operating assets and liabilities:                                                                                   
   (Increase) decrease in accounts receivable                    (83,212)           544,967           271,137          627,132 
   (Increase) decrease in inventory                             (164,312)            64,005           193,578           72,408 
   (Increase) decrease in prepaid expenses                       (13,238)            18,269            31,673           13,586 
   Increase (decrease) in accounts payable                       (70,387)          (257,205)         (438,842)        (549,419)
   Increase (decrease) in accrued expenses                       (40,159)           (31,126)           (9,222)         (25,132)
   Increase (decrease) in customer deposits                      (57,170)          (884,530)         (831,300)         788,819 
                                                       -----------------  ----------------- -----------------  --------------- 
Net cash used by operating activities                           (528,418)          (858,351)       (1,489,773)        (675,220)
                                                       -----------------  ----------------- -----------------  --------------- 

CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                          
   Acquisition of fixed assets                                         0                  0           (12,225)         (48,323)
   Proceeds from the sale of fixed assets                              0                  0            11,616                0 
   Decrease in deposits                                           15,000                  0            25,392                0 
                                                       -----------------  ----------------- -----------------  --------------- 
Net cash from investment activities                               15,000                  0            24,783          (48,323)
                                                       -----------------  ----------------- -----------------  --------------- 

CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                          
   Proceeds of notes payable - related party                   1,006,899                  0             4,231          498,353 
   Proceeds from issuance of common stock                              0                  0           200,000                0 
   Proceeds from issuance of preferred stock                           0                  0                 0          250,000 
                                                       -----------------  ----------------- -----------------  --------------- 
Net cash provided by financing activities                      1,006,899                  0           204,231          748,353 
                                                       -----------------  ----------------- -----------------  --------------- 
Net increase (decrease) in cash                                  493,481           (858,351)       (1,260,759)          24,810 
                                                       -----------------  ----------------- -----------------  --------------- 
CASH, beginning of period                                        298,045          1,558,804         1,558,804        1,533,994 
                                                       -----------------  ----------------- -----------------  --------------- 
CASH, end of period                                    $         791,526  $         700,453 $         298,045  $     1,558,804 
                                                       =================  ================= =================  =============== 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW                                                                                           
INFORMATION:                                                                                                                   
   Interest paid in cash                               $               0  $               0 $               0  $         1,920 
                                                       =================  ================= =================  =============== 
   Income taxes paid in cash                           $               0  $               0 $             800  $           800 
                                                       =================  ================= =================  =============== 
Non-Cash Financing Activities:                                                                                                 
   Common stock issued for acquisition                 $               0  $               0 $               0  $             0 
                                                       =================  ================= =================  =============== 

 The accompanying notes are an integral part of the financial statements

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OTC Wireless, Inc.
 Notes to Financial Statements
(Information with regard to the six months
ended December 31, 2004 and 2003 is unaudited)

NOTE 1 - THE COMPANY                                                            

OTC Wireless,  Inc., (the Company) was incorporated  under the laws of the State
of California  on September 21, 1993.  The Company is engaged in the business of
designing,  manufacturing and marketing wireless hardware and software solutions
for broadband fixed, portable networking and Internet access.                   

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                               

Basis of  Presentation - The financial  statements have been prepared on a going
concern basis.  As of December 31, 2004, the Company had an accumulated  deficit
of $13,167,057 and suffered losses since inception, until the three months ended
September 30, 2004. Management has implemented workforce reduction,  pay cut and
other cost saving programs to reduce the operating  expenses.  In addition,  the
Company also plans to enlarge the customer  base,  increase the sales volume and
institute  more  effective  management  techniques.  Management  believes  these
factors will contribute toward achieving  profitability and providing sufficient
cash and financing  commitments to meet its funding  requirements  over the next
year.  The financial  statements do not include any  adjustments  to reflect the
possible future effects on the  recoverability  and  classification of assets or
the amounts and  classification  of assets and liabilities  that may result from
the outcome of this uncertainty.                                                

Cash  Equivalents  - For purposes of the  statement  of cash flows,  the Company
considers  all highly liquid  investments  with maturity of three months or less
when purchased to be cash equivalents.                                          

Revenue  Recognition  - The Company  recognizes  revenue from product sales when
units are shipped,  provided no significant obligation remains and collection is
probable.                                                                       

Inventory - The  Company  values its  inventory  at the lower of cost or market,
cost  determined  using the standard cost method.  The Company also utilizes the
reserve  method to account for slow moving and obsolete  inventory.  The reserve
for inventory  obsolescence  was $900,961 and $656,004 at June 30, 2003 and 2002
respectively.                                                                   

Estimates  -  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. Actual results could differ from those estimates.                      

