DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2013
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

The following is management's discussion and analysis ("MD&A") of DragonWave Inc.'s consolidated results of operations and financial condition for the three and six months ended August 31, 2013. This MD&A is dated October 9, 2013 and should be read in conjunction with our unaudited consolidated interim financial statements and corresponding notes for the three and six months ended August 31, 2013 and the Annual Information Form for the year ended February 28, 2013 (the "AIF") which is available at www.sedar.com (SEDAR) and at 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, 2013.

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 October 9, 2013 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 direct and indirect 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 USD.

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; our expectations with respect to the results of the acquisition by us of the microwave transport business of Nokia Siemens Networks (now Nokia Solutions and Networks)("NSN"), our expectations with respect to end-customer demand for our products, our expectations regarding the development of our target markets; and our plans, objectives and targets for operating cost reductions, revenue growth and margin performance. 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 we do 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.

There can be no assurance that forward-looking statements will prove to be accurate and actual results and outcomes could differ materially from those expressed or implied in such statements. The following are some of the important factors that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements:

In particular, forward-looking statements relating to the acquisition and integration by us of the microwave transport business of NSN and our renewed operational framework with NSN announced on April 10, 2013 are based on certain assumptions including:

Other risks relating to NSN, identified by Nokia Corporation, its controlling parent, are set out in Nokia Corporation's annual report on Form 20-F for the fiscal year ended December 31, 2012 under item 3D "Risk Factors".

Also see the discussion under "Liquidity and Capital Resources—Liquidity Discussion" in this MD&A, as well as the discussion under "Risk Factors" contained in our most recently filed Annual Information Form. Although we have attempted to identify important factors that could cause our actual results to differ materially from 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. Ongoing global economic uncertainty could impact forward-looking statements contained in this MD&A in an unpredictable and possibly detrimental manner. In light of these risks, uncertainties and assumptions, the forward-looking events described in this MD&A might not occur or might not occur when stated.

		Three Months Ended									Six Months Ended

		August 31, 2013			August 31, 2012			August 31, 2011			August 31, 2013			August 31, 2012			August 31, 2011
REVENUE			25,453			44,157			13,627			49,985			57,131			24,676
	Cost of sales		22,659			37,414			7,852			44,371			46,255			14,257

Gross profit			2,794			6,743			5,775			5,614			10,876			10,419

			11%			15%			42%			11%			19%			42%
EXPENSES
	Research and development		4,783			12,139			6,105			10,085			16,538			12,371
	Selling and marketing		3,175			4,357			3,849			6,557			8,015			7,929
	General and administrative		4,433			8,513			3,717			9,181			13,783			7,680
	Government assistance		—			—			(287	)		—			—			(637	)

			12,391			25,009			13,384			25,823			38,336			27,343

Income (loss) before other items			(9,597	)		(18,266	)		(7,609	)		(20,209	)		(27,460	)		(16,924	)
	Amortization of intangible assets		(437	)		(1,199	)		(622	)		(996	)		(1,741	)		(1,209	)
	Accretion expense		(56	)		(30	)		(276	)		(121	)		(52	)		(552	)
	Restructuring expense		—			—			—			—			(798	)		—
	Interest income/(expense)		(380	)		(740	)		108			(918	)		(711	)		231
	Impairment of intangible assets		—			(1,148	)		(8,315	)		—			(4,017	)		(8,315	)
	Gain on change in estimate		342			352			13,161			342			1,542			13,161
	Gain on contact amendment		—			—			—			5,285			—			—
	Gain on purchase of business		—			19,397			—			—			19,397			—
	Foreign exchange gain (loss)		(397	)		462			(36	)		(495	)		(541	)		84

Net Income (Loss) befire income taxes			(10,525	)		(1,172	)		(3,589	)		(17,112	)		(14,381	)		(13,524	)
	Income tax expense (recovery)		76			—			(1,310	)		168			(572	)		(1,301	)

Net Income (Loss)			(10,601	)		(1,172	)		(2,279	)		(17,280	)		(13,809	)		(12,223	)
	Net Loss Attributable to Non-Controlling Interest		92			50			73			146			108			127

Net Income (Loss) applicable to shareholders			(10,509	)		(1,122	)		(2,206	)		(17,134	)		(13,701	)		(12,096	)

Basic income (loss) per share			(0.28	)		(0.03	)		(0.06	)		(0.45	)		(0.37	)		(0.34	)
Diluted income (loss) per share			(0.28	)		(0.03	)		(0.06	)		(0.45	)		(0.37	)		(0.34	)
Basic weighted average shares outstanding			38,112,887			37,992,859			35,494,976			38,086,403			36,962,103			35,462,012
Diluted weighted average shares outstanding			38,112,887			37,992,859			35,494,976			38,086,403			36,962,103			35,462,012

The changes in the results between fiscal years 2014, 2013 and 2012 can be attributed to a number of factors including:



Assets:
Cash and cash equivalents and restricted cash		9,826	22,959
	Trade receivables	20,832	35,452
	Inventory	32,917	32,722
	Contingent receivable	—	13,843
	Other Assets	5,672	6,146

Total Current Assets		69,247	111,122

Long Term Assets		19,974	23,872

Total Assets		89,221	134,994

Liabilities:
	Accounts Payable & Accrued Liabilities	30,964	56,962
	Debt facility	15,000	15,000
	Other Short Term Liabilities	3,599	4,669

Total Short Term Liabilities		49,563	76,631

Long Term Liabilities		693	2,753

Total Liabilities		50,256	79,384

Total Equity		38,965	55,610

Total Liabilities and Shareholder's equity		89,221	134,994

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 including through NSN. 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 the repercussions of our strategic decisions with respect to, among other things, acquisitions of complementary products or businesses.



