1 TIME: 2:00 P.M. Andrew M. Schatz

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1 Michael D. Braun ( 674 6) BRAUN LAW GROUP, P.C Wilshire Blvd., Suite 920 Los Angeles, CA Tel: (3 0) Fax: (3 0) Proposed Liaison Counsel for Lead Plaintiff Movant The Vertical Group and the Class Andrew M. Schatz Jeffrey S. Nobel Nancy Kulesa SCHATZ NOBEL IZARD, P.C. One Corporate Center 20 Church Street, Suite 700 Hartford, Connecticut Tel: (860) Fax: (860) Proposed Lead Counsel for Lead Plaintiff Movant The Vertical Group and the Class UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION MICHAEL MITCHELL, Individually and ) on Behalf of All Others Similarly Situated, ) VS. Plaintiff, PEGASUS WIRELESS CORPORATION, ) JASPER KNABB, STEPHEN DURLAND, ) ALEX TSAO, ) Defendants. ) ) CLASS ACTION MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR APPOINTMENT OF LEAD PLAINTIFF AND APPROVAL OF LEAD PLAINTIFF'S SELECTION OF COUNSEL ) DATE: February 2,2007 TIME: 2:00 P.M. CTRM: 5, ISth Floor \\F~~~~~N~~\S~~~~~~~C~\BLG\PEGASUS\PLD-WPDPA re LP.wpd

2 I. INTRODUCTION Proposed Lead Plaintiffs Robert Schaffer, James Anglim, Cody Corrubia and the Vertical Group (collectively the "Vertical Group") respecthlly submits this memorandum of points and authorities in support of its motion, pursuant to Section 2D(a)(3)(B) of the Securities and Exchange Act of 934 (the " 934 Act"), as amended by the Private Securities Litigation Reform Act of 995 (the "PSLRA"), 5 U.S.C. 5 7th-4(a)(3)(B), for an Order (i) appointing the Vertical Group as Lead Plaintiff in this action on behalf of investors that purchased the common stock of Pegasus Wireless Corporation ("Pegasus Wireless") between December 22,2005 and September 5,2006, inclusive (the "Class Period") and (ii) approving the Vertical Group's selection of Schatz Nobel Izard, P.C. as Lead Counsel and the Braun Law Group, P.C. as Liaison counsel.' The Vertical Group's motion should be granted. As is shown below, the Vertical Group's motion is timely as it is filed within 60 days of the first published notice of this class action litigation against Defendants. Furthermore, the Vertical Group is the "most adequate plaintifr' within the meaning of 5 U.S.C. tj 78u-4(a)(3)(B) because it has the largest financial interest of any Lead Plaintiff Movant in the relief sought by the proposed Class, and otherwise meets the requirements of Fed. R. Civ. P. 23(a). Finally, the Vertical Group's selection of Schatz Nobel Izard, P.C. as Lead Counsel and the Braun Law Group, P.C. as Liaison Counsel should be approved, as :ach of the firms has substantial experience prosecuting securities class action litigation. [I. SUMMARY OF THE ALLEGATIONS AGAINST THE DEFENDANTS On November 8,2006, counsel to Plaintiff Michael Mitchell filed a complaint in this district 3n behalf of all persons who purchased the common stock of Pegasus Wireless between December 22,2005 and September 5,2006. By his Complaint, Plaintiff alleged, inter alia, that Pegasus Wireless and certain of its 3Ecers and directors (collectively"defendants") violated Section 0(b) of the Securities Exchange 4ct of 934 and Rule lob-5 promulgated thereunder, by issuing materially false and misleading ' Robert Schaffer and James Anglim are both employees of the Vertical Group and mchased shares of Pegasus Wireless in their personal accounts. Cody Corrubia has a relationship with James Anglim and Robert Schaffer which predates this litigation. lemorandum OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR APPOINTMENT OF LEAD PLAINTIFF AND APPROVAL OF LEAD 'LAINTIFF'S SELECTION OF COUNSEL :ASE NO.: 3-06-CV MHP \Fileserver\shareddocs\BLG\PEGASUS\PLD-WPM re LP.wpd

