6-K

QuickLinks -- Click here to rapidly navigate through this document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 6-K

REPORT OF FOREIGN ISSUER

Pursuant To Rule 13a-16 Or 15d-16 Of
The Securities Exchange Act Of 1934

FOR THE MONTH OF MAY 2016

COMMISSION FILE NUMBER: 001-34491

DRAGONWAVE INC.

(Translation of registrant's name into English)

411 Legget Drive, Suite 600
Ottawa, Ontario, K2K 3C9
Canada

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

ý Form 20-F o Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):    o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):    o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

o Yes ý No

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):    n/a

The following exhibits are issued by DragonWave Inc.:

Exhibit Number		Description
	99.1	DragonWave Reports Fourth Quarter and Full Fiscal Year 2016 Results
	99.2	Management's Discussion and Analysis for the three months ended February 29, 2016
	99.3	Annual Audited Consolidated Financial Statements as at February 29, 2016

SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DRAGONWAVE INC. (Registrant)
By:	/s/ PATRICK HOUSTON
Name:	Patrick Houston
Title:	Chief Financial Officer

Date: May 18, 2016

QuickLinks

SIGNATURES

EX-99.1

Exhibit 99.1

DragonWave Reports Fourth Quarter and Full Fiscal Year 2016 Results

OTTAWA, CANADA — May 18, 2016 — DragonWave Inc. (TSX:DWI; NASDAQ:DRWI) a leading global supplier of packet microwave radio systems for mobile and access networks, today announced financial results for the fourth quarter and full fiscal year ended February 29, 2016. All figures are in U.S. dollars and were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).

Revenue for the fourth quarter of fiscal year 2016 was $12.0 million, compared with $21.0 million in the third quarter of fiscal year 2016. Revenue for the fiscal year 2016 was $86.3 million, compared to $157.8 million in the previous year. Revenue from the Nokia channel in the fiscal year decreased from $84.3 million in the previous fiscal year, to $37.6 million. This was mainly attributable to the announcement and completion of the merger of Nokia and Alcatel during 2015.

Gross profit when adjusted for non-cash inventory provision was 22.3% in the fourth quarter of fiscal year 2016, as compared to 24.5% in the third quarter of fiscal year 2016.

See “Non-GAAP Financial Measures” below for a reconciliation of gross profit adjusted for inventory provision to the most directly comparable measure calculated in accordance with GAAP and presented in DragonWave’s financial statements.

Operating expenses excluding restructuring charges were reduced from $8.7 million in the previous quarter to $7.6 million in the fourth quarter.

Net loss attributable to shareholders in the fourth quarter of fiscal year 2016 was ($9.1) million or ($3.02) per basic and diluted share. This compares to a net loss attributable to shareholders of ($6.2) million or ($2.07) per basic and diluted share in the third quarter of fiscal year 2016.

“The end of our relationship with Nokia for forward product has required a restructuring of our operations which is underway. Our confidence about significant near term projects within our existing North American customer base, the expanded opportunity created by Harmony Enhanced Multi Channel and adjusting our geographic focus towards higher margin areas are all important components of this restructuring strategy.” said DragonWave President and CEO, Peter Allen.

Cash and cash equivalents totaled $4.3 million at the end of the fourth quarter of fiscal year 2016, compared to $7.8 million at the end of the third quarter of fiscal year 2016. The decrease in cash and cash equivalents of $3.5 million included debt repayments of $4.5 million during the quarter.

Webcast and Conference Call Details:

The DragonWave management team will discuss the results on a webcast and conference call beginning at 8:30 a.m. Eastern Time on May 19, 2016.

The live webcast and presentation slides will be available at the Investor Relations section of the DragonWave website at: http://investor.dragonwaveinc.com/events.cfm

An archive of the webcast will be available at the same link.

Conference call dial-in numbers:

Toll-free North America Dial-in: (877) 312-9202

International Dial-in: (408) 774-4000

About DragonWave

DragonWave® is a leading provider of high-capacity packet microwave solutions that drive next-generation IP networks.  DragonWave’s carrier-grade point-to-point packet microwave systems transmit broadband voice, video and data, enabling service providers, government agencies, enterprises and other organizations to meet their increasing bandwidth requirements rapidly and affordably.  The principal application of DragonWave’s products is wireless network backhaul, including a range of products ideally suited to support the emergence of underlying small cell networks.  Additional solutions include leased line replacement, last mile fiber extension and enterprise networks.  DragonWave’s corporate headquarters is located in Ottawa, Ontario, with sales locations in Europe, Asia, the Middle East and North America.  For more information, visit http://www.dragonwaveinc.com.

DragonWave®, Horizon® and Avenue® are registered trademarks of DragonWave Inc.

Non-GAAP Financial Measures

This press release contains certain information that is not consistent with financial measures prescribed under GAAP. We break out “Gross profit before inventory provisions” as this measure allows management to evaluate our operational performance and compare to prior periods more effectively. “Gross profit before inventory provisions” does not have any standardized meaning prescribed by GAAP, it is therefore unlikely to be comparable to similar measures presented by other issuers and is not designed to replace other measures of financial performance or the statement of operations as an indicator of performance. This measure should not be considered in isolation or as a substitute for other measures of performance calculated according to GAAP. We believe that it is useful to compare gross profit results without the impact of inventory provisions, since our inventory provisions generally relate to technical obsolescence and excess due to market changes. We believe this non-GAAP measure also provides investors with a better ability to understand our operational performance. We calculate “Gross profit before inventory provisions” consistently over each fiscal period.