		FY12				FY13								FY14

Revenue		11,830		9,150		12,974		44,157		38,452		28,294		24,532		25,453
Gross Profit		4,838		1,144		4,133		6,743		7,138		1,487		2,820		2,794
	Gross Profit %	41%		13%		32%		15%		19%		5%		11%		11%
Operating Expenses		13,893		13,720		13,327		25,009		19,922		18,451		13,432		12,391
Income (loss) before other items		(9,055	)	(12,576	)	(9,194	)	(18,266	)	(12,784	)	(16,964	)	(10,612	)	(9,597	)
Net income (loss) for the period		(8,058	)	(13,415	)	(12,637	)	(1,172	)	(13,936	)	(27,262	)	(6,679	)	(10,601	)
Net income (loss) per share
	Basic	(0.23	)	(0.38	)	(0.35	)	(0.03	)	(0.36	)	(0.71	)	(0.17	)	(0.28	)
	Diluted	(0.23	)	(0.38	)	(0.35	)	(0.03	)	(0.36	)	(0.71	)	(0.17	)	(0.28	)
Weighted average number of shares outstanding
	Basic	35,542,247		35,573,810		35,931,347		37,992,859		38,033,222		38,043,594		38,059,919		38,112,887
	Diluted	35,542,247		35,573,810		35,931,347		37,992,859		38,033,222		38,043,594		38,059,919		38,112,887
Total Assets		134,128		120,121		109,616		164,099		152,433		134,994		104,254		89,221

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 mobile network backhaul. Additional applications include leased line replacement, last mile fiber extension and enterprise networks.

Key points on our results of operations for the second quarter ended August 31, 2013 when comparing those results to the same period in the previous fiscal year include the following:

Changes in Operating Expenses (USD millions)

FY2014	12.4		25.8
FY2013	25.0		38.3

Difference	(12.6	)	(12.5	)

Reduction in NSN Italian and Transitional Services Agreements & NSN Lease "holiday" amortization	(7.4	)	(7.4	)
Israeli Design Centre closed in FY2013	(0.9	)	(2.3	)
Lower staffing levels primarily in Ottawa	(0.9	)	(2.6	)
Commission and variable compensation	(0.7	)	(0.8	)
Travel Costs	(0.6	)	(0.6	)
Professional services spending; including on setting up new Contract Manufacturers (CMs)	(1.4	)	(1.5	)
Depreciation, material spending & other	(0.7	)	0.5
New China design centre—begin to provide services in Q2, FY2012			2.2

	(12.6	)	(12.5	)

Our primary operational objective is to achieve cash flow break-even from operations. We plan to accomplish this objective largely by capitalizing on revenue growth we have identified and by decreasing our direct cost of materials and material transport. We took action to bolster our balance sheet to support the working capital requirements of large opportunities by filing a base shelf prospectus in August and completing a public offering of units (the "Offering") for gross proceeds of approximately $25.0 million on September 23, 2013.

On September 23, 2013, pursuant to the Offering 11,910,000 common shares and 8,932,500 warrants were issued for proceeds, before expenses, of approximately $25.0 million. The units were offered at a price to the public of $2.10 per unit. Each unit consisted of one common share and three quarters of one warrant. Each whole warrant entitles the holder to purchase one common share at an exercise price of $2.70 per share until September 23, 2018, subject to certain adjustments. We do not intend to list the warrants on any stock exchange. As at the Balance Sheet date, we capitalized $0.3 million of expenses which will be offset against the proceeds in our third quarter.

On June 1, 2012 we announced the closing of the acquisition of NSN's microwave transport business, including its associated operational support system (OSS) and related support functions. The acquisition was effected pursuant to the Amended and Restated Master Acquisition Agreement between DragonWave Inc., its wholly-owned subsidiary DragonWave S.a r.l and NSN dated May 3, 2012.

The results of operations for the six months ended August 31, 2013 were impacted by changes announced on April 10, 2013 to our existing operational framework with NSN. In line with the renewed framework, we will continue to be the preferred, strategic supplier to NSN of packet microwave and related products, and the companies will jointly coordinate technology development activities.

The original purchase price for the acquisition of NSN's microwave transport business included a contingent receivable based on business performance in the eighteen months following closing. Under the

terms of the renewed framework, NSN paid $13.8 million to us on April 12, 2013 which settled the balance of our contingent receivable.