Loss Per Share - Loss per share is computed using the Weighted Average Number of
common shares outstanding during the fiscal year.                               

Concentration  of  Credit  Risk  - The  Company  extends  credit,  based  on the
evaluation of each customer's  financial  condition,  and generally  requires no
collateral from its customers.  Credit losses,  if any have been provided for in
the  financial   statements   and  have  been  generally   within   management's
expectations. For the fiscal year ended June 30, 2003, three customers accounted
for 46% of the Company's total sales and 71% of the accounts receivable balance.
Also, two vendors  accounted for 39% of the Company's total purchases and 97% of
the accounts payable balance.                                                   

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OTC Wireless, Inc.
 Notes to Financial Statements

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued                    

For the year  ended  June  30,  2002,  two  suppliers  accounted  for 72% of the
Company's total purchases and 89% of the accounts payable balance.              

During the years ending and at June 30, 2003 and 2002,  the Company had deposits
in banks in excess of the FDIC insurance limit.                                 

Advertising - The Company  expenses the production  costs of advertising as they
are incurred.  Advertising  expense was $47,408 and $12,959 for the years ending
June 30, 2003 and 2002 respectively.                                            

Shipping and Handling Costs - The Company incurs and bills shipping and handling
costs related to the sales of its products.  Amounts  billed  customers in sales
transactions  for  shipping  and  handling  are  recorded  as credit to shipping
expenses.  The net freight were $13,699 and 20,460 for the years ending June 30,
2003 and 2002 respectively.                                                     

Interim  financial  information  - The financial  statements  for the six months
ended December 31, 2004 and 2003 are unaudited and include all adjustments which
in the opinion of  management  are  necessary  for fair  presentation,  and such
adjustments are of a normal and recurring nature. The results for the six months
are not indicative of a full year results.                                      

NOTE 3 ACCOUNTS RECEIVABLE                                                      

The Company uses the allowance method to account for its doubtful accounts. The 
allowance for doubtful accounts is based on management's estimates. Accounts    
receivable as of June 30, 2003 and 2002 consist of the following:               

Trade accounts receivable             $  697,253          $1,369,405
 Sales return allowance                       -0-              (2,000)
 Allowance for doubtful accounts           (4,200)            (47,220)
                                      ----------          ----------
            Total                     $  693,053          $1,320,185

NOTE 4 INVENTORY                                                                

The Company values its inventory at the lower of cost or market, cost determined
using the standard cost method.  The Company also utilizes the reserve method to
account for slow moving and  obsolete  inventory.  Inventory as of June 30, 2003
and 2002 consist of the following:                                              

Raw Materials                          $1,359,685           $1,098,077
Work in process                               -0-               61,706
Consigned goods                               -0-               27,353
 Less: Reserve for obsolescence           (900,961)            (606,004)
                                       ----------          -----------
            Total                      $  448,724          $   531,132

NOTE 5 NOTES PAYABLE                                                            

On March 6, 2003, the Company obtained a loan, totaling $500,000 from one of its
stockholders.  The loan shall be due and payable in two years. It bears interest
at 5% per annum with quarterly payments. The total interest accrued on this loan
at June 30, 2003 was $8,630.                                                    

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OTC Wireless, Inc.
 Notes to Financial Statements

NOTE 6 FIXED ASSETS                                                             

Fixed assets are stated at cost. Maintenance,  repairs and renewals are expensed
as  incurred.  Maintenance,  repairs and  renewals  are  expensed  as  incurred.
Depreciation  is computed  using the  straight-line  method  over the  estimated
useful lives  ranging from 3 to 7 years.  Fixed assets as June 30, 2003 and 2002
consist of the following:                                                       