3 statements. Specifically, the Complaint alleges that investors learned the following adverse information in an August 24,2006 report published by The MotleyFool.com: (i) Pegasus failed to disclose CEO Jasper Knabb's and CFO Stephen Durland's close business ties with convicted felons; (ii) Pegasus failed to disclose a series of related party transactions and the manner in which Knabb purchased more than $26 million in Pegasus stock; and (iii) Pegasus withheld pertinent information involving Knabb's history with penny stock companies with suspicious trading patterns. At the close of the Class Period, a report by Barron's revealed that: (i) Knabb had previously been arrested for possible insurance fraud; (ii) Two former Knabb companies -- BIFS Technologies, formerly Biofiltration Systems, and Wireless Frontier -- evidenced suspected stock and market manipulation; and (iii) Pegasus failed to disclose the truth concerning the novelty and uniqueness of its products and the foreseeability to compete in the current marketplace.. THE VERTICAL GROUP SHOULD BE APPOINTED AS A LEAD PLAINTIFF A. The Procedure for Appointment of Lead Plaintiff Under the PSLRA The PSLRA sets forth the procedure governing the appointment of Lead Plaintiff in each private action arising under the 934 Act that is brought as a plaintiff class action pursuant to the Federal Rules of Civil Procedure. See 5 U.S.C. $ 78u-4(a)(l). Under the first step of this procedure, the plaintiff who files a putative class action under the Act must publish a notice advising members of the purported plaintiff class of the (i) pendency of the action, (ii) claims asserted therein, (iii) purported class period, and (iv) option of any member of the purported class to move to serve as lead plaintiff of the purported class not later than 60 days after the date on which the notice is published. See 5 U.S.C. 5 78u-4(a)(3)(A). Under the PSLRA, the Court is then required to appoint as lead plaintiff the "most adequate plaintiff,'' which the Act defines as "the member or members of the purported plaintiff class that the court determines to be most capable of adequately representing the interests of class members." See 5 U.S.C. 9 78u-4(a)(3)(B)(i). The PSLRA further provides: [Tlhe court shall adopt a presumption that the most adequate plaintiff in any private action arising under this subchapter is the person or group of persons that- (aa) has either filed the complaint or made a motion in response to a notice under subparagraph (A)(i); 2 \\FII~s~N~~\s~~~~~~oc~\BLG\PEGASUS\PLD-WPDPA re LP wpd

4 (bb) (cc) in the determination of the court, has the largest financial interest in the relief sought by the class; and otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure. 5 U.S.C. 78~-4(a)(3)(~)(iii)().~ See Armour v. Network Assocs., 7 F. Supp. 2d 044, I048 (N.D. Cal. 200); see also In re Cavanaugh, 306 F.3d 726, (9th Cir. 2002). B. The Notice Requirements Under The PSLRA Have Been Satisfied The notice requirements set forth in 5 U.S.C u-4(a)(3)(A)(i)(I) and () have been satisfied. On November 8,2006, counsel for Plaintiff Michael Mitchell caused a notice to be published that advised purchasers of Pegasus Wireless common stock of (i) the pendency of a securities class action against Defendants, (ii) the claims asserted, (iii) the purported class period in that litigation, and (iv) the right of any member of the purported class to move the court to serve as lead plaintiff within the 60-day period (by January 8,2006) (the "~otice").~ Cf. In re Nice Svs. Sec. Litig., 88 F.R.D. 206,26 (D.N.J. 999); In re Milestone Scientific Sec. Litin., 83 F.R.D. 404, 43 (D.N.J. 998); Greebel v. FTP Software, Inc., 939 F. Supp. 57,62-63 (D. Mass. 996). The PSLRA provides that the: presumption [of the claimants with the largest loss being lead plaintiffs] may be rebutted only upon proof by a member of the purported plaintiff class that the presumptively most adequate plaintiff-- (aa) (bb) will not fairly and adequately protect the interests of the class; or is subject to unique defenses that render such plaintiff incapable of adequately representing the class. 5 U.S.C. 5 78u-4(a)(3)(B)(iii)(II). A copy of the Notice is attached as Exhibit "B" to the January 8,2006 Declaration of Michael D. Braun in Support of Motion for Appointment of Lead Plaintiff and for Approval of Choice of Counsel (the "Braun Declaration"). 3 \\Fileserver\shareddocs\BLG\PEGASUS\PLD-PA re LP.wpd