NSN also took on additional commitments and costs so that we can continue to develop and supply microwave products. The Italian services agreement, pursuant to which NSN provided research & development and certain other services to DragonWave since June 1, 2012, was terminated. As a result, we were able to reduce our accounts payable by $13.3 million. We also eliminated the capital assets and the corresponding capital lease obligation associated with the Italian operations. Finally, we recorded an estimated termination fee of $8.7 million to be paid in several tranches over the balance of fiscal year 2014. The estimate is subject to measurement uncertainty as to the timing and amount that could have a material impact on our financial statements should actual results differ.

The net impact of these items results in a gain of $5.3 million which was recognized in the statement of operations in the first quarter of fiscal year 2014.

Overdue balances recorded in accounts receivable and payable as at February 28, 2013 between the two companies were settled in the first quarter of fiscal 2014 in the amount of $19.4 million and $13.8 million respectively.

We have established a long term credit facility with Comerica Bank and Export Development Canada. As at August 31, 2013, this asset based credit facility was for a total of $20.0 million plus $2.5 million for letters of credit and foreign exchange facilities. Credit availability is subject to ongoing compliance with borrowing covenants and short term assets on hand. As at August 31, 2013, we had drawn $15.0 million on the facility.

The credit facility matures on May 31, 2014 and is secured by a first priority charge on all of our assets and principal direct and indirect subsidiaries. Borrowing options under the credit facility include US dollars Canadian dollar, and Euro loans. Interest rates vary with market rate fluctuations, with loans bearing interest in the range of 3% to 4% above the applicable base rates. The terms of the credit facility include other customary terms, conditions, covenants, and representations and warranties. Direct costs associated with obtaining the debt facility such as closing fees, registration and legal expenses have been

capitalized and will be amortized over the two year term of the facility. During the three and six months ended August 31, 2013 the weighted average debt outstanding was $15.0 million (three and six months ended August 31, 2012—$34.3 million and $17.1 million, respectively) and we recognized $0.4 million and $0.9 million respectively in interest expense related to the debt facility (three and six months ended August 31, 2012—$0.6 million).

As at February 28, 2013, we were in breach of one of the covenants then in place on the facility. However, we obtained a waiver of the breach from our lenders for a period through May 30, 2013, which eliminated any acceleration of repayment of our obligation.

As at August 31, 2013 we were in breach of two of the financial covenants under the credit facility. Both breaches have been waived by our lenders. The waivers eliminate any acceleration of repayment of our obligations in respect of such breaches. As of the date of this MD&A we are in compliance with all of the required covenants.

On January 22, 2013 we sold all of our shares of DragonWave Ltd. ("DWL"), our former wholly owned subsidiary incorporated in Israel. The shares were sold for a nominal amount. Under the share purchase agreement, we have a liability to pay certain future obligations and as at August 31, 2013 we have recorded a discounted liability of $0.2 million (February 28, 2013—$0.8 million). The maximum potential liability for us, as at August 31, 2013, is $0.2 million (February 28, 2013—$1.3 million). Also, under the terms of a supply and services agreement, we have an opportunity to earn an additional $5.3 million (February 28, 2013—$5.3 million) based on business performance subsequent to the disposition for which we have recorded a receivable of $0.6 million (February 28, 2013—$0.6 million). This value represents our estimate of the amounts to be collected based on the discounted forecasted future cash inflows.

We continue to believe strongly that our growth will come through relationships with partners in a variety of regions throughout the world. This includes India where our 50.1% owned company, DragonWave-HFCL, is active in pursuing regional opportunities. We continue to be optimistic about India's potential.

In the United States, we are working closely with our customer base to position ourselves as a viable partner for future planned network expansions in that country.

This MD&A contains certain information that is not consistent with financial measures prescribed under GAAP. We use earnings before interest, taxes, depreciation and amortization ("EBITDA") as this measure allows management to evaluate our operational performance and the performance of our assets. EBITDA does not have any standardized meaning prescribed by GAAP, and is not designed to replace other measures of financial performance or the statement of cash flows as an indicator of liquid assets.

This measure should not be considered in isolation or as a substitute for other measures of performance calculated according to GAAP. We use this non-GAAP measure because it provides additional information on our existing and active commercial operations performance.

Adjusted EBITDA corresponds to EBITDA as defined above less elements that are non-cash in nature. We believe that this metric is necessary in order to isolate the commercial operations from certain non-cash costs. Consistent improvement in adjusted EBITDA is one of management's primary objectives. These measures are used by us because we believe they provide useful information regarding performance. The definitions of the measures that we adopted may differ from those of other businesses. We calculate EBITDA and adjusted EBITDA consistently over each fiscal period.



Summarized US GAAP Income Statement
Revenue		25,453		49,985
Cost of Sales		22,659		44,371

Gross Margin		2,794		5,614
Operating Expenses		12,391		25,823
Other Gains/Losses		1,004		(2,929	)

Net Income (loss)		(10,601	)	(17,280	)
Reconciliation to Non-GAAP Measures
Net Income, under US GAAP		(10,601	)	(17,280	)
	Interest expense	380		918
	Tax expense	76		168
	Depreciation of fixed assets	1,270		2,796
	Amortization of intangible assets	437		996

EBITDA		(8,438	)	(12,402	)
Non-Cash and Normalizing Adjustments:
	Stock option expenses	327		642
	Gain on contract amendment	—		(5,285	)
	Accretion expense	56		121
	Inventory provision	64		163

Adjusted EBITDA		(7,991	)	(16,761	)

We continue to have one reportable segment, broadband wireless backhaul equipment. The vast majority of our sales come from the shipment of equipment (as opposed to services or software) either through direct sales, sales to distributors, or through OEMs.