                                      2003              2002
                                     -----------        ----------
Furniture and fixtures               $   120,180        $  120,180
Machinery and equipment                  595,750           590,321
Automobiles                               38,466            38,466
Computer equipment                       187,682           175,028
Software                                 328,007           298,754
Leasehold improvements                    25,961            25,740
                                     -----------        ----------
            Total                      1,296,046         1,248,480
 Less: Accumulated depreciation          (896,099)         (698,746)
                                     -----------        ----------
            Net                      $   399,947        $  549,734

NOTE 7 STOCKHOLDERS' EQUITY                                                     

The  authorized  capital stock of the Company  consists of 50,000,000  shares of
common  stock and  35,000,000  shares of  preferred  stock.  The stock is no par
value.                                                                          

There are  5,124,784  shares of common  stock  outstanding  at June 30, 2003 and
2002.                                                                           

There are six series of preferred  stock;  Series A - 3,816,000  authorized  and
outstanding  shares at June 30, 2003 and 2002;  Series B - 3,052,632  authorized
and  outstanding  shares  at June  30,  2003  and  2002;  Series  C -  1,379,310
authorized  and  outstanding  shares  at June  30,  2003  and  2002;  Series D -
2,999,264  authorized and outstanding shares at June 30, 2003 and 2002; Series E
- 3,308,000  authorized  and  outstanding  shares at June 30, 2003 and 2002; and
Series F - 740,000 and 640,000 shares authorized and outstanding  shares at June
30, 2003 and 2002 respectively.                                                 

Holders  of the  Series  A,  Series  B, and  Series C are  entitled  to  receive
distributions  as  declared  by the  board of  directors.  Dividends  to  common
shareholders  are  restricted  until  the  aggregate  distributions  to Series A
holders equals $.25 per share,  to Series B holders  equals,  $.49 per share and
Series C holders equals $.725 per share.                                        

Holders of Series D, Series E and Series F are entitled to receive distributions
as declared by the board of  directors  at the rate of $.086 per share of Series
D, $.10 per share of  Series  E, and $.125 per share of Series F.  Common  share
dividends are  restricted  unless are dividends are paid to holders of Series D,
Series E, and Series F preferred stock.                                         

Preferred  stockholders  receive  preference  and a premium of $.25 per share of
Series A,  $.4915 per share of Series B, $.725 per share of Series C, $1.075 per
share of Series D, $1.25 per share of Series E, and $2.50 per share of Series F.
The premium amounts are reduced by the aggregate dividends per share theretofore
paid on the shares outstanding.                                                 

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OTC Wireless, Inc.
 Notes to Financial Statements

NOTE 7 STOCKHOLDERS' EQUITY, continued                                          

Each share of preferred stock shall be convertible,  at the option of the holder
thereof,  at any time, into such number of shares as determined by the following
conversion rates;  Series A $.25 per share,  Series B $.4915 per share, Series C
$.725 per share, Series D $1.075 per share, Series E $1.25 per share, and Series
F $2.50 per share. Each share shall automatically  convert into shares of common
stock at the above conversion rates  immediately  prior to the closing of a firm
commitment  underwritten  public offering pursuant to an effective  registration
statement  under  the  Securities  Act of 1933,  covering  the offer and sale of
common  stock at a price per share of $7.50 and an aggregate  offering  price of
not less than $20,000,000. There are certain adjustments to the conversion price
for dilution and dividends paid.                                                

The holder of each share of  preferred  stock has the right to one vote for each
share of  common  stock  into  which  such  share of  preferred  stock  could be
converted.  The voting  rights  are equal in all  respects  to the common  share
voting rights.  Special rights exist for voting for directors.  Series A holders
are entitled to elect two members of the board of  directors.  Series B, C and D
holders are each entitled to elect one member to the board of directors. Holders
of Series E are  entitled  to elect one member to the board of  directors  if at
lease  1,000,000  shares of Series E  preferred  are  outstanding.  And Series F
holders  are  entitled  to elect one  member to the  board of  directors  if the
outstanding shares of Series F preferred  constitute at least ten percent of the
outstanding capital of the Company. Converted preferred shares shall be canceled
upon conversion.                                                                

NOTE 8 OPERATING LEASES                                                         

On September 1, 2000 the Company entered into an operating lease expiring August
31,  2005,  for  office  space.  The base rent is to be  increased  by 4% on the
anniversary of the effective  date. The total rental expense for the years ended
June 30, 2003 and 2002 was $388,826 and $302,576 respectively.                  

