Dragonwave AR

D R A G O N W A V E I N C
F O R M 4 0 - F

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As filed with the Securities and Exchange Commission on May 3, 2012

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

FORM 40-F
REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
OR
ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended February 29, 2012
Commission file number: 001-34491
411 Legget Drive, Suite 600, Ottawa, Ontario, Canada, K2K 3C9
(613) 599-9991
(Address and Telephone Number of Registrant's Principal Executive Offices)

Copies to:
Corporation Service Company
2711 Centerville Road, Suite 400
Wilmington, Delaware, 19808
(800) 927-9800
(Name, address (including zip code) and telephone number
(including area code) of agent for service in the United States)

Securities registered or to be registered pursuant to Section 12(b) of the Act:
Securities registered or to be registered pursuant to Section 12(g) of the Act: N/A
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: N/A
For annual reports, indicate by check mark the information filed with this form:
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: As at
DRAGONWAVE INC.
(Exact Name of Registrant as Specified in its Charter)

Canada
(Province or other jurisdiction of
incorporation or organization)

4812
(Primary Standard Industrial
Classification Code)

Not Applicable
(I.R.S. Employer Identification No.)
Title of Each Class:
Common Shares, no par value
Name of Each Exchange On Which Registered:
The NASDAQ Stock Market LLC
Toronto Stock Exchange
Annual Information Form Audited Annual Financial Statements
February 29, 2012, 35,586,206 common shares of the Registrant were issued and outstanding.
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes No

EXPLANATORY NOTE
DragonWave Inc. ("we", "us", "our", the "Company" or the "Registrant") is a Canadian issuer eligible to file its annual report pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, or the Exchange Act, on Form 40-F pursuant to the multi-jurisdictional disclosure system of the Exchange Act. We are a "foreign
private issuer" as defined in Rule 3b-4 under the Exchange Act. Our equity securities are accordingly exempt from Sections 14(a), 14(b), 14(c), 14(f) and 16 of the Exchange
Act pursuant to Rule 3a12-3.

INCORPORATION BY REFERENCE
This Annual Report on Form 40-F shall be incorporated by reference into the Registrant's Form S-8, SEC File No. 333-167806, filed on June 25, 2010.

FORWARD-LOOKING STATEMENTS
This annual report on Form 40-F and the documents incorporated herein by reference, contain forward-looking statements and forward-looking information within the
meaning of applicable securities laws. Such forward-looking statements or forward-looking information include, but are not limited to statements with respect to strategic
plans and corporate goals and objectives.
Forward-looking statements, which involve assumptions and describe the future plans, strategies and expectations of the Company, are generally identifiable by use of
the words "may", "will", "should", "continue", "expect", "anticipate", "estimate", "believe", "intend", "plan" or "project" or the negative of these words or other variations on
these words or comparable terminology. Forward-looking statements include, without limitation, statements regarding strategic plans, and corporate goals and objectives.
There can be no assurance that forward-looking statements will prove to be accurate and actual results such as the goals and objectives of the Company's compensation
programs for executives and directors, performance, achievements or developments and future events could differ materially from those expressed or implied in such
statements. The following are some of the important risk factors relating to DragonWave and its business that could cause actual results, performance, achievements or
developments to differ materially from those discussed in the forward-looking statements:
ability to successfully complete and integrate acquisitions of products or businesses, including the proposed acquisition of Nokia Siemens Networks, into our
existing product lines and businesses and other risks associated with acquisitions;

dependence on the development and growth of the market for high-capacity wireless communications services;

reliance on a small number of customers for a large percentage of revenue;

intense competition from several competitors;

competition from indirect competitors;

dependence on the ability to develop new products and enhance existing products;

ability to successfully manage growth;

a history of losses;

dependence on establishing and maintaining relationships with channel partners;

quarterly revenue and operating results which are difficult to predict and can fluctuate substantially;

impact that the recent general economic downturn may still be having on customers;

disruption resulting from economic and geopolitical uncertainty;

currency fluctuations;

exposure to credit risk for accounts receivable;

pressure on DragonWave's pricing models;

the allocation of radio spectrum and regulatory approvals for DragonWave's products;

the ability of DragonWave's customers to secure a license for applicable radio spectrum;

changes in government regulation or industry standards that may limit the potential market for DragonWave's products;

risks associated with the possible loss of DragonWave's foreign private issuer status;

risks and expenses associated with DragonWave's status as a public company;

reliance on outsourced manufacturing;

reliance on suppliers of components;

ability to protect its own intellectual property and potential harm to DragonWave's business if it infringes the intellectual property rights of others;

risks associated with software licensed by DragonWave;

a lengthy and variable sales cycle;
dependence on DragonWave's ability to recruit and retain management and other qualified personnel;

exposure to risks resulting from its international sales and operations, including the requirement to comply with export control and economic sanctions
laws; and

product defects, product liability claims, or health and safety risks relating to wireless products.
The risks and uncertainties related to the risk factors listed above, and the materializing of such risk and uncertainties, may be materially increased by the completion of
the anticipated acquisition by us of the microwave transport business of Nokia Siemens Networks. In particular, material risks and uncertainties following and contingent
upon closing of the acquisition will include, without limitation:
reliance on Nokia Siemens Networks for a large percentage of our revenues;

increased cash requirements to fund acquired operations, and associated requirements to comply with debt financing covenants with our lenders, which
should be understood in light of our history of losses noted above;

increased exposure to global currency fluctuations;

increased regulatory compliance obligations, including financial reporting obligations associated with completing a significant acquisition; and

risks associated with acquisitions generally as detailed on in our most recently filed Annual Information Form, or AIF.
Although we have attempted to identify factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements
and forward-looking information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Forward-looking statements
and forward-looking information are based upon management's beliefs, estimates and opinions at the time they are made and we undertake no obligation to update forward-
looking statements and forward-looking information if these beliefs, estimates and opinions or circumstances should change, except as required by applicable law. There can
be no assurance that forward-looking statements and forward-looking information will prove to be accurate, as actual results and future events could differ materially from
those anticipated in such statements and information. Accordingly, readers should not place undue reliance on forward-looking statements and forward-looking information.
The list above is not exhaustive of the factors that may affect our forward-looking statements and forward-looking information. Some of the important risks and
uncertainties that could affect forward-looking statements and forward-looking information are described further in the exhibits attached to this annual report on Form 40-F.
In light of these risks, uncertainties and assumptions, the forward looking events discussed in this annual report on Form 40-F and the documents incorporated herein by
reference, including, without limitation, our published financial guidance, may not occur.

CURRENCY
Unless specifically stated otherwise, all dollar amounts in this annual report on Form 40-F are in U.S. dollars. The exchange rate of U.S. dollars into Canadian dollars,
based upon the closing rate of exchange on February 29, 2012 as reported by the Bank of Canada for the conversion of U.S. dollars into Canadian dollars, was US$1.00
= CAD$0.9895.

AUDITED ANNUAL FINANCIAL STATEMENTS
Our audited consolidated financial statements for the years ended February 29, 2012 and February 28, 2011, including the report of our independent auditor with
respect thereto, are filed as Exhibit 99.1 and incorporated by reference in this annual report on Form 40-F.

MANAGEMENT'S DISCUSSION AND ANALYSIS
Our management's discussion and analysis, or MD&A, for the year ended February 29, 2012 is filed as Exhibit 99.2 and incorporated by reference in this annual report
on Form 40-F.

TAX MATTERS
Purchasing, holding, or disposing of our securities may have tax consequences under the laws of the United States and Canada that are not described in this annual
report on Form 40-F.
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CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
At the end of the period covered by this annual report for the fiscal year ended February 29, 2012, an evaluation was carried out under the supervision of, and with the
participation of, our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, which are our principal executive officer and
principal financial officer, respectively, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the
Exchange Act). Based upon that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective as at February 29, 2012, to give
reasonable assurance that the information we are required to disclose in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms, and (ii) accumulated and communicated to management, including our principal executive and
principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management's Report on Internal Control over Financial Reporting
Our management is also responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act
Rules 13a-15(f) and 15d-15(f) as well as National Instrument 52-109 of the Canadian Securities Administration. These controls are designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes. Under the supervision and with the participation of our
management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial
reporting based on the framework in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on our evaluation under the framework in Internal Control Integrated Framework, our management concluded that our internal control over financial reporting was
effective as of February 29, 2012.
Attestation Report of Independent Registered Public Accounting Firm
The attestation report of Ernst & Young LLP ("EY") is included in EY's report, dated May 2, 2012, to the shareholders of the Company, which accompanies the
Registrant's audited consolidated financial statements for the fiscal year ended February 29, 2012, which is attached as Exhibit 99.1 to this annual report on Form 40-F
and incorporated by reference herein.
Changes in Internal Control over Financial Reporting
During the period covered by this Annual Report on Form 40-F, no changes occurred in our internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.

AUDIT COMMITTEE
Audit Committee
We have a separately designated standing Audit Committee established in accordance with section 3(a)(58)(A) of the Exchange Act and NASDAQ Rule 5605(c)(2).
Our Audit Committee is composed of Tom Manley (Chair), Claude Haw, and Jean-Paul Cossart, each of whom, in the opinion of the directors, is financially literate and
independent as determined under National Instrument 52-110 (Audit Committees) ("NI 52-110"), Rule 10A-3 of the Exchange Act and NASDAQ Rule 5605(a)(2).
Information regarding the members of our Audit Committee can be found under "Audit Committee" in our most recently filed AIF.
The Audit Committee assists the board of directors in fulfilling its responsibilities for oversight of financial and accounting matters. In addition to recommending the
auditors to be nominated and reviewing the compensation of the auditors, the Audit Committee is responsible for overseeing the work of the auditors and pre-approving non-
audit services. The Audit Committee also reviews our annual and interim financial statements and news releases containing information taken from our financial statements
prior to their release. The Audit Committee is responsible for reviewing the acceptability and quality of our financial reporting and accounting standards and principles and
any proposed material changes to them or their application.
The Audit Committee has a published charter, which is available at www.sedar.com and on our website, www.dragonwaveinc.com .
3
Audit Committee Financial Expert
Our Board of Directors has determined that Thomas Manley qualifies as an "audit committee financial expert" within the meaning of the SEC's rules and each of the
members of the audit committee is independent as determined under Exchange Act Rule 10A-3 and NASDAQ Rule 5605(a)(2). Information regarding each audit committee
member's qualifications and experience can be found under "Audit Committee" in our most recently filed AIF.

PRINCIPAL ACCOUNTING FEES AND SERVICES INDEPENDENT AUDITORS
The following table sets out the fees billed to us by Ernst & Young LLP and its affiliates for professional services for the year ended February 29, 2012 and the year
ended February 28, 2011. During these years, E&Y was our only external auditor.

PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES PROVIDED BY
INDEPENDENT AUDITORS
In addition to recommending the auditors to be nominated and reviewing the compensation of the auditors, the Audit Committee is responsible for overseeing the work
of the auditors and pre-approving non-audit services. As a matter of practice, the Audit Committee, and/or the Audit Committee Chairman acting on behalf of the Audit
Committee, will generally pre-approve all audit and permitted non-audit services to be performed by our external auditors. None of the fees reported above under the
heading "External Auditor Service Fees" that were paid to Ernst & Young LLP were approved by our Audit Committee pursuant to the de minimus exception provided by
Section (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

OFF-BALANCE SHEET ARRANGEMENTS
Information about our off-balance sheet arrangements can be found under "Off-Balance Sheet Arrangements" in our management's discussion and analysis, or MD&A,
for the year ended February 29, 2012 which section is incorporated herein by reference.

CODE OF ETHICS
We have adopted a Code of Business Conduct and Ethics (the "Code of Ethics") that is applicable to each of our employees, including our principal executive officer,
principal financial officer, principal accounting officer or controller. Our Code of Ethics is available at on our website at www.dragonwaveinc.com .
4

Year Ended
February 29, 2012
Year Ended
February 28, 2011
Audit Fees
(1)
324,098 281,773
Audit Related Fees
(2)
59,816 58,014
Tax Fees
(3)
107,440 43,139
All Other Fees and Administrative Charges
(4)
108,245 86,989

TOTAL 599,599 469,915

(1) Includes audit services.

(2) Includes quarterly review, assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and that are not included in "Audit Fees".

(3) Includes services for regulatory tax compliance and planning, and tax services related to public filings.

(4) Includes services for advice regarding acquisition related activity.
Any amendments to our Code of Ethics, and all waivers of the Code of Ethics with respect to any of the officers covered by it, will be posted on our website within five
business days of such amendment or waiver and shall be provided in print to any shareholder who requests them.
There have been no waivers or implicit waivers to the Code of Ethics during the fiscal year ended February 29, 2012.

CONTRACTUAL OBLIGATIONS
The following table presents a breakdown of our known outstanding contractual obligations by maturity as of February 29, 2012:
The amounts in the table above do not reflect the future tax consequences attributable to such amounts because we are unable to reasonably estimate the amount of such
tax consequences.

NOTICES PURSUANT TO REGULATION BTR
We did not send any notices to directors and executive officers during the period covered by this annual report as required by Rule 104 of Regulation BTR concerning
any equity securities in a pension or retirement plan subject to a blackout period and, generally, these requirements are inapplicable to us.

NASDAQ CORPORATE GOVERNANCE
Our common shares are quoted for trading on the NASDAQ Global Select Market under the symbol DRWI. NASDAQ Marketplace Rule 5615(a)(3) permits a foreign
private issuer to follow its home country practice in lieu of certain of the requirements of the Rule 5600 Series. A foreign private issuer that follows a home country practice
in lieu of one or more provisions of the Rule 5600 Series is required to disclose in its annual report filed with the SEC, or on its website, each requirement of the Rule 5600
Series that it does not follow and describe the home country practice followed by the issuer in lieu of such NASDAQ corporate governance requirements.
We do not follow Marketplace Rule 5620(c), but instead follow our home country practice. The NASDAQ minimum quorum requirement under Rule 5620(c) for a
meeting of shareholders is 33.33% of the outstanding common shares. In addition, Rule 5620(c) requires that an issuer listed on NASDAQ state its quorum requirement in
its governing documents. Our quorum requirement is set forth in our by-laws. A quorum for a meeting of our shareholders is two persons present in person or by proxy who,
in the aggregate, hold at least 25% of the issued shares entitled to be voted at the meeting. The foregoing is consistent with the laws, customs and practices in Canada and the
rules of the Toronto Stock Exchange.

INTERACTIVE DATA FILE
Concurrent with this filing, we have submitted to the SEC and posted on our corporate website, an Interactive Data File.

UNDERTAKING
We undertake to make available, in person or by telephone, representatives to respond to inquiries made by the SEC's staff, and to furnish promptly, when requested to
do so by the SEC staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on
Form 40-F arises; or transactions in said securities.

CONSENT TO SERVICE OF PROCESS
We previously filed an Appointment of Agent for Service of Process and Undertaking on Form F-X with the SEC on May 6, 2010, with respect to the class of securities
in relation to which the obligation to file this annual report on Form 40-F arises.
5

Payment due by period
(Figures are in thousands of U.S. Dollars)
Contractual Obligations Total
Less than 1
year 1-3 years 3-5 years
More than 5
years
Operating Lease Obligations $ 8,227 $ 1,983 $ 1,564 $ 2,680

Total $ 8,277 $ 1,983 $ 1,564 $ 2,680

SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual
report to be signed on its behalf by the undersigned, thereto duly authorized.
Date: May 3, 2012
DRAGONWAVE INC.

By:

/s/ RUSSELL FREDERICK
Name: Russell Frederick
Title: Chief Financial Officer

EXHIBIT INDEX
Incorporated by Reference
Exhibit
No Exhibit Title
Filed
Herewith Form
Exhibit
No.
File
No.
Filing
Date
23.1 Consent of Independent Registered Public Accounting Firm of
Ernst & Young LLP dated May 2, 2012
X

31.1

Certification of Principal Executive Officer required by
Rule 13a-14(a) of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, dated May 3, 2012

X

31.2

Certification of Principal Financial Officer required by
Rules 13a-14(a) of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, dated May 3, 2012

X

32.1

Certification of Chief Executive Officer pursuant to 18 USC.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, dated May 3, 2012

X

32.2

Certification of Chief Financial Officer pursuant to 18 USC.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, dated May 3, 2012

X

99.1

Audited consolidated financial statements and notes thereto for
the years ended February 29, 2012 and February 28, 2011

X

99.2

Management's Discussion and Analysis for the year ended
February 29, 2012

X

99.3

Press Release dated May 3, 2012 DragonWave Announces
Financial Results for Fourth Quarter and Full Fiscal Year 2012

X

101

Interactive Data File

X

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EXPLANATORY NOTE
INCORPORATION BY REFERENCE
FORWARD-LOOKING STATEMENTS
CURRENCY
AUDITED ANNUAL FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS
TAX MATTERS
CONTROLS AND PROCEDURES
AUDIT COMMITTEE
PRINCIPAL ACCOUNTING FEES AND SERVICES INDEPENDENT AUDITORS
PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES PROVIDED BY INDEPENDENT AUDITORS
OFF-BALANCE SHEET ARRANGEMENTS
CODE OF ETHICS
CONTRACTUAL OBLIGATIONS
NOTICES PURSUANT TO REGULATION BTR
NASDAQ CORPORATE GOVERNANCE
INTERACTIVE DATA FILE
UNDERTAKING
CONSENT TO SERVICE OF PROCESS
SIGNATURES
EXHIBIT INDEX

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm
We hereby consent to the reference to our firm under the caption "Experts" and to the incorporation by reference in DragonWave Inc.'s Annual Report on Form 40-F of
our reports dated May 2, 2012 with respect to the consolidated financial statements of DragonWave Inc. (the "Company") for the years ended February 29, 2012 and
February 28, 2011, and the effectiveness of internal control over financial reporting of the Company as at February 29, 2012.
We also consent to the incorporation by reference in the Registration Statement on Form S-8 No. 333-167806 pertaining to the Company's Fifth Amended and Restated
Key Employee Stock Option Plan of DragonWave Inc. of our reports dated May 2, 2012 with respect to the consolidated financial statements of DragonWave Inc. for the
years ended February 29, 2012 and February 28, 2011, and the effectiveness of internal control over financial reporting of the Company as at February 29, 2012.
Ottawa, Canada,
May 2, 2012
/s/ Ernst & Young LLP
Chartered Accountants
Licensed Public Accountants

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Exhibit 23.1
Consent of Independent Registered Public Accounting Firm

Exhibit 31.1

CERTIFICATION PURSUANT TO
RULE 13a-14(a)
I, Peter Allen, certify that:
1. I have reviewed this annual report on Form 40-F of DragonWave Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

4. The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

c) Evaluated the effectiveness of the issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures; as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the period covered by the annual report that
has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and

5. The issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer's auditors and
the audit committee of the issuer's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the issuer's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal control over financial
reporting.

Date: May 3, 2012

/s/ PETER ALLEN
Peter Allen
Chief Executive Officer

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Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a)

Exhibit 31.2

CERTIFICATION PURSUANT TO
RULE 13a-14(a)
I, Russell Frederick, certify that:
1. I have reviewed this annual report on Form 40-F of DragonWave Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

4. The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

c) Evaluated the effectiveness of the issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures; as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the period covered by the annual report that
has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and

5. The issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer's auditors and
the audit committee of the issuer's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the issuer's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal control over financial
reporting.

Date: May 3, 2012

Russell Frederick
Chief Financial Officer

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Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14(a)

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Information Report of DragonWave Inc. (the "Company") on Form 40-F for the fiscal year ended February 29, 2012 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Peter Allen, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
This certification accompanies the annual report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the issuer for purposes of Section 18 of the Securities Exchange Act of 1934.

