DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
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 months ended May 31, 2014. This MD&A is dated July 9, 2014 and should be read in conjunction with our unaudited consolidated interim financial statements and corresponding notes for the three months ended May 31, 2014 and the Annual Information Form for the year ended February 28, 2014 (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, 2014.

The consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (GAAP) and are reported in United States dollars ("USD"). The information contained herein is dated as of July 9, 2014 and is current to that date, unless otherwise stated. Our fiscal year commences on March 1 of each year and ends on the last day of February of the following year.

In this document, unless the context requires otherwise, "we", "us", "our", the "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 (whose name was changed to Nokia Solutions and Networks in August 2013 in connection with the acquisition by Nokia Corporation of Siemen's 50% stake in Nokia Siemens Networks) and which now operates as Nokia (referred to herein as either: "Nokia" or "Nokia's Networks business"); 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

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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:

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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

Other risks relating to Nokia identified by Nokia Corporation are set out in Nokia Corporation's annual report on Form 20-F for the year ended December 31, 2013 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 AIF. 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.

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

		Three Months Ended

		May 31, 2014 (Q1 FY2015)			May 31, 2013 (Q1 FY2014)			May 31, 2012 (Q1 FY2013)
REVENUE			28,771			24,532			12,974
	Cost of sales		22,885			21,712			8,841

Gross profit			5,886			2,820			4,133

			20.5%			11.5%			31.9%
EXPENSES
	Research and development		4,265			5,302			4,399
	Selling and marketing		3,365			3,382			3,658
	General and administrative		4,426			4,748			5,270

			12,056			13,432			13,327

Loss before other items			(6,170	)		(10,612	)		(9,194	)
	Amortization of intangible assets		(309	)		(559	)		(542	)
	Accretion expense		(40	)		(65	)		(22	)
	Restructuring expense		—			—			(798	)
	Interest (expense)/income		(425	)		(538	)		29
	Impairment of intangible assets		—			—			(2,869	)
	Gain on change in estimate		101			—			1,190
	Gain on contact amendment		—			5,285			—
	Fair value adjustment—warrant liability		150			—			—
	Foreign exchange gain (loss)		121			(98	)		(1,003	)

Net Loss before income taxes			(6,572	)		(6,587	)		(13,209	)
	Income tax expense (recovery)		95			92			(572	)

Net Loss			(6,667	)		(6,679	)		(12,637	)
	Net Loss Attributable to Non-Controlling Interest		35			54			58

Net Loss applicable to shareholders			(6,632	)		(6,625	)		(12,579	)

Basic & Diluted loss per share			(0.11	)		(0.17	)		(0.35	)
Basic & Diluted weighted average shares outstanding			58,194,153			38,059,919			35,931,347

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated



One time severence payments and changes in the location of staff	(0.2	)
Depreciation on assets acquired through the Nokia acquisition	(0.8	)
Savings in warehousing costs and rent	(0.4	)
Legal and other professional fees related in part to the renewed framework agreement	(0.3	)
Higher materials spending levels	0.3

	(1.4	)

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated



Assets
Current Assets
	Cash and cash equivalents	15,567		18,992
	Trade receivables	21,505		17,408
	Inventory	26,023		30,416
	Other current assets	4,974		5,909
	Deferred tax asset	119		69

		68,188		72,794
Long Term Assets
	Property and equipment	2,964		3,168
	Deferred tax asset	1,536		1,536
	Deferred financing cost	49		60
	Intangible assets	1,466		1,635
	Goodwill	11,927		11,927

		17,942		18,326
Total Assets		86,130		91,120

Liabilities
Current Liabilities
	Accounts payable and accrued liabilities	25,954		29,964
	Deferred revenue	889		984
	Capital lease obligation	1,633		1,795

		28,476		32,743
Long Term Liabilities
	Debt facility	17,500		15,000
	Other long term liabilities	3,549		574
	Warrant Liability	1,048		1,360

		22,097		16,934
Shareholders' equity
	Capital stock	198,769		198,593
	Contributed surplus	7,478		7,118
	Deficit	(161,056	)	(154,505	)
	Accumulated other comprehensive loss	(9,682	)	(9,682	)

Total Shareholder's equity		35,509		41,524
	Non-controlling interests	48		(81	)

Total Equity		35,557		41,443
Total Liabilities and Shareholder's equity		86,130		91,120

Shares issued & outstanding		58,491,243		58,008,746

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

The following table sets out selected financial information for each of our most recently completed 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 end-customers we supply through Nokia. 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.



