Re: 8/4/06 - 9/1/06 - [PGWC/BIFT] Pegasus Wireless Attempts Novel Property Dividend in an Attempt to Squeeze the Shorts
Press Release Source: Pegasus Wireless Corporation
Pegasus Wireless Corporation Issues Property Dividend to Shareholders
Friday August 4, 8:30 am ET
FREMONT, Calif.--(BUSINESS WIRE)--Aug. 4, 2006--Pegasus Wireless Corporation (Nasdaq:PGWC - News), a leading provider of advanced wireless solutions, announced today that the Company is issuing a property dividend to its shareholders. Registered shareholders as of the close of the market on August 11, 2006, will be entitled to receive one common stock purchase warrant at a strike price of $8.00 for every ten shares of Pegasus Wireless common stock owned. Shareholders will have a holding period of one year from the date the warrants are issued, and the warrants will expire on the second anniversary of the date of issuance.
"We are issuing this dividend to demonstrate our long-term dedication to those shareholders that have remained loyal and committed to Pegasus, and I trust that every eligible shareholder will enjoy the benefits of the dividend," said Jasper Knabb, President and CEO of Pegasus Wireless Corporation.
Eligible shareholders will have 15 days from the above-mentioned date of record to receive their warrants. The warrants will be issued only in the name of the beneficial owner of the Pegasus common stock. Pegasus will not issue any warrants in the name of a brokerage firm to disseminate to clients. Those shareholders who possess common stock certificates are required to physically present the certificate to Pegasus' transfer agent in order to receive their warrants. Shareholders whose common shares of Pegasus stock are held in a brokerage account must contact their brokerage firm to ensure that the warrants are processed correctly. Any beneficial stockholder who has difficulty with their brokerage house should email the Company at warrants@pgwc.com immediately.
About Pegasus Wireless Corporation
Pegasus Wireless Corporation is a leading provider of advanced wireless solutions. Founded in 1993, Pegasus creates hardware and software solutions for broadband wireless networking and Internet access applications through its manufacturing facilities located in China and Taiwan. Pegasus' patented 802.11 technology is the platform for Wi-Fi technology, and the company offers cutting edge wireless products used in computer networking, industrial data transmission, and multimedia applications. Pegasus pioneered the industry's first driver-less, truly plug-and-play wireless Ethernet bridge, and the company's wireless networking products allow a higher user capacity per base station as compared to the competition. These products also offer advanced security, easy true plug-n-play installation, dynamic load balance, non-interrupting real-time roaming connectivity, e.g. VOIP, and fail-safe, self-healing mesh networking capability. Products are distributed through the company's facility located in California. Pegasus Wireless Corporation can be contacted at 510-490-8288 or by visiting their website at pegasuswirelesscorp.com.
NOTES ABOUT FORWARD-LOOKING STATEMENTS
Statements contained in this release, which are not historical facts, may be considered "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations and the current economic environment. We caution the reader that such forward-looking statements are not guarantees of future performance. Unknown risks and uncertainties as well as other uncontrollable or unknown factors could cause actual results to materially differ from the results, performance or expectations expressed or implied by such forward-looking statements. These factors include, but are not limited to, (i) our ability to complete successful acquisitions of complementary companies, products and technologies; (ii) our ability to attract and retain customers; and (iii) our ability to gain market share. Consequently, all of the forward-looking statements made in this news release are qualified by these cautionary statements, and there can be no assurance that the actual results anticipated by Pegasus Wireless will be realized, or if substantially realized, that they will have the expected consequences to or effects on Pegasus Wireless or its business or operations.
Contact:
Pegasus Wireless Corporation
Jasper Knabb, 510-490-8288
ir@pegasuswirelesscorp.com
--------------------------------------------------------------------------------
Source: Pegasus Wireless Corporation
biz.yahoo.com
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Press Release Source: Pegasus Wireless Corporation
Pegasus Wireless Corporation Provides Instructions for Property Dividend
Wednesday August 9, 12:07 pm ET
FREMONT, Calif.--(BUSINESS WIRE)--Aug. 9, 2006--Pegasus Wireless Corporation (Nasdaq:PGWC - News), a leading provider of advanced wireless solutions, issued instructions today to its shareholders regarding how to go about receiving the property dividend that was announced on Friday, August 4, 2006.
As previously announced, after the close of the market on Friday, August 11, 2006, all registered shareholders of Pegasus Wireless common stock will be eligible to receive one warrant at a strike price of $8.00 for every ten shares owned. The warrant certificates will only be registered directly in the name of the beneficial owner, not a Broker/Dealer, Clearing Agent, Depository, etc.