Dated: May 3, 2012

/s/ PETER ALLEN
Peter Allen
Chief Executive Officer

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Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Information Report of DragonWave Inc. (the "Company") on Form 40-F for the fiscal year ended February 29, 2012 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Russell Frederick, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
This certification accompanies the annual report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the issuer for purposes of Section 18 of the Securities Exchange Act of 1934.

Dated: May 3, 2012

Russell Frederick
Chief Financial Officer

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Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 99.1

INDEPENDENT AUDITORS' REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of
DragonWave Inc.
We have audited the accompanying consolidated financial statements of DragonWave Inc. , which comprise the consolidated balance sheets as at February 29, 2012
and February 28, 2011, and the consolidated statements of operations and comprehensive income (loss), changes in shareholders' equity and cash flows for each of the years
in the two-year period ended February 29, 2012, and a summary of significant accounting policies and other explanatory information.
Management's responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with United States generally accepted
accounting principles, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
Auditors' responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian
generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected
depend on the auditors' judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In
making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the circumstances. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements, evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of DragonWave Inc. as at February 29, 2012 and
February 28, 2011, and the results of its operations and its cash flows for each of the years in the two-year period ended February 29, 2012 in accordance with United States
generally accepted accounting principles.
Other matter
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), DragonWave's internal control over
financial reporting as of February 29, 2012, based on the criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated May 2, 2012 expressed an unqualified opinion on DragonWave Inc.'s internal control over financial
reporting.
Ottawa, Canada
May 2, 2012
1 -- Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of:
DragonWave Inc.
We have audited DragonWave Inc.'s internal control over financial reporting as of February 29, 2012, based on criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). DragonWave Inc.'s management is responsible for
maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying reports from management. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, DragonWave Inc. maintained, in all material respects, effective internal control over financial reporting as of February 29, 2012 based on the
COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of
DragonWave Inc. as of February 29, 2012 and February 28, 2011 and the related consolidated statements of operations and comprehensive income (loss), changes in
shareholders' equity and cash flows for each of the two years in the period ended February 29, 2012 of DragonWave Inc. and our report dated May 2, 2012 expressed an
unqualified opinion thereon.
Ottawa, Canada
May 2, 2012
2 -- Page

CONSOLIDATED BALANCE SHEETS

Expressed in US $000's except share amounts
On behalf of the Board:
See accompanying notes
3 -- Page
Note
As at
February 29,
2012
As at
February 29,
2011
(Note 2)
Assets
Current Assets
Cash and cash equivalents 4 52,798 77,819
Restricted cash 4 177 714
Short term investments 4 11,181
Trade receivables 5 9,850 11,579
Inventory 6 26,994 28,204
Other current assets 7 5,501 5,306
Future income tax asset 16 69 553

95,389 135,356
Long Term Assets
Property and equipment 8 5,280 7,560
Future income tax asset 16 1,308 808
Intangible assets 9 6,217 14,929
Goodwill 9 11,927 11,927

24,732 35,224
Total Assets 120,121 170,580

Liabilities
Current Liabilities
Accounts payable and accrued liabilities 10 12,720 15,967
Deferred revenue 723 1,453
Contingent royalty 14 372 622
Contingent consideration 22 1,884 14,622

15,699 32,664
Long Term Liabilities
Contingent royalty 14 1,292 3,290
Other long term liabilities 11 1,063 1,999

2,355 5,289
Commitments 14
Shareholders' equity
Capital stock 12 172,264 171,570
Contributed surplus 12 4,606 2,642
Deficit 12 (65,448 ) (31,967 )
Accumulated other comprehensive loss 12 (9,695 ) (9,618 )

Total Shareholder's equity 101,727 132,627
Non-controlling interests 3 340

Total Equity 102,067 132,627
Total Liabilities and Shareholder's equity 120,121 170,580

Shares issued & outstanding 12 35,586,206 35,421,893

(Signed) GERRY SPENCER
Director

(Signed) TOM MANLEY
Director

CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)

Expressed in US $000's except share and per share amounts

4 -- Page
Year ended
Note
February 29,
2012
February 28,
2011
(Note 2)
REVENUE 19, 20 45,656 118,010
Cost of sales 6 29,255 67,460

Gross profit 16,401 50,550

EXPENSES
Research and development 24,023 19,056
Selling and marketing 15,307 17,303
General and administrative 16,528 11,785
Government assistance 14 (902 ) (390 )

54,956 47,754

Income (loss) before amortization of intangible assets and other items (38,555 ) 2,796
Amortization of intangible assets 9 (1,986 ) (893 )
Accretion expense (650 ) (393 )
Interest income 393 233
Investment gain 67 7
Impairment of intangible assets 9 (8,315 )
Gain on change in estimate of contingent liabilities 14, 22 15,146
Foreign exchange gain 100 678

Income (loss) before income taxes (33,800 ) 2,428
Income tax expense (recovery) 16 (104

) 421

Net Income (loss) (33,696 ) 2,007
Net Loss Attributable to Non-Controlling Interest 215

Net Income (loss) applicable to shareholders (33,481 ) 2,007
Foreign currency translation differences for foreign operations 77

Comprehensive Income (Loss) applicable to shareholders (33,558 ) 2,007
Income (loss) per share
Basic 13 (0.94 ) 0.06
Diluted 13 (0.94 ) 0.05
Weighted Average Shares Outstanding
Basic 13 35,506,689 35,812,507
Diluted 13 35,506,689 36,741,961

CONSOLIDATED STATEMENTS OF CASH FLOWS

Expressed in US $000's

5 -- Page
Year ended
Note
February 29,
2012
February 28,
2011
(Note 2)
Operating Activities
Net Income (Loss) (33,696 ) 2,007
Items not affecting cash
Amortization of property and equipment 3,370 2,895
Amortization of intangible assets 1,986 893
Accretion expense 650 393
Non cash royalty amortization (490 ) (266 )
Impairment of intangible assets 8,315
Gain on change in estimate of contingent liabilities (15,146 )
Stock-based compensation 1,964 1,410
Unrealized foreign exchange loss 38 134
Non cash future income tax expense (recovery) (42 ) 358
Inventory impairment 2,020 3,285

(31,031 ) 11,109
Changes in non-cash working capital items 15 (3,437

) (12,301

)

(34,468 ) (1,192 )

Investing Activities
Acquisition of property and equipment (1,090 ) (3,839 )
Acquisition of intangible assets (1,589 ) (867 )
Acquisition of Axerra Networks Inc., net of cash acquired (8,700 )
Purchase of short term investments (22,432 ) (135,480 )
Maturity of short term investments 33,613 132,378

8,502 (16,508 )

Financing Activities
Share repurchase (10,738 )
Initial formation contribution by non-controlling interest in DW-HFCL 555
Issuance of common shares net of issuance costs 505 1,115

1,060 (9,623 )

Effect of foreign exchange on cash and cash equivalents (115 ) (134 )
Net decrease in cash and cash equivalents (25,021

) (27,457

)
Cash and cash equivalents at beginning of period 77,819 105,276

Cash and cash equivalents at end of period 52,798 77,819

Cash paid during the period for interest 194

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

[ Expressed in US $000's except common share amounts ]
6 -- Page

Common
Shares
Capital
Stock
Contributed
Surplus Deficit AOCL
Non-
Controlling
Interest
Shareholder's
Equity
Balance at
February 28, 2009 28,559,297 $ 108,153 $ 1,301 $ (60,075 ) $ (15,305 ) $ 0 $ 34,074

Equity financing 7,493,562 $ 68,615 $ 68,615
Stock-based
compensation $ 952 $ 952
Exercise of stock
options 753,443 $ 1,812 $ (692 ) $ 1,120
Warrant exercises 114,594 $ 379 $ 379
Other comprehensive
income $ 164 $ 5,687 $ 5,851
Other 14,021 $ 51 $ 51
Net earnings $ 27,804 $ 27,804

Balance at
February 28, 2010 36,934,917 $ 179,174 $ 1,561 $ (32,271 ) $ (9,618 ) $ 0 $ 138,846

Stock-based
compensation $ 1,389 $ 1,389
Exercise of stock
options 311,254 $ 1,126 $ (285 ) $ 841
Share repurchase (1,865,549 ) $ (9,035 ) $ (1,703 ) $ (10,738 )
Other 41,271 $ 305 $ (23 ) $ 282
Net Earnings $ 2,007 $ 2,007

Balance at
February 28, 2011
(Note 2) 35,421,893 $ 171,570 $ 2,642 $ (31,967 ) $ (9,618 ) $ 0 $ 132,627

Stock-based
compensation $ 1,914 $ 1,914
Exercise of stock
options 113,940 $ 452 $ (141 ) $ 311
Stock option benefit $ 189 $ 189
Other 50,373 $ 242 $ 2 $ 244
Other comprehensive
loss $ (77 ) $ (77 )
Initial formation
contribution by non-
controlling interest
in DW-HFCL
(Note 3) $ 555 $ 555
Net Loss $ (33,481 ) $ (215 ) $ (33,696 )

Balance at
February 29, 2012 35,586,206 $ 172,264 $ 4,606 $ (65,448 ) $ (9,695 ) $ 340 $ 102,067

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

[Expressed in US $000's except share and per share amounts]
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
DragonWave Inc. [the "Company"], incorporated under the Canada Business Corporations Act in February 2000, is in the business of developing next-generation
broadband wireless backhaul and pseudowire equipment.
The Company's common shares are traded on the Toronto Stock Exchange under the trading symbol DWI and on NASDAQ Global Market under the symbol DRWI.
These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, DragonWave Corp., incorporated in the state of
Delaware, USA, DragonWave PTE Limited, incorporated in Singapore, 4472314 Canada Inc., incorporated in Canada, Axerra Networks Inc., incorporated in the state of
Delaware, USA, DragonWave Networks Ltd., incorporated in Israel, DragonWave S.r.l, incorporated in Italy, DragonWave S.A.R.L., incorporated in Luxembourg,
DragonWave LTDA, incorporated in Brazil, Axerra GMBH, incorporated in Germany, Axerra Networks Asia Pacific Limited, incorporated in Hong Kong, and its majority
owned subsidiary, DragonWave HFCL India Private Limited. All intercompany accounts and transactions have been eliminated upon consolidation.
The consolidated financial statements of the Company have been prepared in United States dollars following United States Generally Accepted Accounting Principles
["U.S. GAAP"], as further discussed in note 2.
In the opinion of management, the consolidated financial statements reflect all adjustments, which consist only of normal and recurring adjustments, necessary to
present fairly the financial position as at February 29, 2012 and February 28, 2011 and the results of operations, cash flows and changes in equity for the years ended
February 29, 2012 and February 28, 2011.
2. SIGNIFICANT ACCOUNTING POLICIES
Adoption of United States Generally Accepted Accounting Principles
In February 2008, the Canadian Accounting Standards Board confirmed the transition from Canadian GAAP to International Financial Reporting Standards ["IFRS"]
for all publicly accountable entities no later than fiscal years commencing on or after January 1, 2011. As a result, management undertook a detailed review of the
implications of the Company having to report under IFRS and also examined the alternative available to the Company, as a Foreign Private Issuer in the United States, of
filing its primary financial statements in Canada using U.S. GAAP, as permitted by the Canadian Securities Administrators' National Instrument 51-102, "Continuous
Disclosure Obligations".
As a result of this analysis, management determined that the Company would adopt U.S. GAAP as its primary basis of financial reporting commencing March 1, 2011
on a retrospective basis. All comparative financial information contained in the consolidated financial statements has been revised to reflect the Company's results as if they
had been historically reported in accordance with U.S. GAAP.
The adoption of U.S. GAAP did not have a material change on the Company's accounting policies or financial results. An adjustment in the amount of $154 was made
to increase deficit as calculated by Canadian GAAP as at February 28, 2011 due to the adoption of U.S. GAAP.
Under Canadian GAAP, Investment Tax Credits (ITC's) were recognized as a reduction to the Company's Research and development expense. Under US GAAP, ITC's
are recognized as a reduction to Income tax expense. During fiscal 2011, under Canadian GAAP, the Company recognized $380 as a reduction to research and development
expense. Under US GAAP, the prior year results were impacted as follows: the Company's Income before taxes was adjusted $2,428 and the Company's tax expense was
$421 as opposed to $2,808 and
7 -- Page

DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
$801 respectively as was stated under Canadian GAAP. The GAAP difference had no impact on the Company's consolidated Net and Comprehensive Income in the prior
fiscal year.
Use of accounting estimates
The preparation of the consolidated financial statements in conformity with GAAP requires the Company's management to make estimates that affect the reported
amounts of assets and liabilities and disclosure of contingent amounts of assets and liabilities as at the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting periods presented. Actual results could differ from the estimates made by management.
The following include estimates by management: allowance for doubtful accounts, inventory allocations, inventory provisions, accrued liabilities, warranty provisions,
contingent royalty, tax valuation allowance, impairment of intangible assets and goodwill, vendor specific objective evidence, estimated selling price and estimated returns
as it relates to revenue recognition, and stock-based compensation.
These estimates and assumptions are based on management's historical experience, best knowledge of current events and conditions and actions that the Company may
undertake in the future. Certain of these estimates require subjective or complex judgments by management about matters that are uncertain and changes in those estimates
could materially impact the amounts reported in the consolidated financial statements and accompanying notes.
Foreign currency translation
The Company's operations and balances denominated in foreign currencies, including those of its foreign subsidiaries which are considered financially and
operationally integrated, are translated into US dollars (USD) using the temporal method of translation: monetary assets and liabilities are translated at the period end
exchange rate, non-monetary assets are translated at the historical exchange rate, and revenue and expense items are translated at the average exchange rate. Gains or losses
resulting from the translation adjustments are included in income (loss).
The cumulative foreign currency translation adjustment included under accumulated other comprehensive loss within shareholders' equity on the consolidated balance
sheets relates to the Company's adoption of USD as the functional and reporting currency which was effective March 1, 2010 and unrealized foreign currency translation
gains or losses of our self-sustaining foreign subsidiary which are translated into USD using the current rate method. Under the current rate method, assets and liabilities are
translated at the rate of exchange prevailing at the balance sheet date. Revenue and expenses are translated at the average exchange rate prevailing during the period.
Revenue recognition
The Company derives revenue from the sale of broadband wireless backhaul equipment which includes embedded software and a license to use said software and
extended product warranties. Software is considered to be incidental to the product. Services range from installation and training to basic consulting. Revenue is recognized
when persuasive evidence of an arrangement exists, delivery has occurred and there are no significant remaining vendor obligations, collection of receivables is reasonably
assured and the fee is fixed and determinable. Where final acceptance of the product is specified by the customer, revenue is deferred until acceptance criteria have
been met.
8 -- Page

DragonWave Inc.
The Company's business agreements may also contain multiple elements. Accordingly, the Company is required to determine the appropriate accounting, including
whether the deliverables specified in a multiple element arrangement should be treated as separate units of accounting for revenue recognition purposes, the fair value of
these separate units of accounting and when to recognize revenue for each element. For arrangements involving multiple elements, the Company allocates revenues to each
element based on a selling price hierarchy. The selling price for a deliverable is based on its vendor specific objective evidence ("VSOE") if available, third party evidence
("TPE") if VSOE is not available, or estimated selling price ("ESP") if neither VSOE nor TPE is available. In multiple element arrangements, revenues are allocated to each
separate unit of accounting for each of the deliverables using the relative estimated selling prices of each of the deliverables in the arrangement based on the aforementioned
selling price hierarchy. The Company has determined the selling price for the undelivered items using VSOE and the delivered items using ESP.
The Company generates revenue through direct sales and sales to distributors. The Company defers the recognition of a portion of sales to distributors based estimated
sale returns and stock rotation granted to customers on products in the same period the related revenues are recorded. These estimates are based on historical sales returns;
stock rotations and other known factors. During the current fiscal year the Company determined that there was sufficient history to base its estimates on and adapted our
policy accordingly.
Revenue associated with extended warranty and advanced replacement warranty is recognized rateably over the life of the contracted service.
Revenue from engineering services or development agreements is recognized according to the specific terms and acceptance criteria as services are rendered.
The Company accrues estimated potential product liability as warranty costs when revenue on the sale of equipment is recognized. Warranty costs are calculated on a
percentage of revenue per month based on current actual warranty costs and return experience.
Shipping and handling costs borne by the Company are recorded in cost of sales. Shipping and handling costs charged to customers are recorded as revenue, if billed at
the time of shipment. Costs charged to customers after delivery are recorded in cost of sales.
The Company generates revenue through royalty agreements as a result of the use of its Intellectual Property. Royalty revenue is recognized as it is earned.
Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Short term investments
The Company has classified its short term investments as held for trading, which are carried at fair value with both realized and unrealized gains and losses included in
net income (loss).
Financial instruments
The Company classifies its financial instruments as held-for-trading, held-to-maturity, available-for-sale, loans and receivables and other financial liabilities. The
classification depends on the purpose for which the financial instruments were acquired, their characteristics and management's intent. Management determines the
classification of financial assets and liabilities at initial recognition and the classification is not changed
9 -- Page

DragonWave Inc.
subsequent to initial recognition. The Company designated its cash and cash equivalents and short term investments as held-for-trading which are measured at fair value,
with changes in fair value being recorded in net earnings. Trade receivables and other receivables have been classified as loans and receivables which are measured at
amortized cost. Accounts payable and accrued liabilities have been classified as other financial liabilities, which are measured at amortized cost.
Transaction costs directly attributable to the acquisition of financial assets are recorded in net income (loss)in the period in which they are incurred.
Inventory
Inventory is valued at the lower of cost and net realizable value ["NRV."] The cost of inventory is calculated on a standard cost basis, which approximates average
actual cost. NRV is determined as the market value for finished goods, replacement cost for raw materials, and finished goods market value less cost to complete for work in
progress inventory. Indirect manufacturing costs and direct labour expenses are allocated systematically to the total production inventory.
Income taxes
Income taxes are accounted for using the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are determined
based on differences between the tax and accounting bases of assets and liabilities as well as for the benefit of losses available to be carried forward to future years for tax
purposes that are more likely than not to be realized. Deferred income tax assets and liabilities are measured using enacted tax rates that apply to taxable income in the years
in which temporary differences are expected to be recovered or settled. The Company provides a valuation allowance against its deferred tax assets when it believes that it is
more likely than not that the assets will not be realized.
The Company determines whether it is more likely than not that an uncertain tax position will be sustained upon examination by the tax authorities. The tax benefit of
any uncertain tax position that meets the more-likely-than-not recognition threshold is calculated as the largest amount that is more than 50% likely of being realized upon
successful resolution. To the extent a full benefit is not expected to be realized, an income tax liability is effectively established. The Company recognizes accrued interest
and penalties on unrecognized tax benefits as interest expense.
Management periodically reviews the Company's provision for income taxes and valuation allowance to determine whether the overall tax estimates are reasonable.
When management performs its quarterly assessments of the provision and valuation allowance, it may be determined that an adjustment is required. This adjustment may
have a material impact on the Company's financial position and results of operations.
10 -- Page