		FY13						FY14								FY15

Revenue		44,157		38,452		28,294		24,532		25,453		22,169		17,857		28,771
Gross Profit		6,743		7,138		1,487		2,820		2,794		2,460		2,589		5,886
	Gross Profit %	15.3%		18.6%		5.3%		11.5%		11.0%		11.1%		14.5%		20.5%
Operating Expenses		25,009		19,922		18,451		13,432		12,391		12,623		11,790		12,056
Loss before other items—(gross profit less operating expenses)		(18,266	)	(12,784	)	(16,964	)	(10,612	)	(9,597	)	(10,163	)	(9,201	)	(6,170	)
Loss for the period		(1,172	)	(13,936	)	(27,262	)	(6,679	)	(10,601	)	(5,622	)	(11,599	)	(6,667	)
Net loss per share
	Basic and Diluted	(0.03	)	(0.36	)	(0.71	)	(0.17	)	(0.28	)	(0.12	)	(0.20	)	(0.11	)
Weighted average number of shares outstanding
	Basic & Diluted	37,992,859		38,033,222		38,043,594		38,059,919		38,112,887		47,329,275		57,062,936		58,194,153
Total Assets		164,099		152,433		134,994		104,254		89,221		98,113		91,120		86,130

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.

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Key points on our results of operations for the first quarter ended May 31, 2014 when comparing those results to the same period in the previous fiscal year include the following:

Our primary operational objective is to achieve cash flow break-even from operations. We plan to accomplish this objective largely by focusing on the new revenue opportunities we are now working to close on and by continuing to focus on optimizing our costs associated with manufacturing and logistics.

On June 1, 2012 we announced the closing of the acquisition of Nokia's microwave transport business.

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

The net impact of the changes resulting from the renewed framework was a gain on contract amendment of $5.3 million in the three months ended May 31, 2013.

On January 6, 2014, we extended the credit facility with Comerica Bank and Export Development Canada which was set to mature on June 1, 2016. The revised line has been increased to $40.0 million plus $4.0 million for letters of credit and foreign exchange facilities and will expire on June 1, 2016. The new terms of the credit facility include customary terms, conditions, covenants, and representations and warranties, consistent with the facility which was already in place. Credit availability is subject to ongoing compliance with borrowing covenants and short term assets on hand. As at May 31, 2014 we had $17.5 million drawn on this facility, and as of the date of this MD&A we have $19.0 million outstanding. Access to additional available funds is geared to future growth in accounts receivable. The credit facility 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 dollars 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. 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.

As at March 30 and April 30, 2014, we were in breach of one of the covenants then in place on the facility. We obtained waivers from our lenders in May 2014 for these breaches and amended the term of the facility going forward. We were in compliance with all covenants as at May 31, 2014.

In June 2014 during our annual general and special meeting of shareholders, we announced changes to the composition of the board of directors. Jean-Paul Cossart did not stand for re-election as director after several years of service. Russell Frederick also stepped down as director, but will continue in his role as Chief Financial Officer.

We believe that revenue growth will be achieved through both strategic partnerships and direct customer relationships.

We recently announced a frame agreement with Reliance Jio Infocomm Limited, a subsidiary of Reliance Industries Limited. First purchase orders for 5,000 links have now been received to provide

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

microwave products and related services to this Indian Telecom and Broadband Service Provider. DragonWave will provide 5,000 turnkey Horizon Compact+ links in support of the Indian operator's plan to roll out extensive, nationwide 4G/LTE networks. The deployment will also include services to be delivered by our Indian joint venture, DragonWave HFCL.