Future minimum lease payments for the remaining lease term are as follows:      

Year ending June 30,                                          
2004       $327,266   
2005       $340,356   
2006        $57,092   

  F-10

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 INDEX TO PRO FORMA FINANCIAL STATEMENTS

Pro forma Consolidated Balance Sheet........................................F-12

Pro forma Consolidated Statements of Operations.............................F-13

Notes to Pro forma Consolidated  Financial Statement........................F-14

  F-12

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                             PEGASUS WIRELESS CORP.                                                                               
                      Pro forma Consolidated Balance Sheet                                                                        
                                   (Unaudited)                                                                                    
                                December 31, 2004                                                                                 

                                                                                           CEO                                    
                                                          Pegasus           OTC          Channel.                                 
                                                         Wireless        Wireless,         com,           Proforma                
                                                           Corp.            Inc.           Inc.         Adjustments   Proforma    
                                                      --------------- -------------  -------------   -------------- ------------- 
                                                                                                                                  
                             ASSETS                                                                                               
CURRENT ASSETS                                                                                                                    
   Cash                                               $             0 $     828,931  $      15,000                  $     843,931 
   Accounts receivable                                              0       505,128              0                        505,128 
   Inventory                                                        0       429,458              0                        429,458 
   Prepaid expenses and other current assets                        0        24,713              0                         24,713 
                                                      --------------- -------------  -------------                  ------------- 
          Total current assets                                      0     1,788,230         15,000                      1,803,230 
                                                      --------------- -------------  -------------                  ------------- 
PROPERTY, PLANT AND EQUIPMENT                                                                                                     
   (Net of accumulated depreciation)                                0       176,488              0                        176,488 
                                                      --------------- -------------  -------------                  ------------- 
          Total property, plant and equipment                       0       176,488              0                        176,488 
                                                      --------------- -------------  -------------                  ------------- 
OTHER ASSETS                                                                                                                      
   Investment in subsidiaries                                       0             0              0  a)   13,077,074               
                                                                                                    c)       15,000               
                                                                                                    d)  (13,092,074)            0 
   Other                                                            0        16,186              0                         16,186 
                                                      --------------- -------------  -------------                  ------------- 
          Total other assets                                        0        16,186              0                         16,186 
                                                      --------------- -------------  -------------                  ------------- 
Total Assets                                          $             0 $   1,980,904  $      15,000                  $   1,995,904 
                                                      =============== =============  =============                  ============= 

              LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                
CURRENT LIABILITIES                                                                                                               
   Accounts payable                                   $             0 $     443,871  $           0                  $     443,871 
   Accrued expenses                                                 0        62,349              0                         62,349 
   Customer deposits                                                0         6,688              0                          6,688 
   Short-term notes payable - related party                         0       552,380         18,200  c)      (18,200)      552,380 
                                                      --------------- -------------  -------------                  ------------- 
          Total current liabilities                                 0     1,065,288         18,200                      1,065,288 
                                                      --------------- -------------  -------------                  ------------- 

LONG-TERM DEBT                                                                                                                    
   Long-term note payable - related party                           0             0              0                              0 
                                                      --------------- -------------  -------------                  ------------- 
          Total long-term debt                                      0             0              0                              0 
                                                      --------------- -------------  -------------                  ------------- 
Total Liabilities                                                   0     1,065,288         18,200                      1,065,288 
                                                      --------------- -------------  -------------                  ------------- 
STOCKHOLDERS' EQUITY                                                                                                              
  Preferred stock, n/a, no, no par value; n/a,                                                                                    
    35,000,000 and 10,000,000 shares authorized;                                                                                  
    n/a, 15,295,206 and 0 issued and outstanding                  n/a    12,663,209              0  a)  (12,663,209)            0 
  Common stock, $0.0001,no, $0.0001 par value;                                                                                    
    100,000,000, 50,000,000 and 50,000,000 shares                                                                                 
    authorized; 39,190,985, 5,645,287 and                                                                                         
     12,200,000 shares issued and outstanding                   3,919       416,865          1,220  a)   12,663,209               
                                                                                                    a)        2,170               
                                                                                                    b)       (3,000)              
                                                                                                    c)          300               
                                                                                                    c)       (1,220)              
                                                                                                    d)  (13,080,074)        3,389 
   Additional paid-in capital                               1,068,975             0        233,760  a)   13,074,904               
                                                                                                    b)        3,000               
                                                                                                    c)       14,700               
                                                                                                    c)     (233,760)   14,161,579 
   Accumulated deficit                                     (1,072,894)  (12,164,458)      (238,180) d)      238,180               
                                                                                                    d)        3,000   (13,234,352)
                                                      --------------- -------------  -------------                  ------------- 
          Total stockholders' equity                                0       915,616         (3,200)                       930,616 
                                                      --------------- -------------  -------------                  ------------- 
Total Liabilities and  Stockholders' Equity           $             0 $   1,980,904  $      15,000                  $   1,995,904 
                                                      =============== =============  =============                  ============= 