Shareholders who have physical certificates registered in their name will need to take no action. The Company's transfer agent will issue the Purchase Warrant in accordance with its records and mail the new warrant certificate directly to the shareholder at the "address of record." Those shareholders who have their shares deposited with a brokerage firm will need to contact their broker to "register" the shares in their name as the beneficial owner. If the Broker/Dealer holds the physical certificate in their "Street Name" (or the name of the brokerage firm), shareholders must make sure that their broker makes arrangements directly with Pegasus' transfer agent. If the Broker/Dealer has deposited the shares with the Depository Trust Company ("DTCC"), shareholders should make sure that their broker contacts the DTCC directly to make arrangements with Pegasus' transfer agent on behalf of the broker/dealer. All brokerage firms must provide Pegasus' transfer agent with a list that is consistent with DTCC records of names of all shareholder that are eligible to receive the dividend no later than August 28, 2006.
"Due to the overwhelming response to the warrants@pgwc.com address, we are issuing these more specific instructions from our legal counsel that should alleviate any confusion," said Jasper Knabb, President and CEO of Pegasus Wireless Corporation. "We are doing everything in our power to ensure that each and every eligible shareholder receives their warrants. We are looking forward to making this a simple and rewarding experience for our investors and expect that these instructions will clear up any uncertainties that shareholders and brokers may have had."
Any shareholders with any further questions or issues should still email the Company at warrants@pgwc.com. Brokers are asked to contact Olde Monmouth Stock Transfer Co., Inc. regarding Pegasus Wireless at (732) 872-2727 or via fax at (732) 872-2728.
[About, Notes, and Contact info same as above]
biz.yahoo.com
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Press Release Source: Pegasus Wireless Corporation
Pegasus Wireless Corporation Issues Notice to Brokerage Houses Regarding Property Dividend
Wednesday August 16, 10:14 am ET
Company Has Retained Securities Attorney to Protect Rightful Shareholders
FREMONT, Calif.--(BUSINESS WIRE)--Aug. 16, 2006--Pegasus Wireless Corporation (Nasdaq:PGWC - News), a leading provider of advanced wireless solutions, issued today a statement to brokerage houses that specifically addresses issues regarding the property dividend that was announced August 4, 2006.
"We have received numerous phone calls from brokerage firms that have lent out Pegasus common stock, and we are taking this opportunity to notify all broker/dealers that we are not making any exceptions to the dividend rule," declared Jasper Knabb, President and CEO of Pegasus Wireless Corporation. "The rule states that the number of shares that are held by each beneficial owner of Pegasus common stock must be reported to the DTCC by the brokerage firm that holds the shareholders' stock. These numbers must match the number of shares that the DTCC has on record for each shareholder. We at Pegasus are taking a 'zero tolerance' stance on this issue, and until all positions reported to the DTCC balance with their records, we will not issue any warrants other than to those shareholders who hold their stock in certificate form."
In an attempt to protect the rights of its shareholders, the Company has retained a Securities attorney to ensure that all brokerage houses fully comply with the dividend rule. The counsel for Pegasus has more than 25 years experience in practicing securities and general business law; 12 of those years were spent working for the United States Securities and Exchange Commission. "We are confident that we have entrusted the right person to represent our shareholders through this process," stated Knabb. "We at Pegasus fully intend to assist our shareholders in holding any broker/dealer that does not comply with the dividend rule liable for failure to deliver the warrants."
As previously stated, Pegasus is issuing one warrant for every ten shares of common stock owned at a strike price of $8.00 to every rightful shareholder as of August 11, 2006. The Company will not issue any warrants that exceed one tenth of the number of shares outstanding, which further enforces the requirement for all documents submitted from brokerage houses to match the DTCC records.
[About, Notes, and Contact info same as above]
biz.yahoo.com
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Pegasus Squeezes the Shorts
Pegasus is giving out warrants and dropping its shorts.
THE MOTLEY FOOL
By Brendan Mathews
Updated: 1:50 p.m. ET Aug 18, 2006
Pegasus Wireless (Nasdaq: PGWC) is going after the short sellers. Though a very shrewd maneuver, management has put shorts in a very awkward position.
On August 4th, the company announced a special "property dividend," which amounts to a common stock purchase warrant at a strike price of $8 for every ten shares of Pegasus Wireless common stock owned. The catch is that only registered shareholders are eligible to receive the warrant. Investors holding shares with their brokerage in the "Street Name" will not receive the warrants.
Investors who wanted to receive the free warrant needed to call their broker and ensure that their shares were listed under the investor's name, not the brokerage's name. Why is management doing this? Probably because once shares are put in the name of the individual investor, those shares cannot be lent out to short sellers. The effect is that the pool of shares to borrow for short selling will approach zero, and if a brokerage has already lent out shares, there is a good chance those shares will need to be recalled, forcing short sellers to cover at market prices.