We also analyze our sales according to geographic region and target product development and sales strategies to meet the special requirements of each region. The four main geographic regions that we examine are North America, Europe/Middle East & Africa ("EMEA"), India, and the Rest of the World ("ROW"). At present, we ship to a warehouse location for NSN in the Netherlands, and not to end customer sites, and therefore it is difficult to determine accurately a geographic split for the revenue related to this sales channel.

A large component of our cost of sales is the cost of product purchased from outsourced manufacturers. Final test and assembly for the links sold by us is carried on both at our premises and at the premises of our contract manufacturers. Additional costs for logistics and warranty activities are included in cost of sales. We use the services of a number of outsourced contract manufacturers with locations in Germany, China and Malaysia.

Research and Development costs ("R&D") relate mainly to the compensation of our engineering group and the material consumption associated with prototyping activities.

Selling and marketing ("S&M") expenses include the remuneration of sales staff, travel and trade show activities and customer support services.

General and administrative expenses ("G&A") 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. We continue to lease premises from a real estate company controlled by an individual who was a member of the Board of Directors until June 12, 2012. On June 12, 2012, following our Annual General Meeting of shareholders, that director ceased to be a member of the Board but our lease continues to remain in effect. Our management believes the terms of the lease reflect fair market terms and payment provisions.

Comparison of the three months and six months ended August 31, 2013 and August 31, 2012

The business we acquired from NSN began to generate revenue for us in the second quarter of fiscal 2013. Decreases in sales through the NSN sales channel is the largest single driver for the change in revenue in the three months ended August 31, 2013 compared to the same period in the previous fiscal year. We also saw both positive and negative variances related to project based deployments to resellers located in Europe and the United States.

Variance for 3 months

Revenue—Three months ended Aug 31, 2012		44,157
Variances:
	New Global NSN Strategic Relationship	(14,416	)
	Sales in India through NSN	(3,746	)
	US Based distribution	(1,905	)
	Sales of our Fusion based product line	(485	)
	European based integrator	966
	Tier 1 Operator located in US serviced through OEM	951
	Other	(69	)

Revenue—Three months ended Aug 31, 2013		25,453

Variance for 6 months

Revenue—Six months ended Aug 31, 2012		57,131
Variances:
	US Based distribution	(2,850	)
	Sales in India through NSN	(2,481	)
	New Global NSN Strategic Relationship	(1,917	)
	US Based reseller/integrator	(1,867	)
	Sales of our Fusion based product line	(1,181	)
	European based integrator	947
	Tier 1 Operator located in US serviced through OEM	801
	Other	1,402

Revenue—Six months ended Aug 31, 2013		49,985

The lower gross profit percentage in the second quarter of fiscal 2014 compared to the same period in the previous year relates primarily to a shift in the sales mix through our OEM channel. We are working on a number of initiatives to improve our margin performance: we are establishing new warehouse locations closer to contract manufacturing sites to reduce freight costs; we are renegotiating pricing with component suppliers and contract manufacturers; and we are continuing the migration to the lowest cost contract manufacturers available.

The R&D expense profile has changed significantly year over year as a result of our acquisition of NSN's microwave transport business, as well as the restructuring and cost reduction activities we have undertaken to reduce our overall cost base.



NSN Italian Services	(4.6	)	(4.6	)
Amortization Expense of Lease Holiday asset (re NSN Acquisition)	(1.0	)	(1.0	)
Reduction of Canadian design team as China increased in size	(0.5	)	(1.4	)
Depreciation on assets acquired through NSN Acquisition	(0.5	)	0.4
Israeli design centre closed in FY2013	(0.5	)	(1.5	)
Professional fees, material costs and other	(0.4	)	(0.6	)
New China Design Centre; began to provide service in Q2 FY2013	0.1		2.2

	(7.4	)	(6.5	)

Sales and marketing expenses decreased as a result of staff changes and reductions as well as the efforts expended by these groups to reduce spending.

G&A expenses have decreased relative to the same three and six month periods in the previous year because of changes to the NSN services agreement, staff reductions that have taken place since June 1, 2012 and the focus placed by management on cost reductions. Offsetting these reductions have been increases in costs associated with operating a new warehouse location in Europe.



NSN Italian Services & Transional Services Agreement	(1.8	)	(1.8	)
Travel—decreasing with specific restraints in place	(0.5	)	(0.6	)
Variable Compensation	(0.4	)	(0.4	)
Lower staffing levels	(0.4	)	(1.2	)
Israeli office closed in FY2013	(0.3	)	(0.6	)
Higher warehousing expenses	0.4		1.2
Professional fees and other	(1.1	)	(1.2	)

	(4.1	)	(4.6	)

The amortization of technology and customer relationships acquired as part of our acquisition of DragonWave Ltd., and related Office of the Chief Scientist of the Ministry of Industry and Trade in Israel ("OCS") liability ended with the write off of DragonWave Ltd. acquisition related intangibles on August 31, 2012. As a result, there were no expenses associated with the amortization of these balances in fiscal year 2014. The only remaining intangible asset associated with the NSN acquisition is the asset associated with the favourable accounts receivable terms negotiated in the contract. Amortization of computer software and infrastructure software has grown modestly over the past year with new software purchases.