The accompanying notes are an integral part of the proforma financial statements

  F-13

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                             PEGASUS WIRELESS CORP.                                                                              
                 Pro forma Consolidated Statements of Operations                                                                 
                                   (Unaudited)                                                                                   
                       Six Months Ended December 31, 2004                                                                        

                                                                                    United                                       
                                                Pegasus            OTC             Service         Pro forma                     
                                               Wireless         Wireless,         Attendants,      Adjustments     Pro forma     
                                                 Corp.            Inc.               Inc.                                        
                                            ---------------- ----------------   --------------   --------------  --------------- 
                                                                                                                                 
REVENUES                                                                                                                         
   Sales                                    $              0 $      1,859,335   $            0                   $     1,859,335 
                                            ---------------- ----------------   --------------                   --------------- 

          Total revenues                                   0        1,859,335                0                         1,859,335 

COST OF SALES                                                                                                                    
   Cost of sales                                           0        1,003,501                0                         1,003,501 
                                            ---------------- ----------------   --------------                   --------------- 

          Gross margin                                     0          855,834                0                           855,834 
                                            ---------------- ----------------   --------------                   --------------- 

OPERATING EXPENSES                                                                                                               
   General and administrative                        104,894          940,671                0                         1,045,565 
   Depreciation                                            0           56,775                0                            56,775 
                                            ---------------- ----------------   --------------                   --------------- 

          Total operating expenses                   104,894          997,446                0                         1,102,340 
                                            ---------------- ----------------   --------------                   --------------- 

Operating loss                                      (104,894)        (141,612)               0                          (246,506)
                                            ---------------- ----------------   --------------                   --------------- 

OTHER INCOME (EXPENSE)                                                                                                           
   Interest income                                         0                0                0                                 0 
   Interest expense                                        0          (15,503)            (600)                          (16,103)
                                            ---------------- ----------------   --------------                   --------------- 

          Total other income (expense)                     0          (15,503)            (600)                          (16,103)
                                            ---------------- ----------------   --------------                   --------------- 

Net income (loss)                           $       (104,894)$       (157,115)  $         (600)                  $      (262,609)
                                            ================ ================   ==============                   =============== 

The accompanying notes are an integral part of the proforma financial statements

  F-14

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PEGASUS WIRELESS CORP.
Notes to Pro forma Consolidated Financial Statements
 (Unaudited)

(1)  Pro forma  Changes On November 5, 2004,  the Company  entered  into a Share
     Exchange  Agreement  with OTC  Wireless,  Inc., a California  company.  The
     business   combination   is  a   reverse   merger,   accounted   for  as  a
     recapitalization  of OTC. The Company  issued  21,700,492  shares of common
stock of the Company to complete this acquisition.                    

     On April 5, 2005, the Company  entered into an  acquisition  agreement with
     CEO  Channel.com,  Inc. The Company issued 3,000,000 shares of common stock
of the Company to complete this acquisition.                          

     The Pro  forma  statement  of  operations  includes  the six  months  ended
December 31, 2004 for the Company, OTC and CEOC..                     

(2)  Pro forma Adjustments                                                      

     a)   21,700,492  shares of common  stock of the Company  issued in exchange
          for  100%  of  the  issued  and  outstanding  common  shares,   (after
          conversion  of 100% of the  outstanding  preferred  shares  to  common
shares) of OTC Wireless, Inc.                               

     b)   30,000,000  shares  of common  stock of the  Company  returned  to the
Company and retired.                                        

     c)   3,000,000  shares of common stock of the Company  issued to settle the
          convertible  debt of CEOC.  The  12,200,000  shares of common stock of
CEOC contributed back to the company and retired.           