Over five million shares have been sold short, and the average daily trading volume is under 500,000. The deadline for brokers to report beneficial shareholders to Pegasus' transfer agent is August 28. Assuming that all investors sign up to receive their free warrants, all those shorts will need to be covered in less than seven trading days. This stock is primed for a short squeeze!
To add fuel to the fire, the company put out a press release quoting CEO Jasper Knabb: "We at Pegasus fully intend to assist our shareholders in holding any broker/dealer that does not comply with the dividend rule liable for failure to deliver the warrants." In other words, Knabb is making it abundantly clear to brokers that if they don't get Pegasus shares away from the shorts, there may be legal action.
I must credit the management team for this brilliant and inventive ploy to boost the stock. I have never heard of another company doing this -- not even Overstock.com(Nasdaq: OSTK), which is famously engaged in a battle with naked shorts. Although I still believe that the stock of Pegasus is over-valued and over-hyped based on the fundamental value of the business, I wouldn't want to have a short position at this point
msnbc.msn.com
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Press Release Source: Pegasus Wireless Corporation
Pegasus Wireless Corporation Issues Notice to Shareholders
Tuesday August 22, 2:28 pm ET
FREMONT, Calif.--(BUSINESS WIRE)--Aug. 22, 2006--Pegasus Wireless Corporation (Nasdaq:PGWC - News), a leading provider of advanced wireless solutions, issued today a notice to shareholders who are eligible to receive the previously announced property dividend. It has come to the Company's attention that hedge funds have been contacting shareholders and in an attempt to purchase their warrants. The management at Pegasus is compelled to inform its shareholders as well as any Broker/Dealers who may have been contacted with the same questions that the warrants are non-transferable. Should a shareholder or brokerage firm transfer any warrants, they will become ineligible immediately. The warrants are to be delivered to the beneficial owners of Pegasus Wireless common stock that are eligible to receive the dividend, and any attempt to transfer them out of that name will immediately make them null and void.
"I feel an extremely strong sense of responsibility to protect the shareholders of Pegasus Wireless; and I am taking every precaution to make sure that they are warned of any attempts that are being made to cheat them out of what is rightfully theirs," stated Jasper Knabb, President and CEO of Pegasus Wireless Corporation. "Please be aware that if you are contacted with an attempt to purchase your warrants from you that if you choose to do so, your warrants will not be honored. We at Pegasus have made it quite clear that we will have zero tolerance for any and all organizations or individuals that do not fully comply with the dividend rule."
[About, Notes, and Contact info same as above]
biz.yahoo.com
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Don't Bet on This Horse
By Seth Jayson (TMF Bent)
August 24, 2006
Foolishness first
My Fool colleague Brendan Matthews has had a few unflattering words for Pegasus Wireless (Nasdaq: PGWC) and its acting chief Jasper Knabb. He has already pointed out that among Knabb's most notable past accomplishments are large spikes in share price, followed by collapses. He also noted that Pegasus' valuation is way too high, considering its financial prospects.
Last week, he noted that Knabb had come up with a novel way to try and foment a short squeeze. While Brendan called it an innovative move, I've got another way to describe it:
Gimmicky. Manipulative. Pathetic. Cowardly. Oh, and let's add, "Doomed to failure."
There is, after all, some pretty compelling research that shows that companies that try and fight the shorts through market manipulation don't see the stock rise. But that doesn't seem to matter to Knabb. On Tuesday, he once again tried to stir the coals.
Now, Brendan concluded his article by saying he sure wouldn't want to be short Pegasus. That's where he and I part ways even more drastically. I would love to be short this company, precisely because the CEO is so focused on these kinds of non-issues. (Alas, my brokers have never been able to find shares.) I think Knabb is a self-promotional huckster, and to me, his latest behavior is proof-positive that Pegasus is doomed under his leadership.
Here's why.
A quick review
In case you need to catch up, Pegasus is one of those presto-chango companies that has gone through several costume changes in only half a decade. It is, ostensibly, a provider of wireless networking gear -- the kind of stuff you can get from Cisco's (Nasdaq: CSCO) Linksys, D-Link, Netgear (Nasdaq: NTGR), and many others. Even Microsoft (Nasdaq: MSFT) hawks a line of routers.
It was originally a Nevada software company, founded in 2000, and when that didn't work out, it went dormant in December 2001. After that, it acquired a Swiss water-treatment outfit and became Blue Industries in April 2002, allegedy marketing a chemical-free water-treatment process. That worked so well that, by December 2003, it went inactive yet again, following the bankruptcy of its French subsidiary, blamed on a bizarre burglary. In May, 2005, the shell changed its name to Pegasus Wireless and acquired a company called OTC Wireless, a company where Knabb was previously a managing director.