DragonWave Inc.
Property and equipment
Property and equipment are stated at cost. Amortization is calculated using the straight-line method over the anticipated useful lives of the assets as follows:
Management evaluates the carrying value of its property and equipment assets whenever events or changes in circumstances indicate that the carrying value may not be
recoverable. To the extent the estimated undiscounted future net cash inflows attributable to the asset are less than the carrying amount, an impairment loss is recognized.
The amount of impairment loss to be recorded is the difference between the asset's carrying value and the net discounted estimated future cash flows.
Goodwill and intangible assets
Intangible assets include computer software, infrastructure systems software, customer relationships and developed technology, and are amortized over their estimated
useful lives of 2 years, 3 years, 8 years, and 6 years respectively. Management evaluates the carrying value of its intangible assets whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. To the extent the estimated undiscounted future net cash inflows attributable to the asset are less than
the carrying amount, an impairment loss is recognized. The amount of impairment loss to be recorded is the difference between the asset's carrying value and the net
discounted estimated future cash flows.
Goodwill represents the excess of the purchase price over the estimated fair value of net tangible and intangible assets acquired in business combinations. The
Company reviews the carrying value of goodwill on an annual basis or more frequently if circumstances indicate that it is more likely than not that the fair value of the
goodwill is below its carrying amount. The goodwill impairment test is a three-step process which requires management to make judgmental assumptions regarding fair
value. The first step in the impairment test is to assess qualitative factors to determine whether it is necessary to perform the subsequent two steps of the goodwill
impairment test. The second step consists of estimating the fair value of our aggregated reporting unit. When the fair value of our reporting unit exceeds its carrying amount,
goodwill of the reporting unit is considered not to be impaired and the third step of the impairment test is unnecessary. If the fair value is less than the carrying amount, the
Company compares the implied fair value of the goodwill, determined as if a purchase had just occurred, to the carrying amount to determine the amount of impairment
charge to be recorded. Changes in the estimates and assumptions used in assessing the projected cash flows could materially affect the results of management's evaluation.
Contingent royalty
In the event of an acquisition, the Company identifies any contingent royalties and recognizes the fair value of those liabilities based on the discounted expected cash
outflows. Subsequent to the initial recognition and until the liabilities are settled, cancelled or expire, the Company accretes the liabilities using the initial discount
11 -- Page
Test equipment 4 years
Research and development equipment 5 years
Computer hardware 2 years
Production fixtures 3 years
Leasehold improvements 5 years
Furniture and fixtures 5 years
Communication equipment 3 years
Other 3 - 5 years

DragonWave Inc.
rate and subsequently amortizes the liability into cost of sales based on the forecasted sales over the liability's expected life.
Stock option plan and employee share purchase plan
The Company has a stock option plan and an employee share purchase plan which is described in note 12. The Company accounts for stock options granted to
employees using the fair value method. In accordance with the fair value method, the Company recognizes estimated compensation expense related to stock options over the
vesting period of the options granted, with the related credit being charged to contributed surplus.
The Company launched an employee share purchase plan on October 20, 2008. The plan includes provisions to allow employees to purchase Common shares. The
Company will match the employees' contribution at a rate of 25%. Proceeds from employees and the cost of the matching shares are recorded in share capital and
contributed surplus at the time the shares are issued. The shares contributed by the Company will vest 12 months after issuance with a corresponding compensation expense
recognized in income (loss).
Expenses
The Company defined general and administration expenses to be administrative, finance, and operational costs. Sales and marketing expenses are defined as costs
related to worldwide sales, marketing and product management. Research and development costs are defined as costs related to research and development related activities.
Research and development
Research costs are expensed as incurred. Development costs are expensed as incurred unless they meet generally accepted accounting criteria for deferral and
amortization. Development costs incurred prior to establishment of technological feasibility do not meet these criteria, and are expensed as incurred.
Income per share
Basic income per share is calculated by dividing net income available to Common shareholders by the weighted average number of Common shares outstanding during
the period. For all periods presented, the net income available to Common shareholders equates to the net income (loss).
In the computation of diluted earnings per share, the Company includes the number of additional common shares that would have been outstanding if the dilutive
potential equity instruments had been issued.
Non-controlling interest
Non-controlling interest consists of the minority owned portion of the Company's 50.1% owned subsidiary, DragonWave HFCL India Private Limited.
ACCOUNTING POLICIES ADOPTED IN THE CURRENT FISCAL YEAR
Non-Controlling Interest
The Company adopted ASC 810-10-65, Non-controlling Interests in Consolidated Financial Statements, which governs the accounting for and reporting of (1) non-
controlling interest in partially owned consolidated subsidiaries and (2) the loss of control of subsidiaries. Significant changes to the accounting for non-controlling interests
include (a) the inclusion of non-controlling interests in the equity section of the controlling entity's
12 -- Page

DragonWave Inc.
consolidated balance sheets rather than in the mezzanine section and (b) the requirement that changes in the controlling entity's interest in the non-controlling interest,
without a change in control, be recognized in the controlling entity's equity rather than being accounted for by the purchase method, which accounting under the purchase
method would have given rise to goodwill.
Additionally, the adoption of ASC 810-10-65 requires that net income, as previously reported prior to the adoption of ASC 810-10-65, be adjusted to include the net
income attributable to the non-controlling interest, and that a new separate caption for net income attributable to common shareholders of the Company be presented in the
consolidated statements of operations. ASC 810-10-65 also requires similar disclosure regarding comprehensive income (loss). The Company has disclosed the consolidated
balance sheets and consolidated statements of operations and comprehensive income (loss) in accordance with this ASC.
Multiple-deliverable revenue arrangements
In November 2009, the FASB issued ASU 2009-13, which amends the guidance in ASC 605-25 on multiple element revenue arrangements. The amendment eliminates
the residual method of allocation and requires that any arrangement consideration be allocated to all deliverables using the relative selling price method with any discounts
allocated proportionally to each deliverable. The amendment also establishes a selling price hierarchy for determining the selling price of each deliverable. The selling price,
formally referred to as fair value, will be based on vendor-specific objective evidence if available, third-party evidence if vendor specific objective evidence is not available,
or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available. For the Company, this ASU is effective for revenue
arrangements entered into or materially modified on or after March 1, 2011. This change did not have any material impact on the consolidated financial statements.
Impairment of goodwill
On December 17, 2010, the FASB issued ASU 2010-28, the new standard requires entities with a zero or negative carrying value to assess, considering qualitative
factors such as those listed in ASC 350, whether it is more likely than not that a goodwill impairment exists. If an entity concludes that it is more likely than not that a
goodwill impairment exists, the entity must perform step 2 of the goodwill impairment test. This change did not have any material impact on the consolidated financial
statements.
Intangible assets, goodwill and other
In August 2011, the FASB issued Accounting Standards Update No. 2011-08, Intangibles Goodwill and Other, which discusses the new Qualitative Assessment
Option for testing goodwill impairment. Under this update, the Company may first assess qualitative factors to determine whether it is necessary to perform the two-step
goodwill impairment test. If the assessment resulted in more than 50% likelihood that the fair value of a reporting unit is less than the carrying amount, then the Company
must continue to apply the two-step impairment test. If the fair value exceeds the carrying amount, then neither of the two steps in the current Goodwill impairment test is
required. The Company adopted the standard, effective February 29, 2012. The impact of the adoption has been described in Note 9.
Fair value measurements
In January 2010, the Financial Accounting Standards Board (the "FASB") issued authoritative guidance to improve disclosures about fair value measurements. This
new authoritative guidance became effective for interim and annual periods beginning after December 15, 2009, except for the requirement to separately disclose
13 -- Page

DragonWave Inc.
purchases, sales, issuances, and settlements in the Level 3 reconciliation, which became effective for interim and annual periods beginning after December 15, 2010. The
Company adopted the authoritative guidance to improve disclosures about fair value measurements and the authoritative guidance requiring separate disclosure on
purchases, sales, issuances, and settlements in the Level 3 reconciliation in the first quarter of fiscal 2012. The adoption did not have a material impact on the Company's
results of operations, financial condition or the Company's disclosures.
FUTURE ACCOUNTING CHANGES
Fair value measurements
In May 2011, the FASB, as a result of work performed with the International Accounting Standards Board ["IASB"], issued authoritative guidance to achieve common
fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards ["IFRS"]. The guidance is expected to improve the
comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS. The guidance presents certain
amendments to clarify existing fair value measurements and disclosure requirements such as clarifying the application of the highest and best use and valuation premise
concepts, measuring the fair value of an instrument classified in a reporting entity's shareholders' equity and clarifying that a reporting entity should disclose quantitative
information about the unobservable inputs used in a fair value measurements that is categorized within Level 3 of the fair value hierarchy. Furthermore, the guidance
amends previous literature by requiring additional disclosures about fair value measurements, specifically requesting more information about the valuation processes used
for fair value measurements categorized within Level 3 of the fair value hierarchy as well as presenting sensitivity of the fair value measurements to changes in unobservable
inputs in Level 3 valuations. The guidance also amends previous literature around measuring the fair value of financial instruments that are managed within a portfolio as
well as the application of premiums and discounts in a fair value measurement. The new authoritative guidance is effective for interim and annual periods beginning after
December 15, 2011. The Company will adopt the guidance in the first quarter of fiscal 2013 and is currently evaluating the impact that the adoption of this guidance will
have on its results of operations, financial condition and disclosures.
Presentation of comprehensive income
On June 16, 2011, the FASB issued ASU 2011-05, which revises the manner in which entities present comprehensive income in their financial statements. The new
guidance removes the presentation options in ASC 220 and requires entities to report components of comprehensive income in either (1) a continuous statement of
comprehensive income or (2) two separate but consecutive statements. The ASU does not change the items that must be reported in other comprehensive income. The new
authoritative guidance is effective for interim and annual periods beginning after December 15, 2011.
On December 23, 2011, the FASB issued ASU 2011-12, which defers certain provisions of ASU 2011-05. One of ASU 2011-05's provisions required entities to present
reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in
which other comprehensive income is presented (for both interim and annual financial statements). Accordingly, this requirement is indefinitely deferred by ASU 2011-12
and will be further deliberated by the FASB at a future date. The Company will adopt the guidance in the first quarter of fiscal 2013 and is currently evaluating the impact
that the adoption of this guidance will have on the presentation of comprehensive income.
14 -- Page

DragonWave Inc.
3. MERGERS, ACQUISITIONS AND OTHER RELATED ACTIVITIES
Dragonwave HFCL India Private Limited
On March 10, 2011, DragonWave and Himachal Futuristic Communications Ltd. (HFCL) finalized the incorporation of DragonWave HFCL India Private Limited
[DW-HFCL]. DragonWave invested $560 in return for 50.1% ownership of the newly formed company. The results of the newly formed subsidiary have been consolidated
in the financial statements of the Company as of March 10, 2011. The Company is consolidating the results of DW-HFCL because they have majority control and hold
substantive participating rights in the operations of DW-HFCL.
Non-controlling interest consists of the minority owned portion of DragonWave HFCL India Private Limited.
Prior Year Acquisition
On October 13, 2010, the Company acquired all of the outstanding shares of Axerra Networks Inc. ("Axerra"), a leader in pseudowire technology, under a share
purchase agreement dated October 13, 2010. The total potential purchase price was up to $25,000 which included $9,500 paid in cash on October 13, 2010 and a potential
earn-out of $15,500, based on additional sales performance over the subsequent 16 months, which could have been paid-out in either cash, or the Company's shares at the
Company's option. As at the purchase date, the Company recorded $23,770 for the purchase which included cash consideration of $9,500 and the potential earn-out of
$15,500 discounted to $14,270 using a risk-free rate of return, adjusted for a risk premium.
The acquisition was accounted for in accordance with ASC 805, where the deemed purchase price was allocated to the underlying tangible and identifiable assets and
liabilities acquired based on their respective fair values on the acquisition date, with any excess purchase price allocated to goodwill. The results of operations of the
acquired business were consolidated with those of the Company effective October 14, 2010.
15 -- Page

DragonWave Inc.
3. MERGERS, ACQUISITIONS AND OTHER RELATED ACTIVITIES (Continued)
The estimated fair values of the assets acquired and liabilities assumed in the Axerra acquisition were as follows:
The Company allocated $14,525 to intangible assets, including customer relationships and developed technology based on the relative fair values at the date of
purchase. These intangible assets are being amortized over their estimated useful lives of 8 years and 6 years, respectively. The useful lives of the intangible assets were
determined as the period of time over which the assets are anticipated to contribute to the Company's future cash flows. None of the goodwill and intangible assets are
deductible for tax purposes.
The primary reason for the acquisition, and the factors that contributed to the recognition of goodwill, related to Axerra's position as a leader in pseudowire technology,
and its product portfolio that allows carriers to address the increasing need to carry legacy TDM traffic over a packet based network.
16 -- Page

Purchase Price
Allocation
Tangible assets:
Cash 800
Restricted cash 389
Trade receivables 1,022
Other current assets 1,522
Property, plant and equipment 545
Accumulated tax losses United States (1) 3,057
Accumulated tax losses Israel (2)

Total tangible assets acquired 7,335
Liabilities:
Current liabilities 3,871
Contingent royalty 4,138
Other liabilities 175

Total liabilities assumed 8,184

Fair value of net tangible and monetary assets (849 )

Intangible assets:
Customer relationships 8,257
Developed technology 6,268
Income tax liability (3) (1,833 )

12,692

Goodwill 11,927

Purchase Price 23,770

(1) Accumulated gross tax losses of $8,261 of tax losses acquired

(2) Accumulated gross tax losses of $40,758 acquired; valuation allowance of 100% taken

(3) Temporary Taxable Difference on acquired intangible assets

DragonWave Inc.
3. MERGERS, ACQUISITIONS AND OTHER RELATED ACTIVITIES (Continued)
Axerra's results of operations are included in the consolidated statement of operations and comprehensive income of the combined entity as of the date of acquisition.
The following unaudited pro forma financial information presents the Company's results for the twelve month period ended February 28, 2011, as if the Axerra acquisition
had occurred at the beginning of the annual reporting period.
The pro forma results are not necessarily indicative of the results of operations that actually would have resulted had the acquisition been in effect at the beginning of
the period and are not necessarily representative of future results. The 2011 pro forma net income was adjusted to exclude $1,386 of acquisition-related costs incurred in
fiscal 2011, $352 of accretion related to the contingent consideration, and $98 of nonrecurring expense related to the fair value adjustment to acquisition-date inventory.
4. CASH AND CASH EQUIVALENTS, RESTRICTED CASH, AND SHORT TERM INVESTMENTS
The Company holds cash, cash equivalents and short term investments in various currencies to facilitate specific business initiatives. The following table identifies
those currencies and the corresponding allocation:
The restricted cash is related to security for one of the Company's rental agreements and a standby letter of credit.
17 -- Page

Year Ended
February 28, 2011
Consolidated Revenue 123,393
Net Income 281
as at February 29, 2012
as at
February 28,
2011
Native Currency
Native
Amount
Foreign
Exchange Rate
to USD USD Amount % of total % of total
US Dollar 43,260 1.000 43,260 81.7% 73.6%
Canadian Dollar 7,945 1.011 8,029 15.2% 11.4%
Indian rupee 29,177 0.020 595 1.1% 0.0%
Euro 302 1.336 403 0.8% 0.6%
Israeli New Shekel 647 0.264 171 0.3% 0.7%
United Arab Emirates Dirham 623 0.272 170 0.3% 0.2%
British Pounds 67 1.595 107 0.2% 0.2%
Other 63 0.1% 0.0%

Total Cash & Cash Equivalents 52,798 99.7% 86.7%
US Dollar 177 1.000 177 0.3% 0.8%

Total Restricted Cash 177 0.3% 0.8%

Total Short Term Investments 0.0% 12.5%

TOTAL 52,975 100.0% 100.0%

DragonWave Inc.
5. TRADE RECEIVABLES
The Company is exposed to credit risk with respect to trade receivables in the event that its counterparties do not meet their obligations. The Company minimizes its
credit risk with respect to trade receivables by performing credit reviews for each of its customers.
The Company's allowance for doubtful accounts reflects the Company's assessment of collectability across its global customer base. The Company defines past due
based on agreed upon terms with each individual customer. The following table illustrates the balances which are at least 1 day past due and the allowance for doubtful
accounts deemed appropriate.
As at February 29, 2012, two customers exceeded 10% of the total receivable balance. These customers represented 37% of the trade receivables balance. [February 28,
2011 two customers represented 31% of the trade receivables balance].
Included in general and administrative expenses is $215 related to bad debt expense for the year ended February 29, 2012 respectively [year ended February 28, 2011
$122].
6. INVENTORY
Inventory is comprised of the following:
Cost of sales for the year ended February 29, 2012 was $29,255 [year ended February 28, 2011 $67,460], which included $27,180 [year ended February 28, 2011
$60,351] of costs associated with inventory. The remaining costs of $2,075 [year ended February 28, 2011 $7,190] related principally to freight, warranty and other direct
costs of sales.
For the year ended February 29, 2012, the Company recognized an impairment loss on inventory of $2,020 [year ended February 28, 2011 $3,285].
18 -- Page
as at February 29, 2012 as at February 28, 2011
Current
at least 1 day
past due Total Current
at least 1 day
past due Total
Trade Receivables (gross) 8,395 1,520 9,915 9,507 2,163 11,670
Allowance for doubtful accounts (65 ) (65 ) (91 ) (91 )

Trade Receivables (net) 8,395 1,455 9,850 9,507 2,072 11,579

85 % 15 % 100 % 82 % 18 % 100 %

February 29,
2012
February 28,
2011
Raw Materials 8,313 9,506
Work in Progress 1,350 851
Finished Goods 15,066 15,730

Total Production Inventory 24,730 26,087
Inventory held for customer service/warranty 2,264 2,117

Total Inventory 26,994 28,204

DragonWave Inc.
7. OTHER CURRENT ASSETS
Other current assets are comprised of the following:
8. PROPERTY AND EQUIPMENT
Amortization expenses relating to the above property and equipment of $2,300, $149, $921 was included in research and development, sales and marketing and general
and administrative expenses respectively for the year ended February 29, 2012 [year ended February 28, 2011: R&D $1,957; S&M $81; G&A $857]. Accumulated
amortization was $12,455 as at February 28, 2011.
9. INTANGIBLE ASSETS AND GOODWILL
Intangible assets are apportioned as follows:
19 -- Page

February 29,
2012
February 28,
2011
Deposits with suppliers 2,896 3,108
Prepaid expenses 1,425 786
Goods and services tax 474 652
Receivable from the Office of the Chief Scientist 75 275
Income Tax Receivable 484 221
Other & miscellaneous receivables 147 264

Total other current assets 5,501 5,306

February 29, 2012 February 28, 2011
Cost
Accumulated
Amortization
Net Book
Value
Net Book
Value
Test equipment 13,060 9,250 3,810 5,291
R&D equipment 2,322 1,944 378 594
Computer hardware 2,441 2,180 261 472
Production fixtures 1,136 858 278 520
Leasehold improvements 931 619 312 361
Furniture and fixtures 667 563 104 152
Communication equipment 251 198 53 84
Other 297 213 84 86

Total 21,105 15,825 5,280 7,560

Cost
Accumulated
Amortization Impairment
Net Book
Value Cost
Accumulated
Amortization
Net Book
Value
Customer Relationships 8,257 318 5,938 2,001 8,257 42 8,215
Developed Technology 6,268 1,423 2,377 2,468 6,268 452 5,816
Infrastructure Systems Software 1,071 1,071
Computer Software 2,896 2,219 677 2,378 1,480 898