Consolidation:                                                        

     d)   Eliminate  investment in subsidiaries,  the Company's retained deficit
and common stock of subsidiaries.                           

  F-15

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 INDEX TO PRO FORMA FINANCIAL STATEMENTS

Pro forma Consolidated Statements of Operations.............................F-17

Notes to Pro forma Consolidated  Financial Statement........................F-18

  F-16

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                             PEGASUS WIRELESS CORP.                                                                             
                 Pro forma Consolidated Statements of Operations                                                                
                                   (Unaudited)                                                                                  
                            Year Ended June 30, 2004                                                                            

                                                                                     CEO                                        
                                              Pegasus            OTC            Channel.        Pro forma                       
                                             Wireless         Wireless,           com,         Adjustments      Pro forma       
                                               Corp.            Inc.              Inc.                                          
                                          ---------------- ----------------   -------------  ---------------  ----------------- 
                                                                                                                                
REVENUES                                                                                                                        
   Sales                                  $              0 $      3,136,817   $           0                   $       3,136,817 
                                          ---------------- ----------------   -------------                   ----------------- 

          Total revenues                                 0        3,136,817               0                           3,136,817 

COST OF SALES                                                                                                                   
   Cost of sales                                         0        1,565,592               0                           1,565,592 
                                          ---------------- ----------------   -------------                   ----------------- 

          Gross margin                                   0        1,571,225               0                           1,571,225 
                                          ---------------- ----------------   -------------                   ----------------- 

OPERATING EXPENSES                                                                                                              
   General and administrative                            0        2,385,841               0                           2,385,841 
   Depreciation                                          0          155,196               0                             155,196 
                                          ---------------- ----------------   -------------                   ----------------- 

          Total operating expenses                       0        2,541,037               0                           2,541,037 
                                          ---------------- ----------------   -------------                   ----------------- 

Operating loss                                           0         (969,812)              0                            (969,812)
                                          ---------------- ----------------   -------------                   ----------------- 

OTHER INCOME (EXPENSE)                                                                                                          
   Interest income                                       0            6,751               0                               6,751 
   Interest expense                                      0          (25,000)         (1,200)                            (26,200)
                                          ---------------- ----------------   -------------                   ----------------- 

          Total other income (expense)                   0          (18,249)         (1,200)                            (19,449)
                                          ---------------- ----------------   -------------                   ----------------- 

Net income (loss)                         $              0 $       (988,061)  $      (1,200)                  $        (989,261)
                                          ================ ================   =============                   ================= 

  F-17

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PEGASUS WIRELESS CORP.
Notes to Pro forma Consolidated Financial Statements
 (Unaudited)

(1)  Pro forma  Changes On November 5, 2004,  the Company  entered  into a Share
     Exchange  Agreement  with OTC  Wireless,  Inc., a California  company.  The
     business   combination   is  a   reverse   merger,   accounted   for  as  a
     recapitalization  of OTC. The Company  issued  21,700,492  shares of common
stock of the Company to complete this acquisition.                    

     On April 5, 2005, the Company  entered into an  acquisition  agreement with
     CEO  Channel.com,  Inc. The Company issued 3,000,000 shares of common stock
of the Company to complete this acquisition.                          

     The Pro forma statement of operations includes the year ended June 30, 2004
for the Company, OTC and CEOC.                                                  

(2)  Pro forma Adjustments                                                      

     a)   21,700,492  shares of common  stock of the Company  issued in exchange
          for  100%  of  the  issued  and  outstanding  common  shares,   (after
          conversion  of 100% of the  outstanding  preferred  shares  to  common
shares) of OTC Wireless, Inc.                               

     b)   30,000,000  shares  of common  stock of the  Company  returned  to the
Company and retired.                                        

     c)   .3,000,000  shares of common stock of the Company issued to settle the
          convertible  debt of CEOC.  The  12,200,000  shares of common stock of
CEOC contributed back to the company and retired.           

Consolidation:                                                        

     d)   Eliminate  investment in subsidiaries,  the Company's retained deficit
and common stock of subsidiaries.                           

  F-18

Dates Referenced Herein   and   Documents Incorporated by Reference

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