Knabb's knack
In Pegasus' filings, of course, Knabb is portrayed as a successful tech businessman, but I think the record of his last publicly traded enterprise, Wireless Frontier Internet, proves otherwise. At this company, 80% owned by a Hong Kong firm called "Million Treasure Enterprises," Knabb was president and director. This chart might give you an inkling of Knabb's knack for creating shareholder value there. The story at Wireless Frontier was rolling up rural Internet service providers. The company bought more than a dozen of them. But what rolled up for shareholders, mostly, were losses.
But not before the stock soared, helped along (I have no doubt) by the usual types of penny-stock pumps. (The latter, by the way, looks like it came from a Florida stock tout who had already been nailed by the SEC for fraudulently promoting a stock, working directly with the president of the company.)
I've seen nothing to indicate Knabb had any direct relationship to any of this paid touting -- although believe me, I'm continuing to dig. But then, Knabb did plenty of PR of his own, such as proclaiming his company to be "quickly emerging as the leading resource of wireless broadband Internet," touting Wireless Frontier's application to list on the Amex, and splitting the sub-two-dollar stock in early 2004.
But in reality, Wireless Frontier was not really doing so hot. Its 10-K from the period shows a balance sheet loaded up with goodwill and a couple years of losses. The cash burn was even less impressive. The 10-Q corresponding directly to the period of Knabb's early 2004 enthusiasm shows a widening loss. The stock kept cratering, and by October, only half a year after the (in)glorious run-up, Knabb had resigned. In December 2004, the troubled company agreed to acquire Knabb's former employer, OTC Wireless, but the deal was later scuttled.
Shortly thereafter, the firm seems to have stopped filing financial reports with the SEC, except for the occasional late notice and 8-K, the last of which shows it so hard up that the the CFO resigned to save money. In August 2005, judgments were being entered against the firm, resulting in forced auction of assets.
So let's put that into the "abject failure" column, should we? Now, we're supposed to believe he'll pilot Pegasus to great heights? When he's focused on ancillary issues like sticking it to short sellers? Yeah, I don't think so, either. But let's move on. There's more to see.
Abandon ship!
This is one heckuva filing. The Aug. 22 8-K ostensibly describes Pegasus' acquisition of Maccontrol, a company that sells a $500 universal controller shaped like an iPod and a pricey system that allows you to use your $2,000 Apple (Nasdaq: AAPL) Macintosh computer as a remote. (Yeah, I have my doubts about that one, too, but piggybacking on Apple's current popularity is by now an accepted business plan.)
The real news is tucked into the paragraphs below that, and it doesn't look so hot: board and management resignations. Among those getting off the boat are Alex Tsao, the founding CEO, who resigned all his positions. Jerry Shih also said goodbye to the board position, as did Caspar Lee.
The friends and family plan
That brings us to the friends and family plan. One thing that has always disturbed me about Pegasus is the acquisition binge. If the company has such great wireless technologies, why would it need to diversify into other businesses? (Remember the fate of Knabb's last wireless acquisition machine.)
But things look even odder when you look at some of the details in these acquisitions.
In December 2005, the company paid $8 million (half cash, half stock) for a 51% interest in two California computer sales and service companies called AMAX Engineering and AMAX Information Technologies. If you're wondering why a company trying to position itself as a Wireless developer and manufacturer would be interested in a pair of businesses in the cutthroat computer-hawking market, so am I.
Perhaps this has something to do with it? AMAX was owned by Jerry Shih, brother in-law to Pegasus founding CEO Alex Tsao. Are we to believe that shareholders are well served when companies are buying from their inlaws? I've got my doubts.
But family members aren't the only ones who seem to be getting in on the game. Friends and associates -- some with absolutely worthless businesses -- are fair game, too. Why else would Pegasus have agreed to acquire CEO-channel.com on April, 4, 2005, for 3 million shares of stock (worth about $0.25 each at that time, according to the historical prices at Yahoo!)?
Whole lotta nothin'
What did Pegasus get for that $750,000 worth of stock? Close to nothing. Wait, less than nothing. As of the 10-K filed on April 6, 2005, only two days after that acquisition announcement, CEO-channel.com had $15,000 in cash but $18,200 in liabilities. Take a look for yourself. The company didn't even have an operating business, seriously.
So, why the buy? Who knows. As far as I've seen, it wasn't explained in any of Pegasus's later 10-Ks or noted in a press release at the time. Pegaus shareholders, however, might be interested to know that CEO-channel's owner, Lawrence Creeger, the majority owner, sole director, and officer, just happened to be involved (since at least 2003) with Pegasus CFO Stephan Durland in a venture called Global Event Makers, formerly "Pro Celebrity Caribbean Tour Inc.," and another called Global Equity, formerly "Eventmakers-Caribbean Corp."
Spooky CFO
While we're here, let's take a deeper look at CFO Durland's past. You can't argue that he doesn't know the ground. He's been with Pegasus -- at least the flop predecessor, Blue Industries -- since his firm was hired as auditor in March of 2003.