5 C. The Vertical Group Has The Largest Financial Interest In The Relief Sought By The Class The Vertical Group has "the largest financial interest in the relief sought by the class" within the meaning of 5 U.S.C. 5 78u-4(a)(3)(B)(iii)(I)(bb). According to the information provided in the Certification of Named Plaintiff (s Braun Declaration, Exhibit A), the Vertical Group sustained an estimated loss of over $532,000 dollars from transactions during the proposed Class Peri~d.~ The Vertical Group knows of no other persons who have sought to be Lead Plaintiff in this action who possess a larger financial interest. D. The Vertical Group Has Satisfied The Other Requirements Of The PSLRA The Vertical Group has satisfied each of the other requirements of the PSLRA. First, each member of the Vertical Group has signed a Certification of Named Plaintiff, under oath, which: (i) (ii) (iii) (iv) (v) (vi) states that he has reviewed the Complaint; states that he did not purchase his shares of Pegasus Wireless at the direction of plaintiffs counsel or in order to participate in any private action arising under the federal securities laws; states that he is willing to serve as representative party on behalf of a class, including providing testimony at deposition and trial, if necessary; sets forth all of his transactions in the securities of Pegasus Wireless during the Class Period; states that he has not sought to serve, nor has he served, as a representative party on behalf of a class in any private federal securities action except as detailed in his certification; and states that he will not accept any payment for serving as a representative party on behalf of the class beyond his pro rata share of any recovery. See 5 U.S.C. $5 78u-4(a)(2)(A)(i)-(vi). The Vertical Group has also satisfied the PSLRA by moving for appointment as lead plaintiff within sixty (60) days after the date on which the Notice was published on November 8,2006. See 5 U.S.C. 5 78u-4(a)(3)(A)(i)(II). Exhibit "A" to the Braun Declaration shows that Mr. Corrubia purchased 9,898 shares of Pegasus Wireless during the Class Period at a total price of $33,853; Mr. Schaffer purchased 49,32 shares of Pegasus Wireless during the Class Period at a total price of $4 8,240; Mr. Anglim purchased 6,000 shares of Pegasus Wireless during the Class Period at a total price of $47,580; and the Vertical Group purchased 28,49 shares of Pegasus Wireless during the Class Period at a total price of $625,66. 4 \\F~~~~~N~~\~~~~~U~~~~\BLG\PEGASUS\PLD-WPDPA re LP.wpd

6 Second, the Vertical Group satisfies the requirements of Fed. R. Civ. P U.S.C. 3 78u-4(a)(3)(B)(iii)(I)(cc). Rule 23(a) is satisfied for the purposes of this motion where (i) the claims of the proposed lead plaintiff are typical of the claims of the class and (ii) the proposed lead plaintiff will fairly and adequately protect the interests of the Clas~.~ Amour, 7 F. Supp. 2d at 05. The Vertical Group satisfies the "typicality" and "adequacy" requirements under Rule 23(a). Under Rule 23(a)(3), the "typicality" requirement is satisfied where the claims of the proposed class representative arise from the same course of conduct that gives rise to the other class members' claims, where these claims are based on the same legal theory, and where the class members and proposed class representative were injured by the same conduct. Amour, 7 F. Supp. 2d at 052 (citing Hannon v. Datavrods. Corn, 976 F.2d 497,508 (9th Cir. 992)). The "adequacy" requirement of Rule 23(a)(4) is satisfied when the proposed class representative does not have interests antagonistic to the proposed Class, and where the proposed class representative has retained experienced and capable counsel. In re Emulex Corp. Sec. Litig., 20 F.R.D. 77, 720 (C.D. Cal. 2002). In this action, the Vertical Group's claims are typical of those claims belonging to all Class members. Like all Class members, it suffered damages from purchases of Pegasus Wireless that took place while Defendants made false and misleading representations concerning the Company in violation of Sections 0(b), 20(a), and 4(a) of the 934 Act. Furthermore, the Vertical Group's interests are clearly aligned with those of the members of the Class, and there is no evidence of any antagonism between its interests and those of the Class. In addition, the members of the Vertical Group have already demonstrated that they will adequately represent the interests of the Class by having obtained qualified and experienced counsel, and by submitting Certifications of Named Plaintiff to the Court indicating that they are willing to assume the responsibilities of a class representative. All these factors demonstrate that the Vertical Although there are two other requirements under Fed. R. Civ. P. 23(a) -- that the class be so numerous that joinder of all members is impracticable (Fed. R. Civ. P. 23(a)(l)) and that there be questions of law or fact common to the class (Fed. R. Civ. P. 23(a)(2)) --"[tlypicality and adequacy of representation are the only provisions relevant to a determination of lead plaintiff under the PSLRA." In re Oxford Health Plans, Inc. Sec. Litig;., 82 F.R.D. 42,49 (S.D.N.Y. 998). 5 CASE NO.: 3-06CV MHP \\Filese~er\shareddocs\BLG\PEGASUS\PLD-PA re LP.wpd