The accretion expense in the three months ended August 31, 2012 related primarily to the accretion of the OCS liability. The value of the OCS liability was reduced to zero at August 31, 2012. A small accretion expense was recognized in the three months ended August 31, 2013 associated with balances which arose on the acquisition of the NSN microwave transport business related balances.

The restructuring expenses in fiscal year 2013 related to the announcement in June 2012 of the elimination of approximately 68 positions across all functions primarily in Canada and Israel.

On June 4, 2012, in concert with our acquisition of the NSN microwave transport business, we borrowed against our credit facility with Comerica Bank and Export Development Canada. As of the date

of this MD&A, $15.0 million is outstanding on the line. The average debt outstanding during the second quarter of fiscal year 2013 was $34.3 million and as a result the interest expense for that period was significantly higher than for the same period in the current fiscal year. Interest rates vary with market rate fluctuations, with loans bearing interest in the range of 3% to 4% above the applicable base rates. The terms of the credit facility include other customary terms, conditions, covenants, and representations and warranties.

During the previous fiscal year, in the three months ended August 31, 2012, 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 their use or disposition. Based upon this analysis, we wrote the assets down to their fair value and recorded a corresponding impairment charge as outlined in the table above in fiscal year 2013.

During the three months ended August 31, 2013 we adjusted the contingent liability recognized at the time of sale of DWL, the corresponding gain was made to recognize the change in estimate.

Similarly, during the three months ended August 31, 2012 we adjusted the contingent royalty liability based on a change in estimate. A corresponding gain was made to recognize the change in estimate at that time.

All intangible assets associated with DWL were written off in their entirety by August 31, 2012.

Under the terms of the renewed framework with NSN announced on April 10, 2013, the Italian services agreement, pursuant to which NSN provided research and development and certain other services to us since June 1, 2012, was terminated. As a result we reduced accounts payable by $13.3 million. Capital assets with a net book value of $0.6 million and the corresponding capital lease obligation associated with the Italian operations in the amount of $1.3 million were also eliminated. We also recorded a liability based on management's estimate for a termination fee. This is a Euro based liability estimate, originally valued at $8.7 million. As a result of changes in the Euro to USD exchange rate, the liability at August 31, 2013 is now valued at $8.9 million. This estimated liability is expected to be paid in several tranches over the balance of fiscal year 2014. Inherent in this estimate is measurement uncertainty. A change in the conditions, situation, or the set of circumstances that existed at the date of the financial statements could have a material impact on this estimate in our financial statements.

We recognized a one-time gain of $19.4 million in the three and six months ended August 31, 2012 due to the difference between the cumulative tangible and intangible net assets and the purchase price of the NSN acquisition.

The foreign exchange balance for the three and six months ended August 31, 2013 is driven by the valuation of our foreign denominated monetary balances, primarily the valuation of the EUR relative to the USD during this six month period.

The year-over-year change in income tax expense relates primarily to the write down of the deferred tax assets associated with the impairment of certain DragonWave Ltd. related balance sheet items. The expense in fiscal year 2014 relates to the anticipated payment of taxes in entities that provide either R&D or sales and customer support services to the rest of DragonWave and have no tax losses available.

As at February 28, 2013, we had cumulative operating tax loss carry forwards in the following jurisdictions: Canada—$72.3 million, United States—$8.8 million, Luxembourg—$33.0 million. We also had capital loss carry forwards in the following jurisdictions: Canada—$16.3 million, United States—$36.5 million. In addition, we had $14.6 million of investment tax credits available to reduce future federal Canadian income taxes payable and $2.3 million available to reduce future provincial income taxes payable.



Key Balance Sheet Amounts and Ratios:
	Cash and Cash Equivalents	9,826	22,959
	Working Capital	19,684	34,491
	Long Term Assets	19,974	23,872
	Long Term Liabilities	693	2,753
	Working Capital Ratio	1.4 : 1	1.5 : 1
	Days Sales Outstanding in accounts receivable	60 days	107 days
	Inventory Turnover	2 times	0.2 times

As at August 31, 2013, we had $9.8 million in cash and restricted cash (collectively "Cash"), representing a $13.1 million decrease from the Cash balance at February 28, 2013. Restricted cash represents the cash required as collateral on our debt facility as at August 31, 2013 and amounts to $1.0 million at August 31, 2013.

As at August 31, 2013, we were required to have a minimum of $10.0 million held at Comerica bank. We obtained a waiver from the bank for the breach of this covenant. As at the date of this MD&A, we have the required minimum cash balance held at Comerica Bank.

The following table explains the change in Cash in the three and six months ended August 31, 2013.