His bio says he "specialized in the audits of micro-cap public companies." Of course, if you follow publicly traded microcaps, that might not seem like such a good thing. Nothing to brag about, and maybe even something to hide. Even Pegasus seems to realize that a career in the pennies doesn't look so good, because it appends the following ominous disclaimer to Durland's bio.
"Of the public companies, all but two ... had completed their reverse mergers well before Mr. Durland became aware of the companies. These CFO/Acting CFO positions have primarily been interim in nature to assist these companies through periods when they could with not afford or did not need a full-time CFO." How's that for a yellow flag?
Kind of makes you wonder what sort of delights you'd find by skimming the history of the firms where Durland has been a director or CFO, no?
Knock yourself out. There are plenty in the 10-K, which you can get here. There are some real winners in the crowd -- and by winners, I mean losers. How about Safe Technologies International? Or -- this is a hoot -- a company that was going to make waves salvaging sunken World War I and II-era boats, Ocean Resources? American Ammunition, anyone? If you're hungrier, the 10-K left out a few of Durland's other prior affiliations: ElectraCapital, for instance, and Diversified Product Inspections.
But to me, the most interesting -- and by interesting, I mean horrifying -- has got to be Medical Makeover Corporation of America, a penny stock Durland was involved with from June 2004, and whose business is described in its latest 10-K as follows: "With the failure of the Company's last two business plans, it has reverted to the development stage. Management is currently evaluating several opportunities." Durland was a director, then acting CEO, until July of this year.
I'm not surprised he finally fled this disaster; after all, we're talking about a company that pretty much does nothing, by its own admission. It reports no cash and no revenues, and one employee. This is what Durland took public? No wonder the share price has cratered since the reverse merger he is credited with orchestrating.
Not that there weren't penny-stock hypesters out trying to keep Medical Makeover floating. For instance, take a look at this March 1 2005 "alert" on the company. Note that the fine print discloses it's a paid pump job: Some outfit called DP Martin and Associates shelled out $20,000 to get this load of tripe sent out.
Who is DP Martin and Associates? That's not entirely clear to me yet, but maybe Durland could fill us all in. After all, it appears they may have been neighbors, or even shared the same office.
Florida business records show a DP Martin and Associates located at 500 Australian Avenue, No. 619, West Palm Beach, Fla., an address that just happens to look like the same one address occupied by Medical Makeover's predecessor company, Cactus New Media. Strangely enough, they seem to have changed their addresses to that office within a week of each other. (Medical Makeover's current address is listed in the same building, but in No. 700.)
Finally, click here and here and you'll see that the firms also share the same registered agent, an attorney named Donald Mintmire who was disbarred following a federal conviction on obstruction related to a Florida pump and dump scheme.
So, let's summarize what this looks like: Current Pegasus CFO Durland was CFO and then acting CEO of a Medical Makeover, which appears to have shared an office with DP Martin, which was paying penny-stock promoters to fluff Medical Makeover's shares? And both firms were represented by the now-disgraced Mintmire? Something smells here, people, and it's not the West Palm Beach breeze.
It's entirely possible that this is all just harmless coincidence, but I wouldn't bet my money on it. I don't believe in that many coincidences, which is why, if I could find shares to borrow, I'd bet the opposite.
A final dose of yuck
And here's one more situation that ought to make potential investors squirm. In July, controversial short seller Manuel Asensio released an online report that links one of Pegasus' largest shareholders, one Vision 2000 Ventures, (12.7% owner), with a huge Taiwanese embezzlement case. Strangely, despite the holdings listed in Pegasus' 10-KSB, there's no SEC filing from Vision 2000 regarding Pegasus. But a Vision 2000 filing regarding another company confirms that someone named Hung-Chiu Hu is indeed the director of Vision. If that's the same person implicated in these embezzlement and stock manipulation allegations, yowch.
Foolish bottom line
These are the kind of people I wouldn't trust as far as my sickly cousin Agnes could throw them. Even if Pegasus, Knabb, and Durland turn out to be pure as the driven snow, those top managers still have a history of leaving worthless penny stocks in their wake. I always bet on managers reverting to their means.
And now they're trying to foment a short squeeze via a gimmicky cert-request scheme.
To me, that's the final evidence that Pegasus will end up worth pennies as well. And that's exactly the kind of company I would dearly love to short. Too bad the markets and brokers out there can't accommodate my wishes.
fool.com
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Re: 8/28/06 - [PGWC] NY Post: Horse Feathers
HORSE FEATHERS
By CHRISTOPHER BYRON
August 28, 2006 -- A strangely familiar press release crossed my desk last week, bearing news of an entertainment event that seemed to echo down the corridors of time.
According to the release, it would appear that rock music icon Eric Clapton has fallen mad crazy in love with the technology being developed by a California company called Pegasus Wireless Corp.