We are also working very hard with key customers in the United States, to define our role in certain network expansions in that country.

Revenue Guidance—Growth of 50% over Fourth Quarter of Fiscal Year 2014 revised to 60%

On May 14, 2014, at the time of the release of our financial statements for the year ended February 28, 2014 we disclosed that we were seeing an inflection in demand which allowed us to anticipate first quarter revenue growth of approximately 50% over the $17.9 million revenue achieved in the fourth quarter of fiscal year 2014. Subsequently, on June 4, 2014 we updated this guidance with the expectation that revenue growth would approximate 60%, rather than the 50% estimate provided earlier.

The primary drivers for the increase between the fourth quarter of fiscal year 2014 and the first quarter of fiscal year 2015 in USD millions were as follows:

Continued revenue growth could be influenced by the ability of our supply chain to scale to meet demand, among other factors. See "Risks and Uncertainties".

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.

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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		28,771
Cost of Sales		22,885

Gross Margin		5,886
Operating Expenses		12,056
Other Gains/Losses and Expenses		497

Net Loss		(6,667	)
Reconciliation to Non-GAAP Measures
Net Loss, under US GAAP		(6,667	)
	Interest expense	425
	Tax expense	95
	Depreciation of fixed assets	697
	Amortization of intangible assets	309

EBITDA		(5,141	)
Non-Cash and Normalizing Adjustments:
	Stock based compensation	359
	Fair value adjustments—warrant liability	150
	Gain on change in estimate	101
	Accretion expense	40
	Inventory impairment	90

Adjusted EBITDA		(4,401	)

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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. North America, Europe, and the Middle East are the regions where we have had significant sales, but as seen in the first quarter of fiscal year 2015, we have made significant progress in the Africa and Asia Pacific regions. Recently we have been excited by increased customer interest in Central and Latin America as well. Through co-operation with our strategic OEM partner, Nokia, we now have visibility to the geographical location of our shipments through their various warehouses. The table below displays this information.

	For the three months ended May 31, 2014

Geographic Region	Direct & Indirect Sales		OEM sales through Nokia		Total		% of total revenue
Europe		2,249		8,382		10,631		37%
North America		6,553		—		6,553		23%
Asia Pacific		104		4,494		4,598		16%
Middle East		1,599		2,505		4,105		14%
Africa		228		1,265		1,493		5%
India		—		872		872		3%
Carribean & Latin America		401		119		519		2%

		11,134		17,637		28,771		100%

In the previous fiscal year we did not have visibility to the geographic breakdown of sales shipped through Nokia's warehouses to the end customer. Below is the financial information available on the geographic distribution of our sales at that time.

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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

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

General and administrative ("G&A") 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.

Sales through our Nokia OEM channel was the most significant contributor to the increase in sales between the first quarter of fiscal year 2015 and the same period in the prior fiscal year. Project based software spending by a Tier 1 customer in the United States was lower, but sales to other North American customers, including distributors was significantly higher amid renewed focus by the sales team on this customer sector.

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

We saw continued improvements in our gross margins as compared to the same period in the previous year and versus the previous quarter (14.5% in the fourth quarter of fiscal 2014). These improvements are the result of cost reductions across our various product platforms. Also contributing to the margin improvement were strong software sales and features to customers which carry higher margins. The increase in total sales volume also resulted in an increase in our gross margins. We continue to work toward negotiating more favorable pricing with component suppliers and contract manufacturers as well as improving our global logistical model in view of reducing costs and increasing efficiency in delivering our products to our customers located around the world.

The R&D organization has remained largely unchanged in size since the first quarter of fiscal year 2014, growing slightly in Canada and experiencing a small decrease in China. Contracted service spending is often project based and will increase and decrease according to the timing of our product's release dates.