Net Income adjusted for Non-Cash Items		(8,264	)	(17,388	)
Working Capital Changes
	Change in inventory	2,277		(358	)
	Change in accounts receivable	(2,218	)	14,312
	Change in contingent receivable	—		13,843
	Change in other current assets	(520	)	279
	Change in accounts payable	(3,927	)	(21,626	)
	Change in deferred revenue	(77	)	(382	)
	Change in contingent liabilities	(102	)	(232	)
Capital Asset Acquisitions
	Purchase of intangible fixed assets—software	(68	)	(292	)
	Purchase of new capital assets	(250	)	(484	)
Acquisition and Financing
	Principle payments on capital Lease obligation	(335	)	(926	)
Other		(42	)	121

Total Changes in Cash		(13,526	)	(13,133	)
Beginning Cash Balance		23,352		22,959
Ending Cash Balance		9,826		9,826

		(13,526	)	(13,133	)

The operating losses were once again the most significant driver in the use of Cash in the three and six months ended August 31, 2013.

Many of the significant changes in the six months ended August 31, 2013 relate to the renewed framework with NSN, announced on April 10, 2013.

Inventory decreased in size relative to the balance at May 31, 2013 and grew only modestly since February 28, 2013 thereby minimizing the cash resources required for its procurement.



Changes in working capital
Beginning working capital balance	34,491
Cash and cash equivalents, restricted cash, and short term investments	(13,133	)
Trade receivables	(14,620	)
Inventory	195
Other current assets	(459	)
Contingent receivable	(13,843	)
Future income tax asset	(15	)
Accounts payable and accrued liabilities	25,998
Debt facility	—
Deferred revenue	315
Capital lease obligation	700
Contingent royalty	55

Net change in working capital	(14,807	)

Ending working capital balance	19,684

The trade receivables balance decreased by $14.6 million between February 28, 2013 and August 31, 2013 due primarily to the payment by NSN of $19.4 million in receivables outstanding. The days sales outstanding fell from 107 days at February 28, 2013 to 60 days sales outstanding at August 31, 2013 which also contributed to a lower accounts receivable balance.

Our allowance for doubtful accounts continues to represent a small percentage of our total trade receivables outstanding (August 31, 2013—4.0%; February 28, 2013—0.7%). The balance is higher at August 31, 2013 because of two unique customer account situations.

As at August 31, 2013, one customer exceeded 10% of the total receivable balance. This customer represented 47% of the trade receivables balance (February 28, 2013—one customer represented 67% of the trade receivables balance).

The inventory balance increased by $0.2 million relative to the closing balance at February 28, 2013:

The accounts payable and accrued liabilities balance decreased by $26.0 million between February 28, 2013 and August 31, 2013. The primary driver for the decrease related to the renewed operational framework with NSN which resulted in our payment to NSN of outstanding accounts payable in the amount of $13.9 million, and the reduction in the payable balance to NSN associated with the termination of the Italian services of $13.3 million. Offsetting these reductions was the recognition of an estimated termination fee of $8.9 million relating to the termination of the Italian services agreement.

Our consolidated financial statements for the three and six month periods August 31, 2013 have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the disbursement of liabilities in the normal course of business. We have consumed a significant amount of cash resources during the past two and a half years, mainly attributable to a reduction in sales volumes, and our acquisition and integration of the NSN microwave transport business.

As stated in our year ended MD&A dated May 8, 2013, we have formulated a plan to return to cash flow break-even and to continue to operate as a going concern. Some of the significant assumptions and associated risks that were considered in our planning process as well as some of the steps we have taken to implement our plan included:

In addition to these recent developments, on September 23, 2013 we completed the Offering and issued 11,910,000 common shares and 8,932,500 warrants for net proceeds, before expenses, of approximately $23.5 million. We plan to use these proceeds primarily to strengthen our balance sheet and fund working capital.

We continue to seek growth in sales levels both to NSN and other direct customers, as well as improvements in our gross margins through various ongoing initiatives. While we believe that our plans and assumptions are reasonable, actual events or circumstances may cause the assumptions to be incorrect and actual results may differ materially from the plan.

Future minimum operating lease payments as at August 31, 2013 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.

Our common shares are listed on the Toronto Stock Exchange under the symbol DWI and on the NASDAQ under the symbol DRWI.

As at August 31, 2013, there were 38,123,880 common shares issued and outstanding and options to purchase 2,800,115 common shares granted under our stock option plan.

As of October 4, 2013 there were 50,036,409 common shares issued and outstanding and there were 2,795,115 options outstanding under the stock option plan.

We launched an Employee Share Purchase Plan ("ESPP") on October 20, 2008. The plan includes provisions to allow employees to purchase Common shares. We will match the employees' contribution at a rate of 25%. During the three months ended August 31, 2013 a total of 4,884 common shares were purchased by employees at fair market value, while we issued 1,221 common shares as our matching contribution. During the six months ended August 31, 2013 a total of 12,522 common shares were purchased by employees at fair market value, while we issued 3,130 common shares as our matching contribution. The shares contributed by us will vest 12 months after issuance.

The fair value of the unearned ESPP shares as at August 31, 2013 was $14 thousand (February 28, 2013—$23 thousand). The number of shares held for release, and still restricted under the ESPP at August 31, 2013 was 6,206 (February 28, 2013—7,760). The total fair value of the shares earned during the three and six months ended August 31, 2013 was $5 thousand and $16 thousand, respectively (three and six months ended August 31, 2013—$11 thousand and $25 thousand, respectively).