Total Intangible Assets 18,492 3,960 8,315 6,217 16,903 1,974 14,929

DragonWave Inc.
9. INTANGIBLE ASSETS AND GOODWILL (Continued)
For the year ended February 29, 2012, the Company recognized amortization of intangible assets of $1,986 and [year ended February 28, 2011 $893]. The Company
estimated that it will recognize $1,817, $1,793, $1,216, $607, and $472 respectively for the next five succeeding years.
During the current fiscal year, the Company performed an analysis of its intangible assets in order to determine whether the carrying value of those assets exceeded the
estimated future cash flows expected to result from the use or disposition of those assets. Based upon this analysis, management of the Company determined that the
carrying value of the intangible assets were in excess of the estimated future cash flows expected to result from their use or disposition. In each case where the fair value of
the asset was less than the carrying value, the Company wrote the asset down to its fair value and recorded a corresponding impairment charge. As a result, the Company has
recorded an impairment charge on intangible assets of $8,315 during the nine months ended February 29, 2012.
Goodwill
The goodwill impairment test is a three-step process which requires management to make judgmental assumptions regarding fair value. The first step in the impairment
test is to assess qualitative factors to determine whether it is necessary to perform the two-step goodwill impairment test. Because the Company impaired its intangible assets
with finite lives, the Company believed there were qualitative factors in-place that would suggest that the subsequent two steps of the goodwill impairment test would need
to be performed. The second step consisted of estimating the fair value of the Company's aggregated reporting unit using the market value of our common stock as at
February 29, 2012, multiplied by the number of outstanding common shares (market capitalization). Management compared the estimated fair value of the reporting unit to
its carrying value which includes goodwill. The results of the initial market capitalization test produced results which were above the aggregated reporting unit carrying
value; the third step was not required.
10. ACCOUNTS PAYABLES AND ACCRUED LIABILITIES
Accounts Payable and Accrued Liabilities are apportioned as follows:
Warranty accrual:
Within its accrued liabilities, the Company records a liability for future warranty costs based on management's best estimate of probable claims within the Company's
product warranties. The accrual is based on the terms of the warranty which vary by customer, product, or service and historical experience. The Company regularly
evaluates the appropriateness of the remaining accrual.
20 -- Page

February 29,
2012
February 28,
2011
Trade payables 5,029 7,581
Accrued liabilities 3,168 3,549
Payroll related accruals 3,500 3,507
Warranty accrual 1,023 1,330

Total Accounts Payable and Accrued Liabilities 12,720 15,967

DragonWave Inc.
10. ACCOUNTS PAYABLES AND ACCRUED LIABILITIES (Continued)
The following table details the changes in the warranty liability for the respective periods:
11. OTHER LONG TERM LIABILITIES
Other long term liabilities are apportioned as follows:
12. SHAREHOLDERS' EQUITY
Number of shares authorized
The Company has an unlimited amount of common shares authorized for issuance.
Employee stock option/stock issuance plan
The Company has established the DragonWave Inc. Key Employee Stock Option/Stock Issuance Plan [the "Plan"] applicable to full-time employees, directors and
consultants of the Company for purchase of common shares with 3,558,621 common shares reserved for issuance. Options are granted with an exercise price equal to the
fair value of the common shares of the Company, and generally vest at a rate of 25% one year from the date of the option grant, and 1/36
th
of the remaining 75% per
additional month of full-time employment with the Company. Options expire in periods ranging from three to ten years, or upon termination of employment. The maximum
number of Common Shares issuable under the Stock Option Plan is 10% of the Common Shares issued and outstanding.
21 -- Page

February 29,
2012
February 28,
2011
Balance at the beginning of the period 2,892 2,475
Accruals 255 1,073
Utilization (1,622 ) (1,621 )
Changes in estimates (84 ) 965

Ending Balance 1,441 2,892
Short term Portion 1,023 1,330
Long term Portion 418 1,562

February 29,
2012
February 28,
2011
Warranty accrual 418 1,562
Deferred Revenue 645 437

Total Other Long Term Liabilities 1,063 1,999

DragonWave Inc.
12. SHAREHOLDERS' EQUITY (Continued)
The following is a summary of stock option activity:
The following are the weighted average values used in determining the fair value of options granted in 2012 and 2011:
The 642,000 options granted during the year ended February 29, 2012 were determined to have a fair value of $2,282.
The following table summarizes the various exercise prices inherent in the Company's stock options outstanding and exercisable on February 29, 2012:
The Company has recognized $1,964 for the year ended February 29, 2012 as compensation expense for stock-based grants, with a corresponding credit to contributed
surplus [year ended February 28, 2011 $1,410].
22 -- Page

Year ended
February 29, 2012
Year ended
February 28, 2011
Options
Weighted
Average Price
(CAD) Options
Weighted
Average Price
(CAD)
Opening Balance 2,114,906 $ 5.53 1,603,052 $ 4.06
Granted 642,000 $ 6.38 900,645 $ 7.28
Exercised (113,940 ) $ 2.61 (311,254 ) $ 2.73
Forfeited (246,887 ) $ 5.54 (77,537 ) $ 6.62

Closing Balance 2,396,079 $ 5.90 2,114,906 $ 5.53

Twelve months ended

February 29,
2012
February 28,
2011
Volatility 70.9 % 63.9 %
Risk Free Rate 1.9 % 1.6 %
Dividend Yield Nil Nil
Average Expected Life 4 yrs 4 yrs
Exercise Price Options Outstanding Options Exercisable
Low
(CAD)
High
(CAD)
Quantity of
Options
Weighted Average
Remaining Contractual
Life (yrs)
Weighted
Average
Exercise Price
(CAD)
Quantity of
Options
Weighted
Average
Exercise Price
(CAD)
$ 1.34 $ 2.00 353,881 1.87 $ 1.35 265,061 $ 1.35
$ 2.01 $ 3.00 7,040 1.48 $ 2.69 6,152 $ 2.67
$ 3.01 $ 4.00 203,987 2.77 $ 3.41 111,015 $ 3.38
$ 4.01 $ 5.00 256,853 1.59 $ 4.46 224,281 $ 4.46
$ 5.01 $ 6.00 70,852 2.26 $ 5.60 42,082 $ 5.62
$ 6.01 $ 7.00 911,872 3.78 $ 6.48 169,415 $ 6.10
$ 7.01 $ 8.00 309,624 3.80 $ 7.83 92,157 $ 7.82
$ 8.01 $ 10.00 144,000 3.08 $ 9.34 66,642 $ 9.35
$ 10.01 $ 13.74 137,970 2.81 $ 12.44 72,913 $ 12.35

2,396,079 3.03 $ 5.90 1,049,718 $ 5.02

DragonWave Inc.
The expense was included in General and administrative, Sales and marketing, and Research and development expenses as detailed below:
As at February 29, 2012, compensation costs not yet recognized relating to stock option awards outstanding is $4,131 [February 28, 2010 $4,423] net of estimated
forfeitures. Based on the vesting schedules set out in the stock option issuance plan, the compensation costs will be recognized over the next 3.84 years. Performance vesting
awards will vest as performance conditions are met. Compensation will be adjusted for subsequent changes in estimated forfeitures.
The total intrinsic value of options exercised during the year ended February 29, 2012 is $305 [year ended February 28, 2011 $1,540].
The total intrinsic value of fully vested options at February 29, 2012 was $926 [February 28, 2011 $2,480].
Restricted Shares & Employee Share Purchase Plan
The Company launched an Employee Share Purchase Plan ["ESPP"] on October 20, 2008. The plan includes provisions to allow employees to purchase Common
shares. The Company will match the employees' contribution at a rate of 25%. During the year ended February 29, 2012 a total of 40,284 common shares were purchased by
employees at fair market value, while the Company issued 10,089 common shares respectively as its matching contribution. The shares contributed by the Company will
vest 12 months after issuance.
The Company records an expense equal to the fair value of shares granted pursuant to the employee share purchase plan over the period the shares vest. The total fair
value of the shares earned during the year ended February 29, 2012 was $42 [year ended February 28, 2011 $10]. The fair value of the unearned ESPP shares as at
February 29, 2012 was $48 [February 28, 2011 $42]. The number of shares held for release, and still restricted under the plan at February 29, 2012 was 10,085
[February 28, 2011 6,287].
Warrants
On December 21, 2001, and as amended and restated on November 10, 2003, in connection with the issuance of the long-term debt, the Company issued to two parties
the right to purchase $315 and $35 Series A-1 Preferred Shares of the Company. On April 19, 2007, a capital reorganization occurred pursuant to which all Preferred Shares
were converted into common shares. As a result, and in accordance with the original terms of the agreement, the terms of the warrant were updated such that the holders are
entitled to purchase an aggregate of 38,048 common shares at a purchase price of $9.20 per share. These warrants are still outstanding, carry a cashless conversion privilege,
and expire upon the later of: [a] the tenth anniversary of the grant of the right to purchase or [b] April 19, 2012.
Effective May 30, 2007, the Company granted a warrant to a party to purchase up to 126,250 common shares of the Company at a price of $3.56 CAD per share. The
warrant expires 10 years after the date of issuance. The warrants vested based on the achievement of pre-determined business milestones and resulted in
23 -- Page
Year ended

February 29,
2012
February 28,
2011
General and Administration 733 475
Research and Development 458 273
Sales & Marketing 773 662

1,964 1,410

DragonWave Inc.
an issuance of 31,562 warrants. As at August 31, 2008, a revenue reduction provision in the amount of $64 was recognized with a corresponding increase in contributed
surplus based on achievement. The provision was determined using the Black-Scholes Options Pricing Model using a volatility factor of 50%, risk free rate of 3.3%
dividend yield of nil, and an expected life of 8.75 years.
13. NET INCOME (LOSS) PER SHARE
The following table illustrates the dilutive impact on net income (loss) per share including the effect of outstanding options and warrants:
As at February 29, 2012, 2,396,079 options, 69,610 warrants and 400,983 shares with regards to the Company's contingent consideration were excluded from the net
income (loss) per share calculation as they were anti-dilutive.
14. COMMITMENTS
Future minimum operating lease payments as at February 29, 2012 per fiscal year are as follows:
Royalty Commitments
Under the research and development agreements of Axerra Networks Ltd., a subsidiary of DragonWave, the Company received and accrued participation payments
from the Office of the Chief Scientist ["OCS"] of the Ministry of Industry and Trade in Israel in the amount of $902 in the year ended February 29, 2012 [year ended
February 28, 2011 $390]. DragonWave is required to pay royalties at the rate of 3% 3.5% of sales of products
24 -- Page
Year Ended

February 29,
2012
February 28,
2011
Basic Net Income (Loss) per share
Net Income (Loss) applicable to shareholders (33,481 ) 2,007
Weighted average number of shares outstanding 35,506,689 35,812,507

Net Income (Loss) per share $ (0.94 ) $ 0.06

Diluted Net Income (Loss) per share
Net Income (Loss) (33,481 ) 2,007
Weighted average number of shares outstanding 35,506,689 35,812,507
Dilutive effect of warrants 11,284
Dilutive effect of stock options 918,170

Adjusted weighted average number of shares outstanding 35,506,689 36,741,961

Net Income (Loss) per share $ (0.94 ) $ 0.05

2013 $ 1,983
2014 $ 1,849
2015 $ 1,715
2016 $ 1,678
Thereafter $ 1,002

$ 8,227

DragonWave Inc.
14. COMMITMENTS (Continued)
developed with funds provided by the OCS, up to an amount equal to 100% of the OCS grants, bearing interest at the rate of LIBOR. The obligation to pay these royalties is
contingent on actual sales of the products and in the absence of such sales, no payment is required.
During the fiscal year the Company adjusted the contingent royalty liability based on a change in estimate. A corresponding gain of $1,850 was made to recognize the
change in estimate in the consolidated statement of operations and comprehensive income (loss) in the year ended February 29, 2012. The fair value represents the
discounted, most probable obligation to the Company. After consideration of the liability currently recognized in the consolidated balance sheet of $1,711, the Company has
a maximum potential obligation of an additional $13,938.
15. SUPPLEMENTAL CASH FLOW INFORMATION
16. INCOME TAXES
The components of the Company's income (loss) before income taxes, by taxing jurisdiction, were as follows:
25 -- Page
Year ended

February 29,
2012
February 28,
2011
Changes in non-cash working capital balances:
Restricted cash 537 (325 )
Trade receivables 1,729 18,369
Inventory (810 ) (6,756 )
Other current assets (195 ) (2,090 )
Future income tax asset 26
Accounts payable and accrued liabilities (3,247 ) (20,997 )
Deferred revenue (730 ) 436
Other long term liabilities (936 ) (103 )
Stock option benefit 189
Income taxes payable (835 )

(3,437 ) (12,301 )

2012 2011
Canada (28,481 ) 2,132
United States 4,659 648
Other (9,978 ) (352 )

(33,800 ) 2,428

DragonWave Inc.
16. INCOME TAXES (Continued)
Income tax expense (recovery) consists of the following:
The reported income tax provision differs from the amount computed by applying the Canadian statutory rate to the net income (loss), for the following reasons:
26 -- Page
2012 2011
Current
Canada 398 305
Foreign (120 ) 138

Total 278 443

Deferred
Canada
Foreign 42 358

Total 42 358

Investment Tax Credits
Canada (424 ) (380 )

Income tax expense (recovery) (104 ) 421

2012 2011
Income (loss) before income taxes (33,800 ) 2,428
Statutory income tax rate 27.92 % 30.42 %
Expected income tax expense (9,437 ) 739
Foreign tax rate differences 422 39
Non-deductible expenses and non-taxable income (3,455 ) 408
Utilization of tax assets previously unrecognized (359 ) (4,441 )
Operating losses and other assets not recognized 12,653 3,795
Prior year adjustments 88 (141 )
Other (16 ) 22

Income tax expense (recovery) (104 ) 421

DragonWave Inc.
The Company's deferred tax assets and liabilities include the following significant components:
As at February 29, 2012, the Company had cumulative tax loss carryforwards in the following jurisdictions: Canada $52,847, Israel $44,637, United States
$9,237.
The losses in Canada expire starting in Fiscal 2029 until Fiscal 2032. The losses in Israel can be carried forward indefinitely. The losses in Israel were obtained by the
Company as a result of the acquisition of Axerra Networks, Inc. in October 2010. Income tax benefits relating to the losses in Canada and Israel have not been recognized in
the consolidated financial statements as the recognition requirements under the liability method of accounting for income taxes have not been met.
The losses in the U.S. expire between 2021 and 2032. Internal Revenue Code Section 382 imposes an annual limitation on the use of a company's net operating loss
carryforwards when a company has an ownership change. The acquisition of Axerra Networks, Inc by the Company resulted in an ownership change as understood by
Section 382. As a result, the annual restriction of the amount of losses of Axerra Networks, Inc that may be used has been calculated as $521.
The net change in the valuation allowance over the prior year of $13,789 relates primarily to the research and development tax credits in Canada and tax losses in the
United States, as management believes it is more likely than not that the related deferred tax assets will not be realized. The valuation allowance related to deferred tax assets
in the United States increased during the year by $1,777 due to a change in circumstances that has caused a change in judgement about the amount of deferred tax assets that
will be realized in future.
As at February 29, 2012, the Company had $12,327 of investment tax credits available to reduce future federal Canadian income taxes payable. These investment tax
credits begin to expire in 2021. In addition, the Company had provincial research and development tax credits of $1,782, which are available to reduce future provincial
income taxes payable. These provincial tax credits begin to expire in 2029. The tax benefit of the federal and provincial tax credits has not been recognized in the
consolidated financial statements.
27 -- Page
2012 2011
Deferred Tax Assets
SR&ED expenditures 5,242
Research and development tax credits 10,983 7,569
Income tax loss carryforwards 25,557 21,068
Income and expense reserves 904 1,851
Book and tax differences on assets 1,195 1,314
Share issue expenses 692 1,331
Ontario Harmonization tax credit 1,079 1,396

Gross future tax assets 45,652 34,529
Valuation allowance (43,157 ) (29,368 )

Net deferred tax assets 2,495 5,161

Deferred Tax Liabilities
Book and tax differences on intangible assets (1,118 ) (3,800 )

Gross deferred tax liabilities (1,118 ) (3,800 )

Net deferred tax asset 1,377 1,361

DragonWave Inc.
The Company had a transitional tax credit of $1,079, arising from Federal/Ontario Corporate Tax Harmonization, which is available to reduce future Ontario income
tax and expires in 2014. A tax benefit for this credit has not been recognized in the consolidated financial statements.
During the year, the Company recorded an increase to contributed surplus in the amount of $189 that resulted from an adjustment made to prior year tax returns. The
adjustment made to prior year tax returns resulted in a tax benefit that exceeded the related deferred tax asset. According to US GAAP, the excess tax benefit is required to
be recorded to contributed surplus.
As of February 29, 2012, the Company has not recorded any liabilities associated with unrecognized tax benefits.
The Company remains subject to examination by tax authorities in Canada for tax years 2005 to 2012 and in the United States for tax years 2009 to 2012.
No deferred income taxes have been provided on undistributed earnings or relating to cash held in foreign jurisdictions, as the Company has determined that any
income or withholding taxes on repatriation would not be significant.
17. RELATED PARTY TRANSACTIONS
The Company leases premises from a real estate company controlled by a member of the Board of Directors. During the year ended February 29, 2012, the Company
paid $1,705 [year ended February 28, 2011 $1,463], relating to the rent, operating costs, and leasehold improvements associated with this real estate, and the value owing
for net purchases at February 29, 2012 was $3 [February 28, 2011 $30].
The Company also purchased services from a company controlled or significantly influenced by a Board member. Total net services purchased for the year ended
February 29, 2012 was $119 [year ended February 28, 2011 $250]. These amounts have been allocated amongst various expense accounts and prepaid expenses.
During the prior year the Company purchased products and services from a company controlled or significantly influenced by a Board member in the amount of
$2,794. The company ceased to be a related party on May 28, 2010.
Details of the related party transaction amounts included in the consolidated statements of operations and comprehensive income (loss) are as follows:
All transactions are in the normal course of business and have been recorded at the exchange amount.
28 -- Page
Year ended

February 29,
2012
February 28,
2011
Cost of Sales 133 3,135
Research and development 883 758
General and administration 541 362
Sales and marketing 267 252

Total 1,824 4,507

DragonWave Inc.
18. FINANCIAL INSTRUMENTS
Financial instruments are classified into one of the following categories: held-for-trading, held-to-maturity, available-for-sale, loans and receivables, or other financial
liabilities.
Fair Value
The following table summarizes the carrying values of the Company's financial instruments:
Cash and cash equivalents, restricted cash, short term investments, trade receivables, other receivables, accounts payable and accrued liabilities are short term financial
instruments whose fair value approximates the carrying amount given that they will mature shortly. As at the consolidated balance sheet dates, there are no significant
differences between the carrying values of these items and their estimated fair values. All financial instruments have been measured using Level 1 inputs.
Interest rate risk
Cash and cash equivalents and short term investments with fixed interest rates expose the Company to interest rate risk on these financial instruments. Interest income
of $393 was recognized during the year ended February 29, 2012 on the Company's cash, cash equivalents and short term investments [year ended February 28, 2011
$233].
Credit risk
In addition to trade receivables and other receivables, the Company is exposed to credit risk on its cash and cash equivalents, restricted cash, and short term investments
in the event that its counterparties do not meet their obligations. The Company does not use credit derivatives or similar instruments to mitigate this risk and, as such, the
maximum exposure is the full carrying value or fair value of the financial instrument. The Company minimizes credit risk on cash and cash equivalents and short term
investments by transacting with only reputable financial institutions and customers.
29 -- Page

February 29,
2012
February 28,
2011
Held-for-trading (1) 52,975 89,714
Loans and receivables (2) 10,214 12,197
Other financial liabilities (3) 11,655 14,608
(1) Includes cash, cash equivalents, restricted cash, and short term investments

(2) Includes trade receivables and other receivables which are financial in nature

(3) Includes accounts payable and accrued liabilities which are financial in nature