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

The S&M organization which includes marketing, product line management, customer service and sales grew slightly between the first quarter of fiscal year 2014 and the first quarter of fiscal year 2015 as new resources in locations including England and the Middle East were added. The change in the geographic and experience mix of the team means that the compensation costs have not grown significantly despite the growth.

Over the past year efforts to reduce G&A costs have resulted in savings in a number of areas. For example, warehousing and rental costs are lower, a portion of which remains in G&A with the remainder being charged to Cost of Goods Sold. The expenses associated with renegotiating the framework agreement with Nokia in the first quarter of fiscal year 2014 generated higher spending levels during that time which have not been repeated in the first quarter of fiscal year 2015.

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated



IRS payroll taxes refund and reduction in finance staff in Luxembourg	(0.1	)
Lower legal fees; Q1 FY2014 included costs associated with renewed framework with Nokia	(0.2	)
Lower warehousing costs	(0.1	)
Reductions in rental expenses	(0.1	)
Higher bad debt expense (relates to a single invoice)	0.2

	(0.3	)

The only remaining intangible asset associated with the acquisition of Nokia's microwave transport business was the asset associated with the favourable accounts receivable terms in the first quarter of fiscal year 2014. This balance is now fully amortized. Amortization of computer software and infrastructure software has remained consistent.

We continue to accrete a small expense associated with the capital leases which were acquired on the acquisition of Nokia's microwave transport business.

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

We have a credit line available to us of $40.0 million plus $4.0 million for letters of credit and foreign exchange facilities. The credit line will expire on June 1, 2016.

As of the date of this MD&A, $19.0 million is outstanding on the line of credit. At May 31, 2014 we had $17.5 million outstanding. Interest rates vary with market rate fluctuations, with loans bearing interest in the range of 3% to 4% above the applicable base rates. The average debt outstanding in the three months ended May 31, 2014 was $15.3 million, compared to $15.0 million for the same three month period in the previous year. We capitalized the fees associated with the creation and renegotiation of the line and are amortizing those costs over the life of the agreement.

During the three month period ended May 31, 2014, we revised the Italian termination fee estimate and determined the payment schedule of the Italian operations termination fee. This resulted in a gain of $0.1 million in change in estimate. The first payment in the amount of $0.7 million was made in May 2014. As a result of the payment and revaluation, the termination fee liability is valued at $8.2 million at May 31, 2014.

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

As described in the section entitled "Acquisition of Nokia's Microwave Transport Business", a number of factors make up the gain on contract amendment in the previous fiscal year. The following table breaks down those elements, in USD millions:

The warrant liability is required to be presented at its estimated fair value as at each Balance Sheet date. Increases or decreases in fair value of the warrants are included as a component of other income (expense) in the Consolidated Statement of Operations.

The foreign exchange gains and losses for both the three months ended May 31, 2014 and the three months ended May 31, 2013 resulted from the translation of foreign denominated monetary accounts. While we periodically purchase forward contracts to mitigate that risk, there were no contracts in place at May 31, 2014.

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

The expense in both the first quarter of fiscal year 2015 and the first quarter of 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 where no tax losses are available.

As at February 28, 2014, we had cumulative operating tax loss carry forwards in the following jurisdictions: Canada–$87.6 million, United States–$8.3 million, Luxembourg–$54.5 million. We also had capital loss carryforwards in the following jurisdictions: Canada–$16.3 million, United States–$45.5 million. In addition, we had $14.6 million of investment tax credits available to reduce future federal Canadian income taxes payable and $2.6 million available to reduce future provincial income taxes payable.



Key Balance Sheet Amounts and Ratios:
	Cash and Cash Equivalents	15,567	18,992
	Working Capital	39,712	40,051
	Long Term Assets	17,942	18,326
	Long Term Liabilities	22,097	16,934
	Working Capital Ratio	2.4 : 1	2.2 : 1
	Days Sales Outstanding in accounts receivable	55 days	81 days
	Inventory Turnover	3.4 times	1.9 times

As at May 31, 2014, we had $15.6 million in Cash and Cash Equivalents ("Cash"), representing a $3.4 million decrease from the Cash balance at February 28, 2014.