City	Country	Lessor	Lease Expiry	Cost per Month

Roswell, Georgia	United States	A-COLONIAL 100/200 OWNER, LLC	March, 2014	$	5,000
Luxembourg City	Luxembourg	FPS Offïce Center S.A.R.L.	Month to Month	$	1,500
Singapore	Singapore	APBC Pte Ltd	August, 2014	$	3,200
Ottawa (Warehouse & Operations at Terry Fox Drive + Office Space at 411 Legget Drive)	Canada	Kanata Research Park	November, 2016	$	125,000
Shanghai	China	Caike Property (Shanghai) Co., Ltd	January, 2015	$	55,404
Herzlyia	Israel	Margalin Holdings Ltd.	Nov 30, 2013	$	2,289

The leases listed above are arranged at market pricing levels in all jurisdictions and the lease periods listed above represent a commitment for the time period indicated. We are actively seeking sub-lease arrangements in a number of locations as part of our efforts to reduce costs. There can be no assurance that we will secure sub-leases or that sub-lease terms will be favourable.

We use an outsourced manufacturing model in which 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 after a certain 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 our behalf by our contract manufacturers should those forecasts or projections change.

Financial instruments are classified into one of the following categories: held-for-trading, held-to-maturity, available-for-sale, loans and receivables, and other financial liabilities.

The following table summarizes the carrying values of our financial instruments:

Cash and cash equivalents, restricted cash, trade receivables, other receivables, accounts payable, accrued liabilities, debt facility, contingent liabilities and lease obligations are short term financial instruments whose fair value approximates the carrying amount. 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 with the exception of our contingent receivable and contingent liabilities which have been measured using a Level 3 input, a discounted cash flow model that values the underlying assets and liabilities based on expected timing of payments and receipts.

Cash and cash equivalents and our debt facility which has interest rates with market rate fluctuations expose us to interest rate risk on these financial instruments. Net interest expense of $0.4 million and $0.9 million respectively, was recognized during three and six months ended August 31, 2013 on our cash, cash equivalents, and debt facility (three and six months ended August 31, 2012—Expense of $0.7 million and $0.7 million respectively).

In addition to trade receivables and other receivables, we are exposed to credit risk on our cash and cash equivalents, and restricted cash in the event that our counterparties do not meet their obligations. We do 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. We minimize credit risk on cash and cash equivalents by transacting with only reputable financial institutions and customers.

Foreign exchange risk arises because of fluctuations in exchange rates. To mitigate exchange risk, we utilize forward contracts to secure exchange rates with the objective of offsetting fluctuations in our

operating expenses incurred in foreign currencies with gains or losses on the forward contracts. As at August 31, 2013 we had no forward contracts in place. Our foreign exchange forward contracts are over-the-counter instruments. There is an active market for this instrument and, therefore, it is classified as Level 1 in the fair value hierarchy. All foreign currency gains and losses related to forward contracts are included in Foreign exchange gain (loss) in the Consolidated Statements of Operations.

As of August 31, 2013, if the US dollar had appreciated 1% against all foreign currencies, with all other variables held constant, the impact of this foreign currency change on our foreign denominated financial instruments would have resulted in a decrease in after-tax net income (loss) of $0.2 million for the three and six months ended August 31, 2013 (three and six months ended August 31, 2013—decrease of $39 thousand), with an equal and opposite effect if the US dollar had depreciated 1 percent against all foreign currencies at August 31, 2013.

We were dependent on two key customers with respect to revenue in the three and six months ended August 31, 2013. These customers represented approximately 71% in the first quarter and 70% for the six months ended August 31, 2013, of sales (three and six months ended August 31, 2012—one customer representing 76% and 59% respectively).

At the end of the period covered by this MD&A (such period being the three month and six months ended August 31, 2013), 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 August 31, 2013 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.

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 Administrators. 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 August 31, 2013.

Ernst & Young LLP, the independent registered public accounting firm that audited our consolidated financial statements filed on SEDAR on May 8, 2013, has also audited the effectiveness of our internal control over financial reporting as of February 28, 2013, as stated in their report which is included in the annual audited financial statements.

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.

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.

We derive 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.

Our business agreements may also contain multiple elements. Accordingly, we are 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, we allocate 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. We have

determined the selling price for the undelivered items using VSOE and the delivered items using VSOE if available, TPE if VSOE is not available, or ESP if neither VSOE nor TPE is available.

We generate revenue through direct sales and sales to distributors. We defer 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 previous fiscal year we determined that there was sufficient history on which to base our estimates and, adapted our policy accordingly.

Revenue associated with extended warranty and advanced replacement warranty is recognized ratably 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.

We accrue 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 us 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.

We generate revenue through royalty agreements as a result of the use of our intellectual property. Royalty revenue is recognized as it is earned.

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.

Our standard warranty for customers generally varies between 12 and 39 months. Our extended warranty programs enable customers to continue to have repairs and customer support guidance beyond the standard warranty period.

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, and is thus considered an insignificant deliverable to the overall arrangement and not considered a separate unit of accounting.