So smitten has Clapton apparently become that - according to the release - he has decided to turn his Madison Square Garden concert on Sept. 28 into what amounts to a warm-up act for the evening's real top banana - Pegasus Wireless itself.
Following the concert, Pegasus is to step into the spotlight for a mini-performance of its own, unfurling various new Pegasus products for "select members of the media and investment communities."
The post-concert event is described as a "private technology fair" that will feature none other than Clapton himself as a guest.
But wait. A "private technology fair?" . . . for "select members of the media and investment communities?"
Why not show the stuff to everyone? Is this really what it purports to be - or maybe just a too-obvious gimmick for taking a free ride on the Clapton name?
In fact, it's déjà vu all over again for the world's greatest living rock guitarist and the penny-stock jackals who've been stalking him for much of the past decade.
Their mission: Turn the man behind "Lay Down Sally," "Cocaine," and more than 350 other tunes, into a carnival barker for some of the stock market's trashiest, high-risk investments.
The last time Slowhand's name got dragged through these parts was eight years ago when smooth-talking stock market swindler Peter C. Lybrand used Clapton as bait in a pump-and-dump swindle.
At that time Lybrand managed to pump close to half a billion dollars of hot air into a worthless penny stock called Citron Inc. by hyping it in press releases as the Internet marketing arm of a Clapton-owned drug treatment center in the British West Indies.
For that and several related swindles, Lybrand was convicted and sentenced to seven years in federal prison. He was released last October, and for now at least seems to have left Wall Street and the world of crooked penny stocks far behind.
But the ghost of the pump-and-dumper still stalks the Clapton name, as last week's baloney-stuffed release from the bunch behind Pegasus Wireless plainly underscores.
OVER the years this one time Vancouver- based penny stock has accu mulated one of the most convoluted and confusing corporate pedigrees imaginable - including two reverse mergers as well as a failed attempt at a third reverse merger.
Much of the action revolves around the firm's CEO - an attention-hungry self-promoter from South Carolina named Jasper Knabb, who once appeared as an extra in an episode of "CSI: Miami."
In 1998 Knabb set out to make a name for himself in the red-hot dot-com space, launching a small scale Internet service provider called Beach Access, buying what he needed for the enterprise from an obscure West Coast supplier called OTC Telecom.
Knabb claimed Beach Access could provide connection services that ran 100 times faster than rivals. But the business never got off the ground and in early 2000 he sold it to Biofiltration Systems, a Florida-based penny-stock concern.
Biofiltration had no business operations or revenues of its own at the time, so to stir some interest in itself as a stock play, the company had already hired a convicted sex offender named Orville Baldridge to pump up its stock on the Over The Counter market.
Thinking he saw an opportunity for himself in the run-up that followed, Knabb offered to swap ownership of Beach Access for 12 million shares of Biofiltration stock, agreeing to stay on as head of what would now become a Biofiltration subsidiary.
Yet not many months passed before Biofiltration fired Knabb and sued him to recover those shares, claiming Knabb was full of bull about Beach Access and had actually never owned the operation to begin with.
The court agreed with about half of what Biofiltration claimed, and ruled it had the right to fire Knabb but not to force him to hand back his stock. Next, Biofiltration collapsed and in 2003 the Securities and Exchange Commission delisted its shares.
Unfazed by his firing, Knabb landed on his feet with a new job as an aide to the top man at OTC Telecom, Alex Tsao, who had recently changed the company's name to OTC Wireless to reflect the boom in orders that he had been expecting to receive from Knabb and Beach Access.
The orders, of course, failed to materialize and before long Knabb and Tsao began looking elsewhere for opportunities, hooking up finally in late 2004 with what looked to be their meal ticket - a defunct Florida-based penny-stock outfit called Homeskills.
In early November 2004, OTC Wireless and Homeskills merged in a share exchange and began trading on the Over The Counter market under the name of Pegasus Wireless.
The name change reflected the arrival of a new player: a London-based Greek shipowner named Nicos Peraticos, who serves as Pegasus' chairman of the board.
The company's SEC filings describe Peraticos as head of a London shipping firm called Pegasus Ocean Services, LTD. Yet that is hardly the whole story.
U.K. corporate records show the Pegasus operation to be bankrupt and in liquidation, while sources in the closely knit Greek shipping community say Pegasus has been out of business for years.
British shipping industry trade publications place the blame for Pegasus's demise squarely on Peraticos himself.
Hoping to expand the family business, he had issued $150 million in late 1990s junk bonds to a consortium of lenders that included Lazard Freres and Merrill Lynch, then ruinously poured the money into a fleet of aging rust-bucket oil tankers, leading to the collapse of the business.
None of these things are even hinted at in Pegasus Wireless' SEC filings. And neither is there a coherent discussion of the company's allegedly cutting-edge technology.