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

The following table explains the change in Cash during the three months ended May 31, 2014.



Beginning Cash Balance		18,992
Net Income adjusted for Non-Cash Items		(5,151	)
	Change in inventory	4,393
	Change in accounts receivable, and other current assets	(3,162	)
	Change in accounts payable and other liabilities	(1,393	)

Working capital combined with long term liability changes		(162	)

	Capital asset acquisitions	(495	)
	Purchases of software	(140	)
	Change in debt facility	2,500

Non-working capital cash changes		1,865

Other		23

Ending Cash Balance		15,567

Key points associated with the Cash usage of $3.4 million in the first quarter of fiscal year 2015 include:

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Changes in working capital

Beginning working capital balance	40,051
Cash and cash equivalents	(3,425	)
Trade receivables	4,097
Inventory	(4,393	)
Other current assets	(935	)
Future income tax asset	50
Accounts payable and accrued liabilities	4,010
Deferred revenue	95
Capital lease obligation	162

Net change in working capital	(339	)

Ending working capital balance	39,712

The trade receivables balance increased by $4.1 million in the quarter as a result of the increase in sales. Our days sales outstanding dropped from 81 days at February 28, 2014 to 55 days at May 31, 2014. Our allowance for doubtful accounts continues to represent a small percentage of our total trade receivables outstanding (May 31, 2014–3.0%; February 28, 2014–3.0%).

As at May 31, 2014, one customer exceeded 10% of the total receivable balance. This customer represented 62% of the trade receivables balance (February 28, 2014–one customer represented 56% of the trade receivables balance).

Included in G&A expenses is an expense of $148 thousand related to bad debt expense for the three months ended May 31, 2014 (first quarter fiscal year 2015–$5 thousand).

The inventory balance decreased by $4.4 million relative to the closing balance at February 28, 2014. By product category, the decreases and increases in inventory may be described as follows in USD millions:

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

The accounts payable and accrued liabilities balance decreased by $4.0 million between February 28, 2014 and May 31, 2014. Of that decrease $2.9 million relates to the reclassification of a portion of the termination fee from short term to long term. No changes have been made in the rate at which we pay our suppliers.

On September 23, 2013, pursuant to our public offering of units (the "Equity Offering"), we issued 11,910,000 common shares and 8,932,500 warrants for proceeds, before deducting fees and expenses, of approximately $25.0 million. After deducting fees and expenses, we realized net proceeds of $22.4 million. Our net proceeds from the Equity Offering, after payment of the underwriters' fee and deducting the expenses of the Equity Offering were $22.4 million.

As previously disclosed we planned to use the proceeds we received from the Equity Offering as follows: approximately $15.0 million to strengthen our balance sheet, approximately $5.0 million to fund working capital and approximately $2.4 million for general corporate purposes. In our industry, a strong balance sheet (in the sense of a cushion of available cash) is attractive to customers as it demonstrates the capacity to ramp up and support higher production levels. In some longer term and larger deployments, a certain amount of cash on the balance sheet is a pre-condition to qualifying to supply products. To the extent we are successful in winning more business; funds allocated to strengthening our balance sheet may be re-allocated to supporting higher levels of production, including purchases of component inventory to support our supply chain. Any amounts for general working capital remain unallocated and will be expended at the discretion of management.

Although we intend to use the net proceeds from the Equity Offering for the purposes set forth above, we reserve the right to use such net proceeds for other purposes to the extent that circumstances, including unforeseen events and other sound business reasons, make such use necessary or prudent.

The following table sets out a comparison of the intended use of proceeds disclosed in the prospectus supplement dated September 18, 2013 (the "Intended Use of Proceeds") publicly filed in connection with the Equity Offering and actual use of proceeds from the Equity Offering (other than working capital), along with an explanation of the variances and the impact of the variances on our ability to achieve our business objectives and milestones:

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Our consolidated financial statements for the three month period ended May 31, 2014 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 three years, mainly attributable to expense base reductions that lagged reductions in sales volumes, and our acquisition and integration of Nokia's microwave transport business.