7 Group's claims are typical of the claims of the Class within the meaning of Rule 23(a)(3), and it will fairly and adequately represent the interests of the Class under Rule 23(a)(4). E. The Court Should Approve The Vertical Group's Choice Of Counsel. The PSLRA expressly provides that the "most adequate plaintiff shall, subject to the approval of the court, select and retain counsel to represent the class." 5 U.S.C. 5 78u- 4(a)(3)(B)(v). The Court should not disturb a proposed lead plaintiffs choice unless "necessary to protect the interests of the plaintiff class." See Statement of Managers -- "The Private Securities Litigation Reform Act of 995," 4 Cong. Rec. HI369-08, at HI3700 (daily edition Nov. 28, 995). The Court should approve Schatz Nobel Izard, P.C. as Lead Counsel and The Braun Law Group, P.C. as Liaison Counsel. Each of the firms has extensive experience in the area of securities class action litigation, as detailed in their firm resumes (s Braun Declaration, Exhibits C and D). Thus, the Court may be assured that the members of the Class will receive the highest caliber of legal representation. 5 6 IV. CONCLUSION For the foregoing reasons, the Vertical Group respectfully requests that this Court appoint it 7 8 to serve as Lead Plaintiff, and approve its selection of Schatz Nobel Izard, P.C. as Lead Counsel and The Braun Law Group, P.C. as Liaison Counsel By: Dated: January 8,2006 Michael D. Braun BRAUN LAW GROUP, P.C. IS/ Michael D. Braun 2400 Wilshire Blvd., Suite 920 Los Angeles, CA Tel: (3 0) Fax: (3 0) Proposed Liaison Counsel for Lead Plaintiff Movant The Vertical Group and the Class 6 CASE NO.: 3-06CV MHP \\Filese~er\shareddocs\BLG\PEGASUS\PLD-WPM re LP.wpd

8 Andrew M. Schatz Jeffrey S. Nobel Nancy Kulesa SCHATZ NOBEL IZARD, P.C. One Corporate Center 20 Church Street, Suite 700 Hartford, Connecticut Tel: (860) Fax: (860) Proposed Lead Counsel for Lead Plaintiff Movant The Vertical Group and the Class 7 CASE NO.: 3-06CV MHP \\Filese~er\shareddocs\BLG\PEGASUS\PLD-PA re LP.wpd

9 STATE OF CALIFORNIA COUNTY OF LOS ANGELES )ss.: PROOF OF SERVICE I am employed in the county of Los Angeles, State of California, I am over the age of 8 and not a party to the within action; my business address is 2400 Wilshire Boulevard, Suite 920, Los Angeles, CA On January 8,2007, using the Northern District of California's Electronic Case Filing System, with the ECF ID registered to Michael D. Braun, I filed and served the document(s) described as: MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR APPOINTMENT OF LEAD PLAINTIFF AND APPROVAL OF LEAD The ECF System is designed to automatically generate an message to all parties in the case, which constitutes service. According to the ECFIPACER system, for this case, the parties served are as follows: Aaron H. Darsky, Esq. Juden Justice Reed, Esq. Robert C. Schubert, Esq. Seth A. Safier, Esq. adarsky@schubert-reed.com jreed@schubert-reed.com rschubert@schubert-reed.com seth@gutridesafier.com Counsel for Plaintiff Perry J. Woodward, Esq. pwoodward@terra-aw.com Counsel for Defendant Pegasus Wireless Corporation On January 8,2007, I served the document(s) described as: MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR APPOINTMENT OF LEAD by placing a true copy(ies) thereof enclosed in a sealed envelope(s) addressed as follows: Andrew M. Schatz, Esq. Jeffrey S. Nobel, Esq. Nancy Kulesa, Esq. SCHATZ NOBEL IZARD, P.C. One Corporate Center 20 Church Street, Suite 700 Hartford, Connecticut Tel: (860) Fax: (860) \\Fileserver\shareddocs\BLG\PEGASUS\PLD-PA re LP.wpd

10 Kim E. Miller, Esq. Michael A. Swick, Esq. KAHN GAUTHIER SWICK, LLC 9 E. 39th Street New York, NY 00 6 Tel: (2 2) Fax: (504) Lewis Kahn, Esq. KAHN GAUTHIER SWICK, LLC 650 Poydras Street, Suite 250 New Orleans, LA Tel: (504) Fax: (504) Michael R. Reese, Esq. GUTRIDE SAFIER LLP 230 Park Avenue, Suite 963 New York, NY 069 Tel: (22) Fax: (22) Counsel for Plaintiffs I served the above docurnent(s) as follows: II BY MAIL. I am familiar with the firm's practice of collection and processing correspondence for mailing. Under that practice it would be deposited with U.S. postal service on that same day with postage thereon fully prepaid at Los Angeles, California in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postal cancellation date or postage meter date is more than one day after date of deposit for mailing in an affidavit. I declare, pursuant to Civil L.R. 23-2, that on the date hereof I served a copy of the abovelisted document(s) on the Securities Class Action Clearinghouse by electronic mail through the following electronic mail address provided by the Securities Class Action Clearinghouse: I further declare that I am employed in the office of a member of the bar of this Court at whose direction the service was made. I further declare under penalty of perjury under the laws of the United States that the above is true and correct. Executed on January 8,2007, at Los Angeles, California IS LEITZA MOLINAR Leitza Molinar 9 CASE NO.: 3-06CV MHP \\F~~~~~N~~\~~~~~~~~CS\BLG\PEGASUS\PLD-WPDPA re LP.wpd II