DragonWave Inc.
18. FINANCIAL INSTRUMENTS (Continued)
Foreign exchange risk
The following table summarizes the currency distribution of the Company's financial instruments in US dollars, as at February 29, 2012 and February 28, 2011:
Foreign exchange risk arises because of fluctuations in exchange rates. The Company does not currently use derivative financial instruments to mitigate this risk.
If the US dollar had appreciated 1% against all foreign currencies at February 29, 2012, with all other variables held constant, the impact of this foreign currency
change on the Company's foreign denominated financial instruments would have resulted in a decrease in after-tax net income of $67 for the year ended February 29, 2012
[year ended February 28, 2011 $84], with an equal and opposite effect if the US dollar had depreciated 1 percent against all foreign currencies at February 29, 2012.
Liquidity risk
A risk exists that the Company will not be able to meet its financial obligations as they become due. Based on the Company's recent performance, current revenue
expectations and strong current ratio, management believes that liquidity risk is low.
19. SEGMENTS AND GEOGRAPHICAL INFORMATION
The Company operates in one reportable segment broadband wireless backhaul equipment.
The following table presents total net book value of property and equipment, intangible assets and goodwill by geographic location:
30 -- Page

US
Dollars
CDN
Dollars
Other
Currency
US
Dollars
CDN
Dollars
Other
Currency
Held-for-trading 82% 15% 3% 87% 11% 2%
Loans and receivables 84% 13% 3% 94% 1% 5%
Other financial liabilities 60% 26% 14% 70% 18% 12%
For the Year Ended
Amount % Amount %
Canada 3,941 17% 6,296 28%
United States 16,504 70% 25,958 61%
Malaysia 1,228 5% 1,632 8%
Luxembourg 1,077 5% 0%
Other 674 3% 530 3%

Total 23,424 100% 34,416 100%

DragonWave Inc.
19. SEGMENTS AND GEOGRAPHICAL INFORMATION (Continued)
The following table presents total revenues by geographic location:
During each of the periods presented revenue is comprised of:
20. ECONOMIC DEPENDENCE
The Company was dependent on three key customers with respect to revenue in the year ended February 29, 2012. These customers represented approximately 17%,
10% and 10% of sales for the year ended February 29, 2012 [year ended February 28, 2011 one customer representing 60% of sales].
21. EXPENSES
Included in general and administrative expenses is $382 related to premises rental expense for the year ended February 29, 2012 [year ended February 28, 2011
$211].
22. SUBSEQUENT EVENTS
Settlement of Contingent Consideration
On October 13, 2010, the Company acquired all of the outstanding shares of Axerra Networks Inc. ["Axerra"], a leader in pseudowire technology, under a share
purchase agreement dated October 13, 2010. The total potential purchase price was up to $25,000 which included $9,500 paid in cash on October 13, 2010 and a potential
earn-out of $15,500, based on sales performance over the following 16 months, which could have been paid-out in either cash, or the Company's shares at the Company's
option.
The earn-out phase of the acquisition was completed on February 13, 2012 and, based on actual sales, the earn-out amount was determined to be $1,884. Subsequent to
February 29, 2012, at DragonWave's option, $84 of the earn-out was paid in cash, and the balance of the earn-out was paid with 400,983 common shares of DragonWave,
valued at $4.49 per common share based on a 20 day volume weighted average price.
During the year ended February 29, 2012, the Company recognized $557 of accretion expense with regards to the contingent consideration liability [year ended
February 28, 2011 $352]. During the year ended February 29, 2012 the Company also recognized a gain on the settlement of the contingent consideration in the amount
of $13,296.
31 -- Page
For the year ended
Amount % Amount %
Canada 7,419 16% 7,489 6%
North America (excluding Canada) 25,522 56% 88,656 76%
Europe, Middle East, and Africa 10,724 24% 19,382 16%
Other 1,991 4% 2,483 2%

Total Revenue 45,656 100% 118,010 100%

For the year ended
Amount % Amount %
Product Sales 39,775 87% 113,024 96%
Services 5,881 13% 4,986 4%

Total Revenue 45,656 100% 118,010 100%

QuickLinks
Exhibit 99.1
INDEPENDENT AUDITORS' REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CONSOLIDATED BALANCE SHEETS Expressed in US $000's except share amounts
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) Expressed in US $000's except share and per share amounts
CONSOLIDATED STATEMENTS OF CASH FLOWS Expressed in US $000's
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY [ Expressed in US $000's except common share amounts ]
DragonWave Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [Expressed in US $000's except share and per share amounts]

Exhibit 99.2

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2012
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated
The following provides management's discussion and analysis ("MD&A") of DragonWave Inc.'s consolidated results of operations and financial condition for the three
and twelve months ended February 29, 2012. This MD&A is dated May 3, 2012 and should be read in conjunction with our audited consolidated financial statements and
corresponding notes for the year ended February 29, 2012 and, Annual Information Form for the year ended February 28, 2011, which is available at www.sedar.com
(SEDAR) and www.sec.gov/edgar/searchedgar/companysearch.html (EDGAR) as an exhibit to our Annual Report on Form 40-F for the year ended February 28, 2011, and
our Annual Information Form for the year ended February 29, 2012 to be filed on SEDAR and on EDGAR as an exhibit to our Annual Report on Form 40-F for the year
ended February 29, 2012.
The consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (GAAP) and are reported in US
dollars ("USD"). The information contained herein is dated as of May 3, 2012 and is current to that date, unless otherwise stated. Our fiscal year commences March 1 of
each year and ends on the last day of February of the following year.
In this document, "we", "us", "our", "Company" and "DragonWave" all refer to DragonWave Inc. collectively with its subsidiaries. The content of this MD&A has been
approved by our Board of Directors, on the recommendation of its Audit Committee.
Unless otherwise indicated, all currency amounts referenced in this MD&A are denominated in US dollars.
Forward-Looking Statements
This MD&A contains "forward-looking information" and "forward-looking statements" within the meaning of applicable Canadian and US securities laws. All
statements in this MD&A, other than statements that are reporting results or statements of historical fact are forward-looking statements which involve assumptions and
describe our future plans, strategies and expectations. Forward-looking statements are generally identifiable by use of the words "may", "will", "should", "continue",
"expect", "anticipate", "estimate", "believe", "intend", "plan" or "project" or the negative of these words or other variations of these words or comparable terminology.
Forward-looking statements include, without limitation statements regarding: our strategic plans and objectives; growth strategy; customer diversification and expansion
initiatives; and our plans for, and terms of, the anticipated acquisition by us of the microwave transport business of Nokia Siemens Networks. There can be no assurance that
forward-looking statements will prove to be accurate and actual results or outcomes could differ materially from those expressed or implied in such statements. Important
factors that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements are discussed in this MD&A under the heading
"Risks and Uncertainties". Forward-looking statements are provided to assist external stakeholders in understanding management's expectations and plans relating to the
future as of the date of this MD&A and may not be appropriate for other purposes. Readers are cautioned not to place undue reliance on forward-looking statements.
Forward-looking statements are made as of the date of this MD&A and the Company does not undertake to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise, except to the extent expressly required by law.
1

DragonWave Inc.
Risks and Uncertainties
Our financial performance, achievements and results may be impacted by risks and uncertainties related to our business. These risks and uncertainties include, but are
not limited to the following:
ability to successfully complete and integrate acquisitions of products or businesses, including the proposed acquisition of Nokia Siemens Networks, into our
existing product lines and businesses and other risks associated with acquisitions;
dependence on the development and growth of the market for high-capacity wireless communications services;
reliance on a small number of customers for a large percentage of revenue;
intense competition from several competitors;
competition from indirect competitors;
a history of losses;
dependence on the ability to develop new products and enhance existing products;
our ability to successfully manage growth;
dependence on establishing and maintaining relationships with channel partners;
quarterly revenue and operating results which are difficult to predict and can fluctuate substantially;
the impact of the general economic downturn on our customers;
disruption resulting from economic and geopolitical uncertainty;
currency fluctuations;
exposure to credit risk for accounts receivable;
pressure on our pricing models from existing and potential customers and as a result of competition;
the allocation of radio spectrum and regulatory approvals for our products;
our customers' ability to secure a license for applicable radio spectrum;
changes in government regulation or industry standards that may limit the potential market for our products;
risks associated with possible loss of our foreign private issuer status;
risks and expenses associated with being a public company;
reliance on outsourced manufacturing and third party component suppliers;
our ability to protect our own intellectual property and potential harm to our business if we infringe the intellectual property rights of others;
risks associated with software licensed by us;
a lengthy and variable sales cycle;
dependence on our ability to recruit and retain management and other qualified personnel;
exposure to risks resulting from international sales and operations, including the requirement to comply with export control and economic sanctions laws; and
product defects, product liability claims, or health and safety risks relating to wireless products.
The risks and uncertainties listed above, and the impact of those risks and uncertainties materializing, may be materially increased by the completion of the anticipated
acquisition by us of the microwave transport business of Nokia Siemens Networks. In particular, material risks and uncertainties following closing of the acquisition will
include, without limitation:
reliance on Nokia Siemens Networks for a large percentage of our revenues;
2

DragonWave Inc.
increased cash requirements to fund acquired operations, and associated requirements to comply with debt financing covenants with our lenders, which
should be understood in light of our history of losses noted above;
increased exposure to global currency fluctuations;
increased regulatory compliance obligations, including financial reporting obligations associated with completing a significant acquisition; and
risks associated with acquisitions generally as detailed in our most recently filed Annual Information Form.
Forward-looking statements relating to the anticipated acquisition by us of the microwave transport business of Nokia Siemens Networks are also based on certain
assumptions, including the parties' beliefs regarding the industry and markets in which the parties operate; successful completion of the proposed transaction; and
expectations regarding potential synergies and prospects for the business if the transaction is closed. The proposed transaction is subject to risks, including: the risks that the
parties will not proceed with the transaction for any reason; that the ultimate terms of the transaction will differ from those that are currently contemplated; that if the
transaction is completed, that expected synergies will not materialize; that unexpected costs will be incurred to integrate the business; or that end-customer demand will not
meet expectations. In particular, the completion of the proposed transaction is subject to a number of terms and conditions, including, without limitation, no occurrence of a
material adverse effect. These conditions to the transaction may not be satisfied, in which case the proposed transaction could be modified, restructured or terminated. Other
risks relating to Nokia Corporation including Nokia Siemens Networks are specified in Nokia's annual report Form 20-F for the year ended December 31, 2011 under
item 3D "Risk Factors".
Readers are also referred to "Risk Factors" in the Company's most recently filed AIF, and in particular to risks detailed therein associated with acquisitions generally.
The Company's most recently filed AIF is available at http://www.sedar.com and http://www.sec.gov/edgar/searchedgar/companysearch.html . Although we have attempted
to identify important factors that could cause our actual results to differ materially from our expectations, intentions, estimates or forecasts, there may be other factors that
could cause our results to differ from what we currently anticipate, estimate or intend.
3

DragonWave Inc.
SELECTED FINANCIAL INFORMATION:
4
Three Months Ended Year Ended

February 29,
2012
February 28,
2011
February 28,
2010
February 29,
2012
February 28,
2011
February 28,
2010
REVENUE 9,150 15,105 60,973 45,656 118,010 157,989
Cost of sales 8,006 10,697 34,808 29,255 67,460 91,565

Gross profit 1,144 4,408 26,165 16,401 50,550 66,424

12.5% 29.2% 42.9% 35.9% 42.8% 42.0%
EXPENSES
Research and development 5,400 5,952 5,069 24,023 19,056 14,620
Selling and marketing 3,585 3,964 4,481 15,307 17,303 13,917
General and administrative 4,735 3,332 2,679 16,528 11,785 7,446
Government assistance (144 ) (902 ) (390 )

13,720 13,104 12,229 54,956 47,754 35,983

Income (loss) before
amortization of intangible
assets and other items (12,576 ) (8,696 ) 13,936 (38,555 ) 2,796 30,441
Amortization of intangible assets (373

) (472

) (1,986

) (893

) (207

)
Accretion expense (38 ) (271 ) (650 ) (393 )
Interest income 39 37 60 393 233 89
Investment gain 46 (161 ) 67 7
Impairment of intangible assets (8,315 )

Gain on change in estimate of
contingent liabilities 623 15,146

Gain on sale of property,
equipment and intangible
assets 258
Foreign exchange gain (loss) 218 536 (991 ) 100 678 (2,436 )

Net Income (Loss) before
income taxes (12,061 ) (9,027 ) 13,005 (33,800 ) 2,428 28,145
Income tax expense (recovery) 1,354 (145 ) 203 (104 ) 421 341

Net Income (Loss) (13,415 ) (8,882 ) 12,802 (33,696 ) 2,007 27,804

Net Loss Attributable to Non-
Controlling Interest 47 215

Net Income (Loss) applicable to
Shareholders (13,368 ) (8,882 ) 12,802 (33,481 ) 2,007 27,804
Basic income (loss) per share (0.38

) (0.25

) 0.35 (0.94

) 0.06 0.88
Diluted income (loss) per share (0.38 ) (0.25 ) 0.34 (0.94 ) 0.05 0.85
Basic weighted average shares
outstanding 35,573,810 35,208,606 36,461,643 35,506,689 35,812,507 31,523,226
Diluted weighted average shares
outstanding 35,573,810 35,208,606 37,914,914 35,506,689 36,741,961 32,635,342

DragonWave Inc.
The change in the results between 2012, 2011 and 2010 can be attributed to a number of factors including:
1) The revenue decrease over the disclosed periods relates primarily to lower revenue levels from a US-based national carrier.

2) Gross profit was impacted in the fourth quarter of fiscal 2012 by a $1.7 million inventory provision taken against finished goods inventory of older
technologies which are increasingly being replaced. The gross profit percentages when compared over the time period between fiscal 2010, fiscal 2011 and
fiscal 2012 have remained relatively consistent when adjusted for inventory provisions despite the decrease in volumes (gross profit percentage adjusted for
inventory provisions: fiscal 2012 40%; fiscal 2011 46%; fiscal 2010 42%).

3) Our operating expenses have increased over the periods presented as a result of the following factors: the acquisition of Axerra Networks, Inc. ("Axerra") in
the third quarter of fiscal 2011; the relatively weaker USD in fiscal 2012, which caused the largely Canadian dollar ("CAD") based operating costs to be
reflected as more expensive in USD; and lower overall production volumes. Because we are operating below capacity more of the fixed costs are impacting
operating expenses versus cost of goods sold.
5

As at
February 29
2012
As at
February 28
2011
As at
February 28
2010
Consolidated Balance Sheet Data:
Cash and cash equivalents 52,798 77,819 105,276
Restricted cash 177 714
Short Term Investments 11,181 8,074

Cash 52,975 89,714 113,350

Total Assets 120,121 170,580 176,749
Total liabilities 18,054 37,953 37,903
Total equity 102,067 132,627 138,846

DragonWave Inc.
SELECTED CONSOLIDATED QUARTERLY FINANCIAL INFORMATION
The following table sets out selected financial information for each of our most recent eight fiscal quarters. In the opinion of management, this information has been
prepared on the same basis as our audited consolidated financial statements, and all necessary adjustments have been included in the amounts stated below to present fairly
the unaudited quarterly results when read in conjunction with our consolidated financial statements and related notes thereto.
Historically, our operating results have fluctuated on a quarterly basis and we expect that quarterly financial results will continue to fluctuate in the future. The results
of operations for interim periods should not be relied upon as an indication of the results to be expected or achieved in any future period or any fiscal year as a whole.
Fluctuations in results relate to the project nature of the network installations of our end-customers. In addition, results may vary as a result of the timing of staffing,
infrastructure additions required to support growth, and material costs required to support design initiatives. Operating results may not follow past trends for other reasons,
including strategic decisions by us such as acquisitions of complementary products or businesses.
RESULTS OF OPERATIONS
Overview
DragonWave is a leading provider of high-capacity wireless Ethernet equipment used in emerging internet protocol networks. We design, develop, market and sell
proprietary, carrier-grade microwave radio frequency networking equipment (often referred to as links), that wirelessly transmit broadband voice, video and other data
between two points. Our wireless carrier-Ethernet links, which are based on a native Ethernet platform,
6
FY11 FY12

May 31
2010
Aug 31
2010
Nov 30
2010
Feb 28
2011
May 31
2011
Aug 31
2011
Nov 30
2011
Feb 29
2012
Revenue 48,726 27,171 27,008 15,105 11,049 13,627 11,830 9,150
Gross Profit 21,231 11,952 12,959 4,408 4,644 5,775 4,838 1,144

Gross
Profit % 44% 44% 48% 29% 42% 42% 41% 13%
Operating
Expenses 11,402 10,800 12,448 13,104 13,959 13,384 13,893 13,720
Income
(loss)
before
amortization
of
intangibles
and other
items 9,829 1,152 511 (8,696 ) (9,315 ) (7,609 ) (9,055 ) (12,576 )
Net income
(loss) for
the
period 9,698 1,233 (42

) (8,882

) (9,944

) (2,279

) (8,058

) (13,415

)
Net income
(loss) per
share
Basic 0.26 0.03 (0.00 ) (0.25 ) (0.28 ) (0.06 ) (0.23 ) (0.38 )
Diluted 0.26 0.03 (0.00 ) (0.25 ) (0.28 ) (0.06 ) (0.23 ) (0.38 )
Weighted
average
number
of shares
outstanding
Basic 36,916,893 35,978,213 35,125,724 35,208,606 35,429,049 35,494,976 35,542,247 35,573,810
Diluted 37,930,704 36,690,926 35,125,724 35,208,606 35,429,049 35,494,976 35,542,247 35,573,810
Total Assets 172,840 158,338 178,553 170,580 162,426 145,948 134,128 120,121

DragonWave Inc.

function as a wireless extension to an existing fiber and global optic core telecommunications network. The principal application for our products is the backhaul function in
a wireless communications network.
The key messages surrounding our results of operations for the fourth quarter and full year of fiscal 2012 when comparing those results to the same periods in the
previous fiscal year include the following:
Revenue decreased by $6.0 million between the fourth quarter of fiscal 2012 and the fourth quarter in the previous fiscal year and by $72.4 million when
comparing the revenues for the full twelve months of fiscal 2012 and the same twelve month period in fiscal 2011. The primary factors contributing to the
revenue changes are:

A decrease in sales to a US-based service provider (fourth quarter decrease $1.9 million; full year decrease $65.6 million).

A decrease in sales to a US-based Multiple System Operator ("MSO") (fourth quarter decrease $3.6 million; full year decrease $4.7 million).

Although we achieved growth in sales from certain North American distributors and recognized a new greater than 10% of sales customer in Europe,
reduction in sales in other areas eroded those gains resulting in a net decrease to sales (fourth quarter decrease $0.5 million; full year decrease
$2.1 million).

Gross profit percentage was examined both before and after the inventory provision taken in the fourth quarter of both fiscal 2012 and fiscal 2011. Inventory
provisions taken in the fourth quarter of fiscal 2012 had a 19% negative impact on the gross profit percentage for the quarter and a 4.4% impact for the full
year of fiscal 2012 (impact of inventory provisions on the fourth quarter of fiscal 2011 13.5%; impact for the full year 2.7%). Excluding the inventory
provisions in both years, the gross profit percentage was 40.4% in fiscal 2012 and 45.6% in fiscal 2011.