We have formulated a plan to return to cash break-even and to continue to operate as a going concern. Some of the significant assumptions and associated risks of our plan include:

While we believe that our assumptions are reasonable, actual events or circumstances may cause the assumptions to be incorrect and actual results may differ materially from the plan.

In addition, DragonWave as a publicly traded company has access to cash resources through the equity markets.

Future minimum operating lease payments as at May 31, 2014 per fiscal year relate to leases of office and warehouse space.

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.

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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

The following tables show common share activity in the first quarter of fiscal year 2015.

As at May 31, 2014 there were 58,491,243 common shares issued and outstanding, options to purchase 3,182,681 common shares granted under our stock option plan, and 2,771,000 warrants were exercisable for common shares, with the number of common shares issuable upon exercise subject to adjustment in accordance with terms of the warrants.

As of July 3, 2014 there were 58,569,896 common shares issued and outstanding, 3,160,415 options to purchase common shares outstanding under our stock option plan, and 2,714,750 warrants exercisable for common shares, with the number of common shares issuable upon exercise subject to adjustment in accordance with terms of the warrants.

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 month period ended May 31, 2014 a total of 8,281 common shares were

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

purchased by employees at fair market value, while we issued 2,070 common shares as its matching contribution. The shares we contributed will vest 12 months after issuance.

We record an expense equal to the fair value of shares granted pursuant to the ESPP over the period the shares vest. The total fair value of the shares earned during the three month period ended May 31, 2014 was $4 thousand (three months ended May 31, 2013–$11 thousand). The fair value of the unearned ESPP shares as at May 31, 2014 was $12 thousand (May 31, 2013–$16 thousand). The number of shares held for release, and still restricted under the ESPP at May 31, 2014 was 7,466 (May 31, 2013–6,895).

City	Country	Lessor	Lease Expiry	Cost per Month

Dubai	UAE	TECOM Investments FZ-LLC	November, 2014	$	5,107
Luxembourg City	Luxembourg	FPS Office 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 and Frank Neighbor Place + Office Space at 411 Legget Drive)	Canada	Kanata Research Park	November, 2016	$	115,000
Shanghai	China	Caike Property (Shanghai) Co., Ltd	January, 2015	$	55,404
Herzlyia	Israel	Margalin Holdings Ltd.	November, 2014	$	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.

On January 21, 2014, we subleased a portion of our Kanata office space and as such we recorded, during the year ended February 28, 2014, net rent expense of $84 thousand representing the present value of our estimated remaining rent expense for the duration of the lease after taking into account estimated future sublease income and deferred rent on the facility.

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 we take provisions against any portion of that inventory that we do not expect to be fully used

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

based on current forecasts and projections. As mentioned previously, we would generally 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.

As at May 31, 2014 we have provisions totaling $0.1 million on inventory held by contract manufacturers that we do not expect to be fully used.

Financial instruments are classified into one of the following categories: assets held at fair value, loans and receivables, other financial liabilities, or liabilities held at fair value.

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

We classify our fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The accounting standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The inputs fall into three levels that may be used to measure fair value:

Level 1–Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.

Level 2–Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Level 3–Significant unobservable inputs which are supported by little or no market activity.

Our foreign exchange forward contracts are classified within Level 2 as they are based on foreign currency rates quoted by banks and other public data source. The fair values of the foreign exchange forward contracts are based upon the difference between the forward exchange rate and the contract rate with expected cash flows and effect on the consolidated statements of operations expected to occur upon settlement;

The warrant liability is classified as Level 3. We use a Monte-Carlo Simulation model to estimate the fair value of the warrants. Significant assumptions used at May 31, 2014 for the warrants include a dividend yield of 0%, a 1% assumption that the fundamental transaction will happen every year, volatility of 60%, and a risk free spot rate term structure;

As at May 31, 2014 we held the following Level 3 financial instruments carried at fair value on the consolidated balance sheet.