We do not offer installation services. Periodically, a customer may request that we arrange for the installation of the equipment through a third party service provider as a condition of the sale. In this case, a separate services agreement is created between us 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.

The revenue recognition concepts highlighted above have not changed as a result of our acquisition of the NSN microwave transport business. Shipping terms through the NSN OEM sales channel follow the Incoterms used by our other customers and do not include acceptance criteria.

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 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. We provide 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.

We determine 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. We recognize accrued interest and penalties on unrecognized tax benefits as interest expense.

We periodically review our provision for income taxes and valuation allowance to determine whether the overall tax estimates are reasonable. When we perform our 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 our financial position and results of operations.

In December 2011, the FASB issued ASU 2011-11, "Disclosures about Offsetting Assets and Liabilities," which creates new disclosure requirements about the nature of an entity's rights of offset and related arrangements associated with its financial instruments and derivative instruments. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods therein, with retrospective application required. The new disclosures are designed to make financial statements that are prepared under U.S. GAAP more comparable to those prepared under International Financial Reporting Standards. The adoption did not have an impact on our consolidated financial statements.

In January 2013, the FASB issued ASU 2013-01, "Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities" ("ASU 2013-01"), which clarifies that the scope of ASU 2011-11 applies to derivatives accounted for in accordance with ASU Topic 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with Section 210-20-45 or Section 815-10-45 or subject to an enforceable master netting arrangement or similar agreement. The adoption did not have an impact on our consolidated financial statements.

Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income

In February 2013, the FASB issued ASU 2013-02, Topic 220—Comprehensive Income: Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income ("ASU 2013-02"). ASU 2013-02 changes the presentation requirements of significant reclassifications out of accumulated other comprehensive income in their entirety and their corresponding effect on net income. For other significant amounts that are not required to be reclassified in their entirety, the standard requires the company to cross-reference to related footnote disclosures. ASU 2013-02 became effective for the company on March 1, 2013. The adoption did not have an impact on our consolidated financial statements.



Reduction in accounts payable balance	(13.3	)
Reduction in capital assets	0.6
Elimination of the capital lease obligation	(1.3	)
Recognition of the termination fee	8.7

Gain on Contract Amendment	(5.3	)

	For the three months ended

	31 Aug, 2013				31 Aug, 2012
	$		%		$		%
North America		6,566		26%		8,626		20%
Europe, Middle East and Africa		4,242		17%		2,777		6%
India		2,413		9%		6,159		14%
NSN Microwave Transport Business		11,706		46%		26,122		59%
Rest of World		526		2%		473		1%

Total		25,453		100%		44,157		100%

	For the six months ended

	31 Aug, 2013				31 Aug, 2012
	$		%		$		%
North America		14,045		28%		18,685		33%
Europe, Middle East and Africa		6,989		14%		4,282		7%
India		3,678		7%		6,159		11%
NSN Microwave Transport Business		24,205		48%		26,122		46%
Rest of World		1,068		2%		1,883		3%

Total		49,985		100%		57,131		100%

	Three Months Ended							Six Months Ended

	August 31, 2013		August 31, 2012		Variance			August 31, 2013		August 31, 2012		Variance
Amortization of Axerra Technology & Customer Relationships		—		170		(170	)		—		451		(451	)
Amortization of NSN related balances (Technology, Customer Relationships & Favourable AR terms)		143		739		(596	)		394		738		(344	)
Amortization of computer software & infrastructure software		294		290		4			602		552		50

		437		1,199		(762	)		996		1,741		(745	)



Reduction in accounts payable balance	(13.3	)
Reduction in capital assets	0.6
Elimination of the capital lease obligation	(1.3	)
Recognition of the estimated termination fee	8.7

Gain on Contract Amendment	(5.3	)



Israeli office closed in FY2013	(0.1	)	(0.2	)
NSN Italian Services—ended in fiscal year 2013	(0.5	)	(0.5	)
Lower variable compensation	(0.3	)	(0.4	)
Cost reductions for the closure of certain foreign business offices	(0.2	)	(0.2	)
Staff reductions and other	(0.1	)	(0.2	)

	(1.2	)	(1.5	)


Closing inventory February 28, 2013	32.7

Flexipacket/Harmony product line increases	1.0
Horizon Compact and Quantum products	(0.8	)
Horizon Compact Plus	1.0
Antennas, peripherals and other	(1.0	)

Ending inventory at August 31, 2013	32.9

			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	$	5,166	$	1,082	$	4,084		—		—

Total	$	5,166	$	1,082	$	4,084		—		—


Balance at May 31, 2013		38,107,454

	Exercise of stock options	10,321
	Other	6,105

Balance at August 31, 2013		38,123,880

	Three months ended August 31, 2013

	Options			Weighted Average Price (CAD)
Opening Balance		2,864,017		$	4.30
Granted		25,100		$	2.85
Exercised		(10,321	)	$	1.56
Forfeited		(78,681	)	$	5.40

Closing Balance		2,800,115		$	4.26



Held-for-trading(1)	9,826	22,959
Loans and receivables(2)	21,007	51,362
Other financial liabilities(3)	47,356	75,690