Operating expenses increased by $0.6 million for the fourth quarter of fiscal year 2012 when compared to the fourth quarter of 2011, and by $7.2 million
when comparing to the full year of fiscal 2012 to the same period in the previous fiscal year. The key factors contributing to the changes include:
Changes in Operating Expenses
7
(USD Millions)
Fourth Quarter
FY2012 vs.
Fourth Quarter
FY2011
Full Year FY2012
vs. Full Year
FY2011
DragonWave Israel Expenses (Axerra) (0.3 ) 6.5
Relatively more fixed costs are being reflected in operating expense vs. cost of goods
sold because of low volumes 0.3 2.5
Weaker US dollar; making foreign denominated spending appear more expensive 1.8
DragonWave HFCL; not in existence in FY2011 0.1 0.5
Lower Spending for Materials used for Prototypes, equipment rentals & travel (0.3 ) (1.6 )
Variable compensation, Professional Fees & Other 0.8 (2.4 )

Total 0.6 7.2

DragonWave Inc.
A reduction in the estimated liability associated with the earn-out related to the Axerra acquisition, as well as other Axerra related intangible asset impairment
charges and accretion expenses, resulted in a gain on the profit and loss statement (fourth quarter $0.6 million; full year gain $6.2 million).

As a result of the factors described above, we incurred a net loss applicable to shareholders of $13.4 million in the three months ended February 29, 2012 and
a $33.5 million net loss applicable to shareholders in the twelve months ending on the same date.

Cash (including cash and cash equivalents, short term investments and restricted cash) decreased by $7.2 million when comparing the three months ended
February 28, 2011 to the three months ended February 29, 2012. Between February 28, 2011 and our year ended February 29, 2012 we used $36.7 million of
cash. Our cash balance at February 29, 2012 was $53.0 million.
Our Priorities:
Our predominant focus is on revenue growth, both organically and through continued efforts to identify appropriate acquisition targets and partnerships.
The Merger & Acquisition Growth Strategy
Acquisition of NSN's Microwave Transport Business
This section includes forward-looking statements related to our planned acquisition of the microwave transport business of Nokia Siemens Networks ("NSN"). See
"Forward Looking Statements" and "Risks and Uncertainties."
On November 4, 2011, we announced the planned acquisition of the microwave transport business of NSN (the "Business") pursuant to a Master Acquisition
Agreement dated as of November 4, 2011 between Nokia Siemens Networks B.V., DragonWave and our wholly-owned subsidiary DragonWave S.A.R.L. The details of
proposed acquisition of the Business were disclosed in the press release of the Corporation dated November 4, 2011 and in a material change report of the Corporation dated
November 14, 2011.
On May 3, 2012 we announced that we have reached an amended agreement with NSN for DragonWave's acquisition of NSN's microwave transport business including
its associated operational support system (OSS) and related support functions. The amended agreement simplifies the transaction, provides both companies with greater
flexibility to adapt to changing market environments and enhances the delivery of customer-valued product features, while minimizing disruption in the team. The planned
closing date is June 1, 2012, to align with NSN's fiscal calendar.
Under the terms of the amended agreement, we will become the preferred strategic supplier of packet microwave and related products to NSN and the two companies
will jointly coordinate technology development activities. The NSN employees based in Italy will not transfer to DragonWave under the revised agreement. We will enter
into a services agreement with NSN (Italy) for outsourced R&D, product management, sales support and operations functions. The services agreement contemplates the
potential transfer of the Italian business including its employees to DragonWave at the end of the services agreement. This will enhance our ability to continue to deliver on
critical customer deliveries.
We believe the acquisition and associated supply agreements will accelerate innovation in backhaul products, supporting world-class microwave solutions for mobile
operators. Under the terms of the amended agreement, NSN retains responsibility for its existing solution sales and associated services for microwave
8

DragonWave Inc.

transport, while DragonWave is responsible for the microwave transport product line, including R&D, product management and operation functions.
The Business will be acquired through one of DragonWave's wholly-owned subsidiaries, DragonWave S..r.l. and other indirect wholly-owned subsidiaries. The
purchase price paid on closing will include approximately 11.8 million in cash, subject to customary purchase price adjustments, and common shares of DragonWave with
a value of 5.0 million which are subject to a lock-up restricting sale or disposition of the shares (subject to customary exceptions). DragonWave will also acquire other
assets under capital asset lease or other deferred sale arrangements with a value of approximately 3.6 million over 24 months. In keeping with the simplification of the
transaction, the sales performance based earn-out payments have been eliminated.
We will finance the transaction through a combination of cash on our balance sheet and increased debt facilities provided by Comerica Bank and Export Development
Canada.
The acquisition of NSN's Chinese operations is expected to be formally completed in the second half of 2012, once all of the licenses and permissions to do so are in
place. Approximately 130 employees of NSN based in Shanghai will transfer to DragonWave at that time. We believe that this acquisition provides transferring employees
with attractive new opportunities in a solid, technologically advanced company, with its focus on their core areas of expertise.
We believe that the acquisition will be a "significant acquisition" for us under applicable securities laws and, accordingly, we will file a Business Acquisition Report
within 75 days of closing.
Axerra
During the third quarter of fiscal 2011 we acquired Axerra, a leader in pseudowire technology. We believe that Axerra's complementary technology and existing
customer base will continue to integrate well with our own. The purchase agreement was structured such that we acquired all of the outstanding shares of Axerra. The total
potential purchase price was up to $25.0 million which included $9.5 million paid in cash on October 13, 2010, and a potential earn-out of $15.5 million based on sales
performance over a 16 month period (between October 13, 2010 and February 13, 2012). Axerra has historically had a single customer which accounted for a large
percentage of its revenue. This customer is a US based MSO which accounted for more than 80% of its revenue. Sales to this customer have dropped significantly since the
acquisition date due primarily to uncertainty surrounding merger discussions between major US service providers. Between the date of the acquisition and February 29,
2012, Axerra recognized revenue of $11.5 million. On December 19, 2011, DragonWave announced that it had eliminated 38 positions from its Israeli operations. The staff
reduction, which included both full time and contract staff, is intended to better align the company's global sales force with existing DragonWave resources as well as the
planned acquisition of NSN's microwave transport business. DragonWave will continue to support R&D, customer support, finance, and operations functions in Israel.
The earn-out phase of the acquisition was completed on February 13, 2012 and, based on actual sales, the earn-out amount was determined to be $1.9 million.
Subsequent to February 29, 2012, at DragonWave's option, $84 thousand of the earn-out was paid in cash, and the balance of the earn-out was paid with 400,983 common
shares of DragonWave, valued at $4.49 per common share based on a 20 day volume weighted average price.
On February 27, 2012, we merged Axerra with and into our wholly-owned subsidiary, DragonWave Corp., with DragonWave Corp. surviving the merger.
9

DragonWave Inc.
HFCL India Update
The market opportunities for wireless backhaul in India continue to be a strong area of interest for DragonWave. Through our 50.1% owned subsidiary, jointly owned
with Himachal Futuristic Communications Ltd. ("HFCL"), we are trialing our equipment with major internet service providers in the country. The time from first discussions
with a new carrier to the receipt of purchase orders, can often take eighteen months or longer, as they plan their network and acquire sites. We remain optimistic about
DragonWave HFCL's prospects for deployments in the country.
The Organic Growth Strategy
We continue to believe strongly that our growth will come through relationships with partners in a variety of regions throughout the world. We are supporting trials of
our equipment at original equipment manufacturer ("OEM") locations in the United States and Europe and it is through these relationships that we believe we can best take
advantage of the major network builds and upgrades planned by national carriers. We also continue to work closely with our distributors and resellers who provide an
important link into regional network operators.
We believe strongly that to successfully attract major service providers we need to design products that address the economic pressures of operating networks. Our
research and development focuses heavily on products that maximize spectral efficiency and bandwidth capacity, while minimizing operating costs. In addition, we are
working diligently to remain a leader with innovative solutions that meet the requirements for smaller cell sizes and data traffic management.
Revenue and Expenses
Revenue
We consider that we have one reportable segment, namely, broadband wireless backhaul equipment. The vast majority of our sales come from the shipment of
equipment either through direct sales, through sales to distributors, or through OEMs.
We evaluate the revenue performance of this segment over three main geographic regions. The table below breaks down the revenue earned by region for the three
month period ending February 29, 2012 and the twelve month period ending February 29, 2012 and compares these figures to the same period in the prior fiscal year.
Cost of Sales and Expenses
A large component of our cost of sales is the cost of product purchased from outsourced manufacturers. In addition to the cost of product payable to outsourced
manufacturers, we incur expenses associated with final configuration, testing, logistics and warranty activities. Final test and assembly for the links sold by us is carried
10
for the three months ended for the year ended

February 29,
2012
February 28,
2011
February 29,
2012
February 28,
2011
$'s % $'s % $'s % $'s %
North America 4,804 52% 10,220 67% 32,941 72% 96,145 82%
Europe, Middle East, and Africa 3,734 41% 4,155 28% 10,724 24% 19,382 16%
Other 612 7% 730 5% 1,991 4% 2,483 2%
Total Revenue 9,150 100% 15,105 100% 45,656 100% 118,010 100%

DragonWave Inc.
on both at our premises and at the premises of our contract manufacturers. We use primarily the services of three outsourced contract manufacturers with locations in North
America, Israel and Malaysia.
Research and development costs relate mainly to the compensation of our engineering group and the material consumption associated with prototyping activities.
Selling and marketing expenses include the remuneration of sales staff, travel and trade show activities and customer support services.
General and administrative expenses relate to the remuneration of related personnel, professional fees associated with tax, accounting and legal advice, and insurance
costs.
Occupancy and information systems costs are related to our leasing costs and communications networks and are accumulated and allocated, based on headcount, to all
functional areas in our business. Our Ottawa based facilities are leased from a related party that is controlled by one of our directors and shareholders. Our management
believes the terms of the lease reflect fair market terms and payment provisions.
Comparison of the three and twelve months ended February 29, 2012 and February 28, 2011
Revenue
Revenue for the fourth quarter of fiscal 2012 decreased by $6.0 million compared with the three month period ended February 28, 2011. Revenue for the twelve month
period ended February 29, 2012 was $72.4 million lower than the same period in the previous fiscal year.
Revenue attributable to the acquisition of Axerra in the fourth quarter of fiscal 2012 was $0.4 million. On a year to date basis, the acquisition of Axerra generated
$3.4 million in revenue. Since the acquisition of Axerra, revenue from the Axerra product line has been $11.5 million
Changes to Revenue: Three months ended February 29, 2012 vs Three months ended February 28, 2011
11
Three Months Ended Twelve months Ended
Feb 29,
2012
Feb 28,
2011
Feb 29,
2012
Feb 28,
2011
$9,150 $15,105 $45,656 $118,010
(USD Millions)
National Carriers North America (1.9 )
North American Multiple System Operator (MSO) (3.6 )
Regional Carriers and Distributors North America
Regional Carriers and Distributors Europe and Africa 0.5
Regional Carriers and Distributors Middle East (0.9 )
OEM partner 0.2
Other (0.3 )

Total (6.0 )

DragonWave Inc.
Changes to Revenue: Twelve months ended February 29, 2012 vs Twelve months ended February 28, 2011
Gross Profit
The three most significant factors contributing to the decline in gross profit in the fourth quarter of fiscal 2012, and correspondingly in the full year's gross profit
percentage when compared to the same periods in the previous fiscal year, were: i) the inclusion of a $1.7 million inventory provision in the fourth quarter of fiscal 2012,
ii) higher costs associated with a specific European contract, and iii) lower sales volumes.
The inventory provision was primarily taken against certain finished goods AirPair inventory which has become less marketable as comparable Quantum variants have
been developed.
Customer and product mix changes continue to result in variances in margin each quarter. Higher costs associated with a specific European customer in the fourth
quarter of fiscal 2012 placed downward pressure on margin in the period.
Finally lower sales volumes have impacted the gross margin in a variety of ways including reducing our ability to get favourable material pricing. In addition, lower
revenue levels have increased overhead as a percentage of revenue because our fixed costs are leveraged over fewer units of output. We continue to reduce costs wherever
possible to align the business with current sales volume levels.
Expenses
Three and Twelve Months Ended February 29, 2012 vs. Three and Twelve Months Ended February 28, 2011
Approximately 90% of our operating expenses including compensation-related spending, rent, and professional fees are paid in non-USD currencies. For financial
statement presentation purposes, these costs are translated into USD. As the USD weakens, the value of these expenses in USD terms increases. The CAD, which accounts
for more than 60% of all expenditures, strengthened significantly during the reporting period
12
(USD Millions)
National Carriers North America (65.6 )
North American Multiple System Operator (MSO) (4.7 )
Regional Carriers and Distributors North America 4.7
Regional Carriers and Distributors Europe and Africa (4.5 )
Regional Carriers and Distributors Middle East (4.0 )
OEM partner 1.5
Other 0.2

Total (72.4 )


Feb 29
2012
Feb 28
2011
Feb 29
2012
Feb 28
2011
Gross Profit before Inventory Provisions $ 2,885 $ 6,449 $ 18,421 $ 53,779

Gross Profit % 31.5% 42.7% 40.3% 45.6%
Gross Profit after Inventory Provisions 1,144 4,408 16,401 50,550

Gross Profit % 12.5% 29.2% 35.9% 42.8%

DragonWave Inc.

compared to the USD. The table below indicates the rates used to translate the profit and loss statement values during the time periods noted.
CAD to USD conversion rates
Research and Development
Research and development ("R&D") expenses decreased by $0.6 million for the three month period ended February 29, 2012 when compared with the same period in
the prior fiscal year. R&D expenses were $5.0 million higher in the twelve months of fiscal 2012 compared to the twelve months of fiscal 2011.
Changes to R&D Expenses
13
FY2012 FY2011 % Change
March 1.0264 0.9596 7.0 %
April 1.0385 0.9545 8.8 %
May 1.0535 0.9868 6.8 %
June 1.0294 0.9543 7.9 %
July 1.0419 0.9391 10.9 %
August 1.0438 0.9780 6.7 %
September 1.0254 0.9527 7.6 %
October 0.9579 0.9790 (2.2 )%
November 1.0198 0.9866 3.4 %
December 0.9829 0.9843 (0.1 )%
January 0.9911 0.9986 (0.8 )%
February 1.0029 0.9922 1.1 %
Feb 29
2012
Feb 28
2011
Feb 29
2012
Feb 28
2011
$5,400 $6,332 $24,023 $19,056

Fourth Quarter
FY2012 vs. Fourth
Quarter FY2011
Full Year FY2012 vs.
Full Year FY2011
(USD Millions)
Materials spending for prototypes and equipment rental costs (0.4 ) (0.8 )
Spending on travel & external contractors 0.1 (0.2 )
Weaker USD relative to other currencies 0.7
Increased number of the staff working on pure R&D; previously the costs
associated with support of production activity was reflected in Cost of
Goods Sold 1.0
Spending at DragonWave Israel (Axerra) only 137 days of spending in
FY2011 (0.3 ) 4.3

Net Changes (0.6 ) 5.0

DragonWave Inc.
Selling and Marketing
Sales and marketing expenses decreased by $0.4 million in the three months ended February 29, 2012 relative to the same three month period in the previous fiscal year
and by $2.0 million in the twelve months ended February 29, 2012 when compared to the same period in fiscal year 2011.
Changes in Sales and Marketing Expenses
General and Administrative
General and administrative expenses, ("G&A") increased by $1.4 million for the three month period ended February 29, 2012 when compared with the same period in
the prior fiscal year. Expenses in this category were $4.7 million higher in the full year of fiscal 2012 compared to the full year of fiscal 2011.
14
Feb 29
2012
Feb 28
2011
Feb 29
2012
Feb 28
2011
$3,585 $3,964 $15,307 $17,303

Fourth Quarter
FY2012 vs. Fourth
Quarter FY2011
Full Year FY2011
(USD Millions)
External Contractor Spending higher costs in FY2011 were driven by the
requirements of a European installation in that year . (0.1 ) (1.6 )
Variable compensation; lower year to date because of lower sales levels 0.1 (1.1 )
Compensation Related Spending decreased because of the departure of
senior sales staff in both North American and Europe (0.2 ) (0.5 )
Travel related spending has been strictly controlled (0.1 ) (0.5 )
FY2011 (0.1 ) 1.3

Net Changes (0.4 ) (2.0 )

Feb 29
2012
Feb 28
2011
Feb 29
2012
Feb 28
2011
$4,735 $3,332 $16,528 $11,785

DragonWave Inc.
Changes to General and Administrative Expenses
Government Assistance
The $0.9 million credit for the twelve months ending February 29, 2012 reflects research and development funding received through the Office of the Chief Scientist
("OCS") of the Ministry of Industry and Trade in Israel. In connection with this funding, we will be required to pay royalties at the rate of 3% 3.5% of sales of products
developed with funds provided by the OCS, up to an amount equal to 100% of the OCS grants, bearing interest at the rate of LIBOR. The obligation to pay these royalties is
contingent on actual sales of the products and in the absence of such sales, no payment is required. This funding did not exist prior to the acquisition of Axerra and therefore
was present in our fiscal 2011 financial statements for only the time period from October 13, 2010 to February 28, 2011. There was no funding in the fourth quarter of fiscal
2012 because we have decided not to pursue additional OCS funding at this time.
Amortization of Intangible Assets
In fiscal 2012, the amount in the table above reflects both the amortization of the intangible assets acquired with the acquisition of Axerra and the amortization of
computer software. As a consequence of the revaluation
15

Fourth Quarter
FY2012 vs. Fourth
Quarter FY2011
Full Year FY2011
(USD Millions)
Travel and Living costs, including costs related to merger & acquisition
activity 0.1 0.1
Professional fees, including costs associated with lawyers working on
merger & acquisition efforts 0.6 0.4
HFCL; costs associated with the new entity in India. These costs were not
present in FY2011 0.1 0.5
FY2011 1.2
Costs of operation activities not absorbed into cost of goods sold are
recognized in G&A 0.6 2.0

Net Changes 1.4 4.8

Feb 29
2012
Feb 28
2011
Feb 29
2012
Feb 28
2011
$0 $(144) $(902) $(390)
Feb 29
2012
Feb 28
2011
Feb 29
2012
Feb 28
2011
$(373) $(472) $(1,986) $(893)

DragonWave Inc.

of the intangible assets acquired with the acquisition of Axerra, which took place in the second quarter of fiscal 2012, amortization expense was lower in the second half of
fiscal 2012 than it was in the first half of the same fiscal year. The amortization of intangible assets acquired with the acquisition of Axerra impacted only the three months
ended February 28, 2011 and not the full twelve month comparative period.
Accretion (Expense)
As part of the acquisition of Axerra, we agreed to pay a potential earn-out of $15.5 million based on sales performance over a sixteen month period. The potential
liability that this reflects was recorded on the balance sheet at the time of the acquisition at its fair value using a discount rate equal to the risk free rate of return adjusted for
a risk premium.
The earn-out phase of the acquisition of Axerra was completed on February 13, 2012 and, based on sales the earn-out amount was determined to be $1.9 million.
Subsequent to February 29, 2012, at DragonWave's option, $84 thousand of the earn-out was paid in cash, and the balance of the earn-out was paid with 400,983 common
shares of DragonWave, valued at $4.49 per common share based on a 20 day volume weighted average price.
During the three months and twelve months ended February 29, 2012 we recognized $38 thousand, and $650 thousand of accretion expense that related to the
contingent consideration and OCS liabilities.
Interest
Interest revenue reflects the earnings on the highly liquid low risk investments made by us during the period in question. Interest rates remain low, and returns on
investment are therefore minimal. At February 29, 2012 all short term investments had been converted into cash in preparation for the possible requirements of the
contemplated Nokia Siemens transaction.
Investment Gain/(Loss)
16
Feb 29
2012
Feb 28
2011
Feb 29
2012
Feb 28
2011
$(38) $(271) $(650) $(393)
Feb 29
2012
Feb 28
2011
Feb 29
2012
Feb 28
2011
$39 $37 $393 $233
Feb 29
2012
Feb 28
2011
Feb 29
2012
Feb 28
2011
$46 $(161) $67 $7