As at February 28, 2014, we held the following Level 2 and Level 3 financial instruments carried at fair value on the consolidated balance sheet.

A reconciliation of the warrant liability measured at fair value with the use of significant unobservable inputs (Level 3) for the three month period ended May 31, 2014 follows:

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Cash, 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, excluding deferred financing costs, recognized during the three month period ended May 31, 2014 was $0.3 million on our cash, cash equivalents and debt facility (three months ended May 31, 2013–expense of $0.3 million).

In addition to trade receivables and other receivables, we are exposed to credit risk on our cash and cash equivalents 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 may 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. We had no forward contracts in place at May 31, 2014 (February 28, 2014–$1.2 million). 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 May 31, 2014, 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 loss of $0.1 million for the three months ended May 31, 2014 (three months ended May 31, 2013–decrease of $0.2 million) with an equal and opposite effect if the US dollar had depreciated 1% against all foreign currencies at May 31, 2014.

We were dependent on one key customer with respect to revenue in the three months ended May 31, 2014. This customer represented approximately 61% of sales for the three months ended May 31, 2014 (three months ended May 31, 2013–two customers represented 69%).

At the end of the period covered by this MD&A (such period being the three months ended May 31, 2014), 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 May 31, 2014 to give reasonable assurance that the information we are required to disclose in reports that we file or

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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 May 31, 2014.

Ernst & Young LLP, the independent registered public accounting firm that audited our consolidated financial statements filed on SEDAR on May 14, 2014, has also audited the effectiveness of our internal control over financial reporting as of February 28, 2014, 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.

We regularly review inventory quantities on hand and record a provision for excess and obsolete inventory based on factors including our estimated forecast of product demand, the stage of the product life cycle and production requirements for the units in question.

We carry inventory for the purposes of supporting our product warranty. Standard warranty is typically 13 months but we earn revenue by providing enhanced and extended warranty and repair service during and beyond the standard warranty period. Customer service inventory consists of both component parts and finished units.

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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 both for the undelivered items and the delivered items using ESP.

We generate revenue through direct sales and sales to distributors. We defer the recognition of a portion of sales to distributors based on 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.

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.

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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 Nokia's microwave transport business. Shipping terms through the Nokia 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 are expensed as incurred unless we 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

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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 our deferred tax assets when we believe 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.

Parent's Accounting for the Cumulative Translation Adjustment Upon Derecognition of Certain Subsidiaries or Groups of Assets Within a Foreign Entity or of an Investment in a Foreign Entity

In March 2013, the FASB issued ASU 2013-05, "Foreign Currency Matters." ASU 2013-05 resolves the diversity in practice about whether Subtopic 810-10, Consolidation-Overall, or Subtopic 830-30 "Foreign Currency Matters, Translation of Financial Statements", ASU 2013-05 applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity. In addition, the amendments in ASU 2013-05 resolve the diversity in practice for the treatment of business combinations achieved in stages (sometimes also referred to as step acquisitions) involving a foreign entity. ASU 2013-05 became effective for the Company on March 1, 2014. The adoption did not have an impact on our consolidated interim financial statements.

Obligations Resulting From Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date

In February 2013, the FASB issued ASU No. 2013-04, "Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date" ("ASU 2013-04"). ASU 2013-04 provides guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this ASU is fixed at the reporting date. The guidance requires an entity to measure those obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors as well as any additional amount the reporting entity expects to pay on behalf of its co-obligors. ASU 2013-04 also requires an entity to disclose the nature and amount

DragonWave Inc.
Management's Discussion and Analysis
For the three months ended May 31, 2014
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

of those obligations. The ASU became effective for the Company on March 1, 2014. The adoption did not have an impact on our consolidated interim financial statements.

Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists

In June 2013, the FASB issued ASU No. 2013-11, "Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists" ("ASU 2013-11"). The amendments provide guidance on the presentation of unrecognized tax benefits and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments in this ASU became effective for the Company on March 1, 2014. The adoption did not have an impact on our consolidated interim financial statements.