To get that, a visitor has to travel to Freemont, Calif., and knock on the door of OTC Wireless' original headquarters, now occupied by a dozen employees of Pegasus Wireless.
Do that and you can walk away with a one-page flier for something the company calls its "WiJet plug 'n' play wireless presentation solution."
The WiJet's big selling point: enabling the user to put on a PowerPoint presentation without the hassle and bother of having to hook up any wires from a laptop too a projector.
Sound impressive? Apparently it did to Eric Clapton. Maybe no one told him he could drop by the nearest Radio Shack and pick up basically the same thing - made by Cisco Systems or any of a number of other competing manufacturers.
Private technology fair? For only "select" members of the media? Maybe Pegasus' brass is playing coy for a reason.
cbyron@nypost.com
Copyright 2006 NYP Holdings, Inc. All rights reserved.
nypost.com
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Press Release Source: Pegasus Wireless Corporation
Pegasus Wireless Corporation Updates Shareholders and Brokerage Houses on Progress of Property Dividend
Tuesday August 29, 9:38 am ET
FREMONT, Calif.--(BUSINESS WIRE)--Aug. 29, 2006--Pegasus Wireless Corporation (Nasdaq:PGWC - News), a leading provider of advanced wireless solutions, issued today an update to brokerage firms as well as shareholders who are eligible to receive the property dividend that was announced on August 4, 2006. At the close of business on Monday, August 28, 2006, all brokerage firms were to have submitted lists to the Company's transfer agent that named all beneficial shareholders and the number of shares of Pegasus common stock owned by each as of the close of the market on August 11, 2006. As previously announced, the lists submitted by the brokerage firms must reconcile with the records that the DTCC has on file. It has come to the Company's attention that many of the lists submitted by the brokerage houses are materially out of adjustment with the records held by the DTCC. There are numerous discrepancies of varying magnitudes that have come to light with the submission of these lists, and the management at Pegasus is obliged to notify the shareholders as well as the Broker/Dealers and clearing firms as to its policy regarding this matter.
"In our efforts to ensure that our shareholders receive the warrants that are rightfully theirs, we have given the brokerage houses a one-day extension to submit the beneficial owner lists to our transfer agent," stated Jasper Knabb, President and CEO of Pegasus Wireless Corporation.
For those shareholders who hold stock in certificate form, Olde Monmouth Stock Transfer is in the process of preparing a list of those who are eligible for warrants, and will begin distribution after all regulatory requirements under the securities laws are complied with. This also holds true for the shareholders who's Broker-Dealers have submitted lists that match the DTCC records and have been designated as the beneficial owners to the Company. The Company has been notified that there are brokerage firms that have loaned out Pegasus stock, and the borrowing parties are not responding to requests to recall the loaned shares. For these firms who are attempting to comply with the Company's dividend procedures but are not getting cooperation from those who have borrowed the shares from them (or who have submitted lists with minor discrepancies that they are actively working to resolve), the Company is willing to work with them in good faith to reconcile the positions. Once the unbalanced positions are reconciled with the DTCC lists, those shareholders designated by such Broker-Dealers as beneficial owners will be treated like the others. For those lists which cannot be reconciled due to noncompliance of the brokerage houses or borrowing parties, the Company will make best efforts to assist aggrieved shareholders in retaining legal counsel to advise them on how to proceed.
"We are taking every action to make certain that our shareholders receive the dividend. I ask the shareholders to be patient as we work through the issues with the brokerage firms since I firmly believe that in the end, the extra precautions that we are taking will benefit those who are entitled to the warrants," commented Knabb.
[About, Notes, and Contact info same as above]
biz.yahoo.com
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Who's Buying Now?
By Tim Beyers (TMF Mile High)
August 30, 2006
[edit]
Pegasus still not flying
When is an insider purchase not really an insider purchase? When Pegasus Wireless is involved. Don't get me wrong; I'm not here to pile on. Foolish friend Seth Jayson already revealed the numerous problems facing this company, and I've nothing more to add. I simply find this week's Form 4s both amusing and instructive.
From Friday through Monday, six different insiders appeared to buy shares, including CEO Jasper Knabb, who acquired 132,240 stubs. But Knabb didn't spend a dime, and neither did any of his five colleagues. How do I know? I read the fine print, Fool.
Take this filing from director William Horn. The light green footnote makes clear the arrangement: "Shares issued as Board of Directors compensation in lieu of cash payment."
Neither of the initial filings for Knabb or Chief Financial Officer Stephen Durland featured the same footnote. But that changed on Monday, when new documents were issued. Knabb's revised Form 4 may be found here, while Durland's updated filing is here. The lesson? Take time to read footnotes; they're there for a good reason.
fool.com
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New York Times
Insider
A Bet Against Those Who Bet Against the Company
By JENNY ANDERSON
Published: September 1, 2006
IMAGINE if a company said it would give you a dividend but would make you do cartwheels to get it.