DragonWave Inc.
We make short term investments which carry a fixed yield and term to maturity. Because these investments are reflected on the balance sheet at their fair value,
changes in market interest rates for similar instruments necessitate that the investment is either increased in value or decreased. Because interest rates have decreased since
the time that the fixed yield investment held prior to February 29, 2012 was purchased, an investment gain was recorded.
Impairment of Intangible Assets & Gain on Change in Estimated Liabilities
The amounts identified in the table above relate to the acquisition of Axerra.
During the current fiscal year, we performed an analysis of our intangible assets in order to determine whether the carrying value of those assets exceeded the estimated
future cash flows expected to result from the use or disposition of those assets. Based upon this analysis, we determined that the carrying value of the intangible assets were
in excess of the estimated future cash flows expected to result from their use or disposition. In each case where the fair value of the asset was less than the carrying value, the
Company wrote the asset down to its fair value and recorded a corresponding impairment charge. As a result, we recorded an impairment charge on intangible assets of
$8.3 million during the twelve months ended February 29, 2012.
The gain on change in estimate reflects a revaluation of two different liabilities. During the fiscal year the Company adjusted the contingent royalty liability associated
with the OCS based on a change in estimate. A corresponding charge of $1.9 million was made to recognize the change in estimate in the consolidated statement of
operations and comprehensive income in the year ended February 29, 2012. The second liability adjustment related to the earn-out obligations for DragonWave associated
with the acquisition of Axerra. The earn-out phase of the acquisition was completed on February 13, 2012 and, based on sales the earn-out amount was determined to be
$1.9 million. During the year ended February 29, 2012, the Company recognized $0.6 million of accretion expense with regards to the contingent consideration liability.
During the year ended February 29, 2012 the Company recognized a gain on a change in estimate with regards to the contingent consideration in the amount of
$13.3 million. The total of both adjustments was $15.1 million.
Foreign Exchange Gain
The foreign exchange gain recognized in the fourth quarter of fiscal 2012 and the gain recognized in the twelve month period ending February 29, 2012 resulted from
the translation of monetary accounts denominated
17

Feb 29
2012
Feb 28
2011
Feb 29
2012
Feb 28
2011
Impairment of intangible assets $ 0 $ 0 $ (8,315 ) $ 0
Gain on change in estimate of contingent liabilities $ 623 $ 0 $ 15,146 $ 0
Feb 29
2012
Feb 28
2011
Feb 29
2012
Feb 28
2011
$218 $536 $100 $678

DragonWave Inc.

in currencies other than the USD at February 29, 2012. The company retains bank accounts denominated in other currencies, and has liabilities which need to be paid in
currencies other than USD.
Income Taxes Expense (Recovery)
Income tax recovery for 2012 was ($0.1) million, compared to a tax expense of $0.4 million for the prior year. The year-over-year change relates primarily to the
overall operating loss for 2012, the tax benefit of which has not been recognized, as well as recoveries of prior years' taxes during the year resulting from amendments made
to prior years' tax returns.
Liquidity and Capital Resources
The table below outlines selected balance sheet accounts and key ratios:
18
Feb 29
2012
Feb 28
2011
Feb 29
2012
Feb 28
2011
$1,354 $(145) $(104) $421

As at
February 29, 2012
As at
February 28, 2011
Key Balance Sheet Amounts and Ratios:

Cash and Cash Equivalents 52,798 77,819


Short Term Investments 11,181

Working Capital 79,690 102,692

Long Term Assets 24,732 35,224

Long Term Liabilities 2,355 5,289

Working Capital Ratio 6.1 : 1 4.1 : 1

Days Sales Outstanding in accounts receivable 107 days 69 days

Inventory Turnover 0.2 times 1 time

DragonWave Inc.
Cash and Cash Equivalents, Restricted Cash and Short Term Investments
As at February 29, 2012, we had $53.0 million in cash and cash equivalents, restricted cash, and short term investments (collectively "Cash") representing an
$36.7 million decrease from the Cash balance at February 28, 2011.
Sources and Uses of Cash:
The operating losses (driven by operating expense levels for an organization which was sized to support a larger revenue stream) are the key factor in the cash usage of
$7.2 million in the three months ended February 29, 2012 and $36.7 million in the twelve month period ending fiscal 2012.
We limited the growth in non-cash working capital throughout the year, worked hard to collect accounts receivable as quickly as possible and pushed our vendors to
accept more favourable payment terms. Growth in inventory levels was also limited in the year. Similarly, investment in capital assets and software was restricted, limited to
only $1.2 million in the three months ended February 29, 2012 and in the fiscal year 2012 to $2.7 million.
The proceeds from option exercises provide funds to us. Option exercise prices range from $1.34 to $13.74 and in the three months ended February 29, 2012,
5,414 options were exercised (net proceeds, including
19
Three months ended Year ended

February 29,
2012
February 28,
2011
February 29,
2012
February 28,
2011
(USD Millions)
NET INCOME (13.4 ) (8.9 ) (33.7 ) 2.0
Non-Cash Items 4.2 4.3 2.6 8.9

Non-Cash Adjusted Net Income (9.2 ) (4.6 ) (31.1 ) 10.9

Other Sources of Cash:
Contribution by non-controlling interest in DW-HFCL 0.6
Decrease in trade receivables 2.5 3.4 1.7 18.4
Equity Proceeds 0.1 0.8 0.5 1.1

2.6 4.2 2.8 19.5

Uses of Cash:
Repurchase of Shares (10.7 )
Capital Additions (1.2 ) (1.0 ) (2.7 ) (4.7 )
Accounts payable increase (decrease) 0.2 (3.2 ) (21.0 )
Inventory decrease (increase) 0.8 (3.4 ) (0.8 ) (6.8 )
Other working capital changes (0.3 ) (1.1 ) (1.1 ) (2.9 )
Acquistion of Axerra Networks Inc. (8.7 )
Other (0.1 ) 0.2 (0.6 ) 0.8

(0.6 ) (5.3 ) (8.4 ) (54.0 )

Net impact on Cash (7.2 ) (5.7 ) (36.7 ) (23.6 )

Beginning Cash balance 60.2 95.4 89.7 113.3
Ending Cash balance 53.0 89.7 53.0 89.7

DragonWave Inc.

employee contribution for our Employee Share Purchase Plan ("ESPP") $10 thousand). For the twelve months ended February 29, 2012 113,940 options were exercised
(net proceeds, including employee contribution for ESPP $0.5 million).
Working Capital
Trade Receivables:
The trade receivables balance decreased by $1.7 million between February 28, 2011 and February 29, 2012 (February 28, 2011 $11.6 million; February 29, 2012
$9.9 million). The days sales outstanding in accounts receivable changed, increasing from 69 days at February 28, 2011 to 107 days at February 29, 2012. The increase in
the balance and corresponding days sales outstanding was driven by longer payment terms negotiated for special circumstances with certain customers. Our allowance for
doubtful accounts provision remains low, accounting for only 0.7% of our accounts receivable balance.
Inventory:
The inventory balance decreased by $1.2 million between February 28, 2011 and February 29, 2012. In the face of lower sales levels, our inventory levels continue to
be higher than desired. However, our production inventory is made up of product variants which are continuing to generate significant global interest. Approximately 90%
of our inventory relates to our current platforms including Quantum, Fusion, and Horizon Compact. Only a limited portion of our inventory continues to relate to AirPair
radios and Duo modems, which are now sold less frequently.
20
Changes in working capital
February 28, 2011
to
February 29, 2012
Beginning working capital balance 102,692
Cash and cash equivalents, restricted cash, and short term investments (36,739 )
Trade receivables (1,729 )
Inventory (1,210 )
Other current assets 195
Future income tax asset (484 )
Accounts payable and accrued liabilities 3,247
Income taxes payable 0
Deferred revenue 730
Contingent royalty 250
Contingent consideration 12,738

Net change in working capital (23,002 )

Ending working capital balance 79,690

DragonWave Inc.
Accounts Payable and Accrued Liabilities:
The accounts payable and accrued liabilities balance decreased from $16.0 million at February 28, 2011 to $ 12.7 million at February 29, 2012. The reduction reflects
lower overall purchasing activity as it relates to material purchases for production and engineering prototype development.
Liquidity and Capital Resource Requirements
Based on our recent performance and current revenue expectations, our management believes cash resources will be available to satisfy working capital needs for at
least the next 12 months.
Commitments as at February 29, 2012
Future minimum operating lease payments as at February 29, 2012 per fiscal year are as follows:
In the normal course of our business activities, we are subject to claims and legal actions. We recognize a provision for estimated loss contingencies when it is probable
that a liability has been incurred and the amount of the loss can be reasonably estimated. In management's opinion, adequate provisions have been made for all current and
future claims.
Royalty Commitments
Under research and development agreements assumed in connection with the acquisition of Axerra, the Company received and accrued participation payments from the
OSC in the amount of $0.9 million in the year ended February 29, 2012. DragonWave is required to pay royalties at the rate of 3% 3.5% of sales of products developed
with funds provided by the OCS, up to an amount equal to 100% of the OCS grants, bearing interest at the rate of LIBOR. The obligation to pay these royalties is contingent
on actual sales of the products and in the absence of such sales, no payment is required.
During the fiscal year, the Company adjusted the contingent royalty liability based on a change in estimate. A corresponding charge of $1.9 million was made to
recognize the change in estimate in the consolidated statement of operations and comprehensive income in the year ended February 29, 2012. The fair value represents the
discounted, most probable obligation of DragonWave. After consideration of the liability currently recognized in the consolidated balance sheet of $1.7 million, the
Company has a maximum potential obligation of an additional $13.9 million.
21
2013 $ 1,983
2014 $ 1,849
2015 $ 1,715
2016 $ 1,678
Thereafter $ 1,002

$ 8,227

DragonWave Inc.
Outstanding Share Data
Our common shares are listed on the Toronto Stock Exchange under the symbol DWI and on the NASDAQ under the symbol DRWI.
The following is a summary of stock option activity:
As at May 1, 2012, there were 35,992,991 common shares issued and outstanding and, there were 2,370,948 options outstanding under the stock option plan.
22
Number of Shares
Balance at February 28, 2010 36,934,917
Exercise of stock options 311,254
Share repurchase (1,865,549 )
Other 41,271


Exercise of stock options 113,940
Share repurchase
Other 50,373


Options
Weighted
Average Price
(CAD)
Options outstanding at February 28, 2011 2,114,906 $ 5.53

Granted 642,000 $ 6.38
Exercised (113,940 ) $ 2.61
Forfeited (246,887 ) $ 5.54

Options outstanding at February 29, 2012 2,396,079 $ 5.90

DragonWave Inc.
Off-Balance Sheet Arrangements:
(USD in Dollars)
The leases are arranged at market pricing levels in all jurisdictions and the lease periods listed above represent a commitment for the time period indicated. We may or
may not be able to sub-lease in these locations should we chose to change locations, and as a result the monthly lease commitments may represent an obligation for the time
periods noted above.
We use an outsourced manufacturing model whereby most of the component acquisition and assembly of our products is executed by third parties. Generally, we
provide the supplier with a purchase order 90 days in advance of expected delivery. We are responsible for the financial impact of any changes to the product requirements
within this period. In some cases when a product has been purchased by a contract manufacturer but not pulled on for a build for an amount of time we provide a deposit
against that inventory, but do not take ownership of it.
Our contract manufacturers currently have inventory intended for use in the production of our products, and we have purchase orders in place for raw materials and
manufactured products with these contract manufacturers as well. All of this material is considered to be part of the normal production process and is expected to be fully
used based on current forecasts and projections. As mentioned previously, we would be responsible for the cost of the material approved to be purchased on behalf of our
Company by our contract manufacturers should those forecasts or projections change.
Financial Instruments
Under US GAAP, financial instruments are classified into one of the following categories: held for trading, held-to-maturity, available-for-sale, receivables, or other
liabilities.
23
City Country Lessor Lease Expiry
Cost per
Month
Paris
France Multiburo
Month to
Month $ 4,000
Redditch England BNP Paribas April, 2013 $ 8,000
Roswell, Georgia
United States
A-COLONIAL
100/200 OWNER, LLC March, 2014 $ 5,000
Luxembourg City Luxembourg FPS Offce Center S. r.l March, 2013 $ 1,500
Shanghai Shanghai APBC Pte Ltd June, 2012 $ 4,700
Ottawa (Warehouse & Operations at Terry
Fox Drive + Office Space at 411 Legget
Drive)

Canada Kanata Research Park
November,
2016 $ 191,000
Tel Aviv
Israel
Zisapel asset (1992) Ltd and
Klil & Michael assets
(1992) Ltd
December,
2015 $ 30,000

DragonWave Inc.
Fair Value
The following table summarizes the carrying values of our financial instruments:
Cash and cash equivalents, restricted cash, short term investments, trade receivables, other receivables, accounts payable and accrued liabilities are short term financial
instruments whose fair value approximates the carrying amount given that they will mature shortly. As at the balance sheet date, there are no significant differences between
the carrying value of these items and their estimated fair values.
Interest rate risk
Cash and cash equivalents and short term investments with fixed interest rates expose DragonWave to interest rate risk on these financial instruments. Interest income
of $0.4 million was recognized during the year ended February 29, 2012 on the Company's cash, cash equivalents and short term investments (year ended February 28,
2011 $0.2 million).
Credit risk
In addition to trade receivables and other receivables, the Company is exposed to credit risk on its cash and cash equivalents, restricted cash, and short term investments
in the event that its counterparties do not meet their obligations. The Company does not use credit derivatives or similar instruments to mitigate this risk and, as such, the
maximum exposure is the full carrying value or face value of the financial instrument. The Company minimizes credit risk on cash and cash equivalents and short term
investments by transacting with only reputable financial institutions and customers.
Foreign exchange risk
The following table summarizes the currency distribution of the Company's financial instruments, as at February 29, 2012:
24
Held-for-trading (1) 52,975 89,714
Receivables (2) 10,454 12,197
Other financial liabilities (3) 11,867 14,608
(1) Includes cash, cash equivalents, restricted cash, and short term investments.

(2) Includes trade receivables and other receivables which are financial in nature.

(3) Includes accounts payable and accrued liabilities which are financial in nature.

US
Dollars
CDN
Dollars
Other
Currency
US
Dollars
CDN
Dollars
Other
Currency
Held-for-trading 82% 15% 3% 87% 11% 2%
Receivables 84% 13% 3% 94% 1% 5%
Other financial liabilities 60% 26% 14% 70% 18% 12%

DragonWave Inc.
Foreign exchange risk arises because of fluctuations in exchange rates. The Company does not currently use derivative financial instruments to mitigate this risk.
If the USD had appreciated 1% against all foreign currencies at February 29, 2012, with all other variables held constant, the impact of this foreign currency change on
the Company's foreign denominated financial instruments would have resulted in a decrease in after-tax net income of $67 thousand for the year ended February 29, 2012
(year ended February 28, 2011 $84 thousand), with an equal and opposite effect if the USD had depreciated 1% against all foreign currencies at February 29, 2012.
Transactions with Related Parties
We lease premises from a real estate company controlled by a member of the Board of Directors. During the three and twelve months ended February 29, 2012, we paid
$0.3 million and $1.7 million respectively (three months and twelve months ended February 28, 2011 $0.3 million and $1.5 million respectively), relating to the rent,
operating costs, and leasehold improvements associated with this real estate, and the value owing for net purchases at February 29, 2012 was $3 thousand (February 28,
2011 $30 thousand). These amounts have been allocated amongst various expense accounts, except for leasehold improvements which have been allocated to property
and equipment.
The Company also purchased services from a company controlled or significantly influenced by a Board member. Total net services purchased for the three and twelve
months ended February 29, 2012 was nil and $119 thousand respectively (three and twelve months ended February 28, 2011 nil). This amount was allocated to sales and
marketing. The amount related to a one time sponsorship of a sporting event.
All transactions are in the normal course of business and have been recorded at the exchange amount.
Controls and Procedures
At the end of the period covered by MD&A (such period being the fiscal year ended February 29, 2012), an evaluation was carried out under the supervision of, and
with the participation of, our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, which are our principal executive officer
and principal financial officer, respectively, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")). Based upon that evaluation, our CEO and CFO have concluded that our disclosure controls and
procedures were effective as at February 29, 2012 to give reasonable assurance that the information we are required to disclose in reports that we file or submit under the
Exchange Act and/or applicable Canadian securities legislation is (i) recorded, processed, summarized and reported, within the time periods specified in the U.S. Securities
and Exchange Commission's as well as in accordance with applicable Canadian securities legislation rules and forms, and (ii) accumulated and communicated to
management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding
required disclosure.
25

DragonWave Inc.
Our management is also responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act
Rules 13a-15(f) and 15d-15(f) as well as National Instrument 52-109 of the Canadian Securities Administration. These controls are designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes. Under the supervision and with the participation of our
management, including our principal executive officer, our CEO, and principal financial officer, our CFO, we conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the framework in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on our evaluation under the framework in Internal Control Integrated Framework, our management concluded that our internal control over financial
reporting was effective as of February 29, 2012.
Ernst & Young LLP, the independent registered public accounting firm that audited the consolidated financial statements filed on SEDAR, has also audited the
effectiveness of our internal control over financial reporting as of February 29, 2012, as stated in their report which is included in the financial statements.
Changes in Internal Control over Financial Reporting
During the period covered by this report, no changes occurred in our internal control over financial reporting that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Critical Accounting Policies and Estimates
Inventory
Inventory is valued at the lower of cost and net realizable value ("NRV"). The cost of inventory is calculated on a standard cost basis, which approximates average
actual cost. NRV is determined as the market value for finished goods, replacement cost for raw materials, and finished goods market value less cost to complete for work in
progress inventory. Indirect manufacturing costs and direct labour expenses are allocated systematically to the total production inventory.
Revenue recognition
The Company derives revenue from the sale of broadband wireless backhaul equipment which includes embedded software and a license to use said software and
extended product warranties. Software is considered to be incidental to the product. Services range from installation and training to basic consulting. Revenue is recognized
when persuasive evidence of an arrangement exists, delivery has occurred and there are no significant remaining vendor obligations, collection of receivables is reasonably
assured and the fee is fixed and determinable. Where final acceptance of the product is specified by the customer, revenue is deferred until acceptance criteria have
been met.
The Company's business agreements may also contain multiple elements. Accordingly, the Company is required to determine the appropriate accounting, including
whether the deliverables specified in a multiple element arrangement should be treated as separate units of accounting for revenue recognition purposes, the fair value of
these separate units of accounting and when to recognize revenue for each element. For arrangements involving multiple elements, the Company allocates revenues to each
element based on a selling price hierarchy. The selling price for a deliverable is based on its vendor specific objective evidence ("VSOE") if available, third party evidence
("TPE") if VSOE is not available, or estimated selling price ("ESP") if neither
26

DragonWave Inc.