In May 2014, the FASB issued ASU No. 2014-9, "Revenue from Contracts with Customers". The amendments in this Update create Topic 606, Revenue from Contracts with Customers, and supersede the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, the amendments supersede the cost guidance in Subtopic 605-35, Revenue Recognition–Construction-Type and Production-Type Contracts, and create new Subtopic 340-40, Other Assets and Deferred Costs–Contracts with Customers. The amendments in this ASU are effective for reporting periods beginning after December 15, 2016, with no early adoption permitted. The Company is currently assessing the impact this amendment will have on the Company's consolidated financial statements.


Three months ended February 28, 2014		17.9

Sales through Nokia OEM Channel		7.0
Increased sales to customers in the Middle East		2.1
Sales to North American customers		1.5
Other		0.3

	Total Changes	10.9

Three months ended May 31, 2014		28.8

	For the three months ended May 31, 2013

	$		%
North America		7,479		31%
Europe, Middle East and Africa		2,747		11%
India		1,265		5%
OEM sales through Nokia		12,499		51%
Rest of World		542		2%

Total		24,532		100%


Three months ended May 31, 2013		24.5

Sales through Nokia OEM channel		3.6
Sales to Tier 1 North American customers		(1.6	)
Sales through our direct and indirect North American channel		2.3

	Total changes	4.3

Three months ended May 31, 2014		28.8



Depreciation–assets acquired primarily through the Nokia acquisition	(0.5	)
Reduction in compensation related spending and other costs–China	(0.3	)
Contracted Services and Other	(0.2	)

	(1.0	)

	Three Months Ended

	May 31, 2014		May 31, 2013		Variance
	$		$		$
Amortization of Nokia intangible–favourable AR terms		—		250		(250	)
Amortization of computer software & infrastructure software		309		309		—

		309		559		(250	)



Severence costs in Q1 FY2014 not repeated in Q1 FY2015	(0.2	)
Travel & living, professional fees	0.1
Increased spending on external contracted resources	0.1

	(0.0	)



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	)


Closing inventory February 28, 2014	30.4

Flexipacket/Harmony product line increases	(2.4	)
Horizon Compact and Quantum products	(1.6	)
Horizon Compact Plus	(0.6	)
Antennas, peripherals and other	0.2

Ending inventory at May 31, 2014	26.0

Intended Use of Proceeds	Estimated Amount		Actual Use of Proceeds	Actual Amount		Variances

Strengthen our balance sheet	$	15.0 million	Strengthen our balance sheet	$	13.2 million	Reduction represents the requirement to utilize cash to fund the growth in revenue
General corporate purposes	$	2.4 million	General corporate purposes	$	2.4 million	No variance.

			Payment due by period (Figures are in thousands of USD)

Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Operating Lease Obligations	$	3,649	$	1,414	$	2,235		—		—

Total	$	3,649	$	1,414	$	2,235		—		—



Balance at February 28, 2014		58,008,746

	Exercise of stock options	—
	Exercise of warrants	473,646
	Other	8,851

Balance at May 31, 2014		58,491,243

	Three months ended May 31, 2014

	Options			Weighted Average Price (CAD)
Options outstanding at February 28, 2014		3,173,321		$	3.71
Granted		27,700		$	1.47
Exercised		—		$	—
Forfeited		(18,340	)	$	3.39

Options outstanding at May 31, 2014		3,182,681		$	3.69



Assets held at fair value (A)	15,567	19,011
Loans and receivables (B)	22,607	19,405
Other financial liabilities (C)	45,240	44,043
Liabilities held at fair value (D)	1,048	1,360



Financial Assets
Foreign exchange forward contracts	19	—	19
Financial Liabilities
Warrant liability	—	1,360	1,360

	Three month period ended May 31, 2014

	Warrants			$
Balance at February 28, 2014		3,171,000			1,360
Fair value adjustment–warrant liability		—			(150	)
Exercise of warrants		(400,000	)		(162	)

Balance at May 31, 2014		2,771,000			1,048