Pegasus Wireless, a technology company in Nevada, announced an unusual plan on Aug. 4 to reward loyal shareholders. For every 10 shares of stock, investors would receive a “property dividend” which the company described as a stock warrant.
But there was a catch. The warrants would be issued only to shareholders whose stock was held in “beneficial name” — in other words, in the name of the shareholder. Pegasus would not issue any warrants to brokerage firms to be passed on to clients, which is what normally happens when dividends are paid.
The warrant, as explained in the Pegasus news release, appeared to suggest that brokers — who can lend out stock they hold in certain client accounts — might have to recall the shares so that investors could prove they were the owners. Such action would require those who sell short to give the stock back to the brokers, pushing the price up and creating a short squeeze.
Pegasus said it was only trying to reward investors, but regulators, back-office officials and traders saw another possible motive — to punish short sellers. (Short sellers bet that a company’s stock price will fall, selling shares, usually borrowed from a brokerage firm, and later buying them back at a lower price and pocketing the difference. If the price rises, the plan backfires.)
“It squeezes the shorts, but it also squeezes the brokers,” said David A. Garcia, a principal at the Nevada-based law firm of Hale Lane.
Although the chief executive of Pegasus, Jasper Knabb, said that short sellers had “attacked” his company — amassing 9 million of the 16.5 million outstanding shares — he says the warrant was not intended as retribution.
“I am not Overstock.com,” Mr. Knabb said, referring to the company whose chief executive recently compared short sellers with Al Qaeda (Overstock.com is among a handful of companies suing hedge funds they believe to be behind a short-selling conspiracy).
Mr. Knabb said the board issued the warrant in an effort to get an accurate snapshot of shareholders. He was concerned, he said, that someone had created phantom or fake stock — upward of 22 million shares — and was trading them in the marketplace. One British shareholder, he said, had documentation of a private placement that the company never conducted, evidence that fake shares had materialized in the market.
Whatever the goal of the warrant, the impact was clear. Pegasus’s stock rose almost 30 percent after the warrant was announced, reaching a high of $7.60 on Aug. 22 — bad news for any short seller who expected shares to fall. The stock since has fallen again and closed yesterday at $3.43.
Yesterday, the stock fell 33 percent on volume of 4.6 million. The company usually trades about 130,000 shares a day.
Whatever the reason it was released, such a warrant is highly unusual. Lawyers at the Securities and Exchange Commission could not recall any other such warrant. “It’s an odd situation,” Mr. Garcia said. “Ultimately with the logistics they’ve proposed, a refusal by the company to issue the distribution to a stockholder of record of the company could be problematic under Nevada law.”
John Courtade, a Texas lawyer advising Pegasus, said: “I don’t see how it prejudices any shareholders. The goal was to reward shareholders of Pegasus who have seen their value shredded by short manipulation.”
Mr. Knabb said he was working with regulators, including Nasdaq, on the mysterious share imbalance. But regulators seem more focused on the legality of the warrant.
“Nasdaq is working with other regulators to ensure that securities laws are being appropriately applied,” a Nasdaq spokeswoman, Silvia Davi, said. “This is a process that is independent of the company.” The S.E.C. is also examining the issue, said one person briefed on the inquiry.
As to the fake stock, Mr. Knabb says he believes he has evidence that it exists — proof provided by the Depository Trust Clearing Corporation, which holds in custody about 85 percent of all shares in the marketplace.
Mr. Knabb said after the announcement of the warrant, the clearinghouse reported Pegasus had 16.5 million shares. He said it later reported 38 million outstanding shares, which it detailed in a one-page report sent to Mr. Knabb.
“We have a bunch of phantom stock,” Mr. Knabb said.
But Steven Letzler, director of corporate communications for the clearinghouse, said the second report was an internal document — one that Mr. Knabb should not have seen — that reflects all of the Pegasus shares the clearinghouse holds, including shares in custodial space rented by brokerage houses. The first report, Mr. Letzler said, accurately reflects the number of outstanding shares, that being 16.5 million.
Attacking short sellers is in vogue these days. Several companies, including Overstock.com, have sued short sellers, accusing them of market manipulation and conspiracy. Pegasus’s warrant seems to be a more innovative attempt to hurt those who bet against the company.
Mr. Knabb says Pegasus has a “stellar” record of performance. Company filing and extensive conversations with Mr. Knabb reveal a confusing corporate structure created through repeated reverse mergers with shell companies that have involved businesses ranging from water treatment technology to software development.
For shareholders, it seems a no-win situation. If there is indeed phantom stock, Pegasus will have difficulty ending the problem. If there is not, Mr. Knabb may have to explain to shareholders why he has spent so much time bestowing such rewards upon them and less time running his company.
nytimes.com |