VSOE nor TPE is available. In multiple element arrangements, revenues are allocated to each separate unit of accounting for each of the deliverables using the relative
estimated selling prices of each of the deliverables in the arrangement based on the aforementioned selling price hierarchy. The Company has determined the selling price
for the undelivered items using VSOE and the delivered items using ESP.
The Company generates revenue through direct sales and sales to distributors. The Company defers the recognition of a portion of sales to distributors based estimated
sale returns and stock rotation granted to customers on products in the same period the related revenues are recorded. These estimates are based on historical sales returns;
stock rotations and other known factors. During the current fiscal year the Company determined that there was sufficient history to base its estimates on and adapted our
policy accordingly.
Revenue associated with extended warranty and advanced replacement warranty is recognized rateably over the life of the contracted service.
Revenue from engineering services or development agreements is recognized according to the specific terms and acceptance criteria as services are rendered.
The Company accrues estimated potential product liability as warranty costs when revenue on the sale of equipment is recognized. Warranty costs are calculated on a
percentage of revenue per month based on current actual warranty costs and return experience.
Shipping and handling costs borne by the Company are recorded in cost of sales. Shipping and handling costs charged to customers are recorded as revenue, if billed at
the time of shipment. Costs charged to customers after delivery are recorded in cost of sales.
The Company generates revenue through royalty agreements as a result of the use of its Intellectual Property. Royalty revenue is recognized as it is earned.
Advanced Replacement and Extended Warranty
Advanced replacement and extended warranty contracts are services offered by us to our customers as an option to purchase either at the time the goods are shipped or
at any time after shipment takes place. Many customers wait to purchase extended warranty coverage until their standard warranty period ends.
Advanced replacement is a service we sell which provides to customers the benefit of having a replacement radio or modem shipped to them when a unit they own has
been confirmed by us to be malfunctioning. When the customer receives the replacement radio or modem, they ship the malfunctioning unit back to us. We repair and keep
the returned unit.
Standard warranty for customers generally varies between twelve and thirty-six months. Our extended warranty programs enable customers to continue to have repairs
and customer support guidance beyond the standard warranty period.
Training
We earn a minimal portion of our total revenue from the sale of training services primarily to installation companies. Only in rare circumstances do we provide or sub-
contract installation services (see below), as the customers to whom we sell microwave equipment outsource the installation to specialized companies. As a result,
installation training revenue is generally not sold as a bundled service because it is sold to a different customer base. Further, any training that is provided is not essential to
the functionality of our product offerings,
27

DragonWave Inc.
and is thus considered an insignificant deliverable to the overall arrangement and not considered a separate unit of accounting.
Installation
We do not offer installation services. Periodically, a customer may request that we arrange for the installation of the equipment through a fourth party service provider
as a condition of the sale. In this case, a separate services agreement is created between DragonWave and the end-user of our equipment, and we sub-contract the installation
to a qualified installer. Evidence that the revenue associated with the installation service represents the fair value of the offering is provided by the sub-contracted value of
the installation.
Research and development
Our research costs are expensed as incurred. Our development costs other than property and equipment are expensed as incurred unless they meet generally accepted
accounting criteria for deferral and amortization. Development costs incurred prior to establishment of technological feasibility do not meet these criteria, and are expensed
as incurred.
Income taxes
Income taxes are accounted for using the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are determined
based on differences between the tax and accounting basis of assets and liabilities as well as for the benefit of losses available to be carried forward to future years for tax
purposes that are more likely than not to be realized. Deferred income tax assets and liabilities are measured using enacted tax rates that apply to taxable income in the years
in which temporary differences are expected to be recovered or settled. The Company provides a valuation allowance against its deferred tax assets when it believes that it is
more likely than not that the assets will not be realized.
The Company determines whether it is more likely than not that an uncertain tax position will be sustained upon examination by the tax authorities. The tax benefit of
any uncertain tax position that meets the more-likely-than-not recognition threshold is calculated as the largest amount that is more than 50% likely of being realized upon
successful resolution. To the extent a full benefit is not expected to be realized, an income tax liability is effectively established. The Company recognizes accrued interest
and penalties on unrecognized tax benefits as interest expense.
Management periodically reviews the Company's provision for income taxes and valuation allowance to determine whether the overall tax estimates are reasonable.
When management performs its quarterly assessments of the provision and valuation allowance, it may be determined that an adjustment is required. This adjustment may
have a material impact on the Company's financial position and results of operations.
Adoption of United States Generally Accepted Accounting Principles
In February 2008, the Canadian Accounting Standards Board confirmed the transition from Canadian GAAP to International Financial Reporting Standards ("IFRS")
for all publicly accountable entities no later than fiscal years commencing on or after January 1, 2011. As a result, management undertook a detailed review of the
implications of the Company having to report under IFRS and also examined the alternative available to the Company, as a Foreign Private Issuer in the United States, of
filing its primary financial statements in
28

DragonWave Inc.

Canada using U.S. GAAP, as permitted by the Canadian Securities Administrators' National Instrument 51-102, "Continuous Disclosure Obligations".
As a result of this analysis, management determined that the Company would adopt U.S. GAAP as its primary basis of financial reporting commencing March 1, 2011
on a retrospective basis. All comparative financial information contained in the consolidated financial statements to which this MD&A relates has been revised to reflect the
Company's results as if they had been historically reported in accordance with U.S. GAAP.
The adoption of U.S. GAAP did not have a material change on the Company's accounting policies or financial results. An adjustment of $154 thousand was made to
increase deficit as calculated by Canadian GAAP as at February 28, 2011 due to the adoption of U.S. GAAP.
Under Canadian GAAP, Investment Tax Credits ("ITCs") were recognized as a reduction to the Company's Research and development expense. Under US GAAP,
ITC's are recognized as a reduction to Income tax expense. During fiscal 2011, under Canadian GAAP, the Company recognized $0.4 million as a reduction to research and
development expense. Under US GAAP, the prior year results were impacted as follows: the Company's income before taxes was adjusted $2.4 million and the Company's
tax expense was $0.4 million as opposed to $2.8 million and $0.8 million respectively as was stated under Canadian GAAP. The GAAP difference had no impact on the
Company's consolidated Net and Comprehensive Income in the prior fiscal year.
29

QuickLinks
Exhibit 99.2

Exhibit 99.3

FOR IMMEDIATE RELEASE

DRAGONWAVE ANNOUNCES FINANCIAL RESULTS FOR
FOURTH QUARTER AND FULL FISCAL YEAR 2012
OTTAWA, Canada, May 3, 2012 DragonWave Inc. (TSX: DWI; NASDAQ: DRWI) a leading global supplier of packet microwave radio systems for mobile and
access networks, today announced financial results for the fourth quarter and full fiscal year 2012, ended February 29, 2012. All figures are in U.S. dollars and were
prepared in accordance with U.S. generally accepted accounting principles.
Revenue for the fourth quarter of fiscal year 2012 was $9.2 million, compared with $11.8 million in the third quarter of fiscal year 2012 and $15.1 million in the fourth
quarter of fiscal year 2011. Revenue from customers within North America was $4.8 million, compared with $8.2 million in the third quarter of this fiscal year and
$10.2 million in the fourth quarter of fiscal year 2011. DragonWave had 2 customers who each contributed more than 10% of revenue in the fourth quarter.
Gross margin for the fourth quarter of fiscal year 2012 was 13%, compared with 41% in the third quarter of fiscal year 2012 and 29% in the fourth quarter of fiscal year
2011. The gross margins in the fourth quarters of fiscal years 2012 and 2011 reflect the inclusion of inventory impairment provisions of $1.7 million and $2.0 million
respectively.
Net and comprehensive loss applicable to shareholders in the fourth quarter of fiscal year 2012 was $13.4 million or ($0.38) per basic and diluted share. This compares
to a net and comprehensive loss applicable to shareholders of $8.0 million or ($0.23) per basic diluted share in the third quarter of fiscal year 2012 and net loss of
$8.9 million or ($0.25) per basic and diluted share in the fourth quarter of fiscal year 2011.
"Earlier today, in a separate press release, we announced a transformational event for DragonWave the amended agreement between DragonWave and Nokia
Siemens Networks for DragonWave to acquire the Nokia Siemens Networks' microwave transport business and associated operational support system and support
functions," said DragonWave President and CEO Peter Allen. "In addition, through this strategic partnership, DragonWave becomes the preferred strategic supplier of
packet microwave solutions and related products to Nokia Siemens Networks, and the companies will jointly coordinate technology development activities.
"Nokia Siemens Networks is a leading global supplier of complete solutions for broadband mobile networks. The company is demonstrating strong momentum with
numerous new LTE customer wins," continued Mr. Allen. "Industry-best high-capacity packet microwave backhaul from DragonWave will form a key component and
strategic advantage of NSN's complete solution for broadband mobile networks."
Cash, cash equivalents, restricted cash, and short-term investments totaled $53.0 million at the end of the fourth quarter of fiscal year 2012, compared to $60.2 million
at the end of the third quarter, and $89.7 million at the end of the fourth quarter of fiscal year 2011.
Revenue for the full fiscal year 2012 was $45.7 million, compared with $118.0 million for the prior fiscal year. Net and comprehensive loss applicable to shareholders
for the full fiscal year 2012 was $33.5 million or ($0.94) per basic and diluted share.
Revenue Outlook for First Quarter Fiscal Year 2013
DragonWave expects revenue for the first quarter of fiscal year 2013 to be in the range of $12 million to $14 million.
Webcast and Conference Call Details:
The DragonWave management team will discuss the results on a webcast and conference call beginning at 8:30 a.m. Eastern Time today, May 3, 2012.
The live webcast and presentation slides will be available at the Investor Relations section of the DragonWave website at:
http://investor.dragonwaveinc.com/events.cfm
An archive of the webcast will be available at the same link.
Conference call dial-in numbers:
Toll-free North America: (877) 312-9202

International: (408) 774-4000
U.S. Filings
DragonWave has filed its Form 40-F with the U.S. Securities and Exchange Commission (SEC). A copy of the Form 40-F is available on the DragonWave investor
website at http://investor.dragonwaveinc.com/ .
DragonWave shareholders may request a printed copy of the complete audited financial statements, free of charge, at
http://investor.dragonwaveinc.com/contactus.cfm , or by regular mail at Shareholder Services, DragonWave Inc., 411 Legget Drive, Suite 600, Ottawa, Ontario, K2K 3C9.
About DragonWave
DragonWave is a leading provider of high-capacity packet microwave solutions that drive next-generation IP networks. DragonWave's carrier-grade point-to-point
packet microwave systems transmit broadband voice, video and data, enabling service providers, government agencies, enterprises and other organizations to meet their
increasing bandwidth requirements rapidly and affordably. The principal application of DragonWave's products is wireless network backhaul. Additional solutions include
leased line replacement, last mile fiber extension and enterprise networks. DragonWave's corporate headquarters is located in Ottawa, Ontario, with sales locations in
Europe, Asia, the Middle East and North America. For more information, visit http://www.dragonwaveinc.com .
DragonWave is a registered trademark of DragonWave Inc.
Forward-Looking Statements
Certain statements in this release, including the estimate of the revenue range for the first quarter of fiscal year 2013 and the statements regarding the transactions
involving Nokia Siemens Networks (the "NSN Transactions"), constitute forward-looking statements or forward-looking information within the meaning of applicable
securities laws. These statements are subject to certain assumptions, risks and uncertainties. Material factors and assumptions used to develop revenue estimates include
DragonWave's expectations regarding: the network deployment plans of its existing and new customers, and the volume and timing of orders, shipments and revenue
recognition. The NSN Transactions are subject to closing conditions, including no material adverse effect. Material factors and assumptions relating to the NSN
Transactions include the parties' beliefs regarding the industry and markets in which the parties operate; successful completion of the proposed transaction; and expectations
regarding potential synergies and prospects for the business if the transaction is closed. The NSN Transactions are subject to risks, including: the risks that the parties will
not proceed with the transactions for any reason; that the ultimate terms of the transactions will differ from those that are currently contemplated; that if the transactions are
completed, that expected synergies will not materialize; that unexpected costs will be incurred to integrate the business; or that end-customer demand will not meet
expectations. In particular, the completion of the NSN Transactions is subject to a number of terms and conditions, including, without limitation, no occurrence of a material
adverse effect. These conditions to the transaction may not be satisfied, in which case the NSN Transactions could be modified, restructured or terminated. Material risks
and uncertainties following closing of the NSN Transactions are described under the heading "Risks and Uncertainties" in the MD&A dated May 3, 2012 and material risks
and uncertainties related to acquisitions generally are described on pages 20 and 21 of the Company's Annual Information Form, dated May 4, 2011. Readers are cautioned
not to place undue reliance on forward-looking statements. These statements are provided to assist external stakeholders in understanding DragonWave's expectations as of
the date of this release and may not be appropriate for other purposes. Actual results, performance, achievements or developments of DragonWave may differ materially
from the results, performance, achievements or developments expressed or implied by such statements. Risk factors, in addition to those detailed above, that may cause the
actual results, performance, achievements or developments of DragonWave to differ materially from the results, performance, achievements or developments expressed or
implied by such statements can be found in DragonWave's Annual Information Form dated May 4, 2011 and other public documents filed by DragonWave with Canadian
and United States securities regulatory authorities, which are available at www.sedar.com and www.sec.gov , respectively, and include the following:
DragonWave's growth is dependent on the development and growth of the market for high-capacity wireless communications services.

DragonWave relies on a small number of customers for a large percentage of its revenue and DragonWave's future growth depends on the success of its
customer diversification efforts.

Network deployment plans by DragonWave's existing and potential customers are capital intensive and the timing of such deployments is affected by such
customers' access to capital.

DragonWave faces intense competition from several competitors and if it does not compete effectively with these competitors, its revenues may not grow and
could decline. DragonWave also faces competition from indirect competitors.

DragonWave relies on its suppliers to supply components for its products and the Company is exposed to the risk that these suppliers will not be able to
supply components on a timely basis, or at all.

DragonWave's success depends on its ability to develop new products and enhance existing products.

DragonWave's quarterly revenue and operating results can be difficult to predict and can fluctuate substantially.

If DragonWave is required to change its pricing models to compete successfully, its margins and operating results may be adversely affected.

DragonWave has a lengthy and variable sales cycle.
DragonWave assumes no obligation to update or revise any forward-looking statements or forward-looking information, whether because of new information, future
events or otherwise, except as expressly required by law.
Investor Contact: Media Contact:
John Lawlor
VP, Investor Relations
DragonWave Inc.
jlawlor@dragonwaveinc.com
Tel: 613-895-7000
Nadine Kittle
Marketing Communications
DragonWave Inc.
nkittle@dragonwaveinc.com
Tel: 613-599-9991 ext 2262

CONSOLIDATED BALANCE SHEETS

Expressed in US $000's except share amounts

As at
February 29,
2012
As at
February 28,
2011
Assets
Current Assets

Cash and cash equivalents 52,798 77,819


Short term investments 11,181

Trade receivables 9,850 11,579

Inventory 26,994 28,204

Other current assets 5,501 5,306

Future income tax asset 69 553

95,389 135,356
Long Term Assets

Property and equipment 5,280 7,560

Future income tax asset 1,308 808

Intangible assets 6,217 14,929

Goodwill 11,927 11,927

24,732 35,224
Total Assets 120,121 170,580

Liabilities
Current Liabilities

Accounts payable and accrued liabilities 12,720 15,967

Deferred revenue 723 1,453

Contingent royalty 372 622

Contingent consideration 1,884 14,622

15,699 32,664
Long Term Liabilities

Contingent royalty 1,292 3,290

Other long term liabilities 1,063 1,999

2,355 5,289
Commitments
Shareholders' equity

Capital stock 172,264 171,570

Contributed surplus 4,606 2,642

Deficit (65,448 ) (31,967 )

Accumulated other comprehensive loss (9,695 ) (9,618 )

Total Shareholder's equity 101,727 132,627

Non-controlling interests 340

Total Equity 102,067 132,627
Total Liabilities and Shareholder's equity 120,121 170,580

Shares issued & outstanding 35,586,206 35,421,893

CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)

Expressed in US $000's e and per share amounts

February 29,
2012
February 28,
2011
February 29,
2012
February 28,
2011
REVENUE 9,150 15,105 45,656 118,010
Cost of sales 8,006 10,697 29,255 67,460

Gross profit 1,144 4,408 16,401 50,550

EXPENSES
Research and development 5,400 5,952 24,023 19,056
Selling and marketing 3,585 3,964 15,307 17,303
General and administrative 4,735 3,332 16,528 11,785
Government assistance (144 ) (902 ) (390 )

13,720 13,104 54,956 47,754

Income (loss) before amortization of intangible assets and
other items (12,576 ) (8,696 ) (38,555 ) 2,796
Amortization of intangible assets (373 ) (472 ) (1,986 ) (893 )
Accretion expense (38 ) (271 ) (650 ) (393 )
Interest income 39 37 393 233
Investment gain 46 (161 ) 67 7
Impairment of intangible assets (8,315 )
Gain on change in estimate of contingent liabilities 623 15,146
Foreign exchange gain 218 536 100 678

Income (loss) before income taxes (12,061 ) (9,027 ) (33,800 ) 2,428
Income tax expense (recovery) 1,354 (145 ) (104 ) 421

Net Income (loss) (13,415 ) (8,882 ) (33,696 ) 2,007
Net Loss Attributable to Non-Controlling Interest 47 215

Net Income (loss) applicable to shareholders (13,368 ) (8,882 ) (33,481 ) 2,007

Foreign currency translation differences for foreign
operations 2 77

Comprehensive Income (Loss) applicable to shareholders (13,370 ) (8,882 ) (33,558 ) 2,007
Income (loss) per share
Basic (0.38 ) (0.25 ) (0.94 ) 0.06
Diluted (0.38 ) (0.25 ) (0.94 ) 0.05
Weighted Average Shares Outstanding
Basic 35,573,810 35,208,606 35,506,689 35,812,507
Diluted 35,573,810 35,208,606 35,506,689 36,741,961

CONSOLIDATED STATEMENTS OF CASH FLOWS

Expressed in US $000's

February 29,
2012
February 28,
2011
February 29,
2012
February 28,
2011
Operating Activities
Net Income (Loss) (13,415 ) (8,882 ) (33,696 ) 2,007
Items not affecting cash
Amortization of property and equipment 857 796 3,370 2,895
Amortization of intangible assets 373 445 1,986 893
Accretion expense 38 271 650 393
Non cash royalty amortization (67 ) (140 ) (490 ) (266 )
Impairment of intangible assets 8,315
Gain on change in estimate of contingent liabilities (623 ) (15,146 )
Stock-based compensation 415 451 1,964 1,410
Unrealized foreign exchange loss (92 ) (156 ) 38 134
Non cash future income tax expense (recovery) 1,416 235 (42 ) 358
Inventory impairment 1,741 2,097 2,020 3,285

(9,357 ) (4,883 ) (31,031 ) 11,109
Changes in non-cash working capital items 3,203 (1,052

) (3,437

) (12,301

)

(6,154 ) (5,935 ) (34,468 ) (1,192 )

Investing Activities
Acquisition of property and equipment (147 ) (631 ) (1,090 ) (3,839 )
Acquisition of intangible assets (1,095 ) (330 ) (1,589 ) (867 )
Acquisition of Axerra Networks Inc., net of cash acquired (8,700 )
Purchase of short term investments (11,513 ) (22,432 ) (135,480 )
Maturity of short term investments 2,123 47,431 33,613 132,378

881 34,957 8,502 (16,508 )

Financing Activities
Share repurchase (10,738 )

Initial formation contribution by non-controlling interest in
DW-HFCL 555
Issuance of common shares net of issuance costs 55 762 505 1,115

55 762 1,060 (9,623 )

Effect of foreign exchange on cash and cash equivalents 89 156 (115 ) (134 )
Net decrease in cash and cash equivalents (5,129 ) 29,940 (25,021 ) (27,457 )
Cash and cash equivalents at beginning of period 57,927 47,879 77,819 105,276

Cash and cash equivalents at end of period 52,798 77,819 52,798 77,819

Cash paid during the period for interest 194

QuickLinks
Exhibit 99.3
DRAGONWAVE ANNOUNCES FINANCIAL RESULTS FOR FOURTH QUARTER AND FULL FISCAL YEAR 2012
CONSOLIDATED BALANCE SHEETS Expressed in US $000's except share amounts
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) Expressed in US $000's e and per share amounts
CONSOLIDATED STATEMENTS OF CASH FLOWS Expressed in US $000's

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