The most directly comparable GAAP measure presented in our consolidated financial statements for the three and twelve months ended February 29, 2016 to “Gross profit before inventory provisions” is “Gross profit”.

Forward-Looking Statements

Certain statements in this release constitute forward-looking statements or forward-looking information as defined by applicable securities laws. Forward-looking statements include statements as to DragonWave’s forward opportunities and the potential benefits of, and demand for: DragonWave’s products; DragonWave’s strategy and ability to execute on that strategy; and the outcome of DragonWave’s restructuring efforts. These statements are subject to certain assumptions, risks and uncertainties, including our view of the relative position of DragonWave’s products compared to competitive offerings in the industry, and our ongoing efforts to manage our cash flows.

Forward-looking statements are provided to help external stakeholders understand DragonWave’s expectations as of the date of this release and may not be appropriate for other purposes. Readers are cautioned not to place undue reliance on such statements. DragonWave’s actual results, performance, achievements and developments may differ materially from the results, performance, achievements or developments expressed or implied by such statements, as a result of the risks identified above as well as other risks identified in our publicly filed documents. Material risks and uncertainties relating to our business are described under the heading “Risks and Uncertainties” in the MD&A dated May 18, 2016 and in the Company’s Annual Information Form and other public documents filed by DragonWave with Canadian and United States securities regulatory authorities, which are available at www.sedar.com and www.sec.gov, respectively. DragonWave assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by law.

Investor Contact: Peter Allen President & CEO DragonWave Inc. investor@dragonwaveinc.com Tel: +1-613-599-9991 ext 2222 Media Contact: Nadine Kittle Marketing Communications DragonWave Inc. nkittle@dragonwaveinc.com Tel: +1-613-599-9991 ext 2262 Media Contact: Becky Obbema Interprose Public Relations (for DragonWave) Becky.Obbema@interprosepr.com Tel: +1-408-778-2024

CONSOLIDATED BALANCE SHEETS

Expressed in US $000’s except share amounts

	As at		As at
	February 29,		February 28,
	2016		2015
Assets
Current Assets
Cash and cash equivalents	4,277		23,692
Trade receivables	18,986		48,626
Inventory	22,702		24,294
Other current assets	2,777		5,895
	48,742		102,507
Long Term Assets
Property and equipment	3,702		4,322
Deferred tax asset	—		1,485
Deferred financing cost	—		18
Intangible assets	623		794
Goodwill	—		11,927
	4,325		18,546
Total Assets	53,067		121,053
Liabilities
Current Liabilities
Debt facility	22,152		—
Accounts payable and accrued liabilities	23,557		40,677
Deferred revenue	1,944		830
Deferred tax liability	294		—
Warrant liability	117		—
	48,064		41,507
Long Term Liabilities
Debt facility	—		32,400
Other long term liabilities	773		1,139
Warrant liability	3		1,239
	776		34,778
Commitments
Shareholders’ equity
Capital stock	221,128		220,952
Contributed surplus	9,235		8,388
Deficit	(218,225	)	(175,921	)
Accumulated other comprehensive loss	(9,618	)	(9,618	)
Total Shareholders’ equity	2,520		43,801
Non-controlling interests	1,707		967
Total Equity	4,227		44,768
Total Liabilities and Equity	53,067		121,053
Shares issued & outstanding	3,020,069		3,011,632

CONSOLIDATED STATEMENTS OF OPERATIONS

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

	Three months ended				Twelve months ended
	February 29,		February 28,		February 29,		February 28,
	2016		2015		2016		2015
REVENUE
Hardware and other	8,601		41,654		71,393		150,432
Services	3,440		2,088		14,902		7,334
	12,041		43,742		86,295		157,766
COST OF SALES
Hardware and other	7,794		32,923		58,991		123,950
Services	1,563		1,135		8,917		3,051
Inventory provision	3,181		1,187		4,416		2,771
	12,538		35,245		72,324		129,772
Gross profit	(497	)	8,497		13,971		27,994
EXPENSES
Research and development	2,425		4,271		13,406		18,657
Selling and marketing	1,858		3,745		10,572		13,975
General and administrative	3,311		3,288		13,798		15,085
	7,594		11,304		37,776		47,717
Loss before other items	(8,091	)	(2,807	)	(23,805	)	(19,723	)
Goodwill impairment	—		—		(11,927	)	—
Restructuring costs	(130	)	—		(1,549	)	—
Amortization of intangible assets	(96	)	(207	)	(577	)	(1,188	)
Accretion expense	(37	)	(59	)	(205	)	(168	)
Interest expense	(424	)	(452	)	(2,014	)	(1,557	)
Warrant issuance expenses	—		—		—		(221	)
Gain on change in estimate	—		(234	)	—		67
Gain on sale of fixed assets	—		—		—		18
Fair value adjustment - warrant liability	(69	)	979		1,119		2,007
Foreign exchange (loss) gain	(307	)	327		(331	)	846
Loss before income taxes	(9,154	)	(2,453	)	(39,289	)	(19,919	)
Income tax expense	129		(330	)	2,275		717
Net loss and comprehensive loss	(9,283	)	(2,123	)	(41,564	)	(20,636	)
Net income attributable to non-controlling interest	152		(145	)	(740	)	(884	)
Net loss and comprehensive loss attributable to shareholders	(9,131	)	(2,268	)	(42,304	)	(21,520	)
Net loss and comprehensive loss per share
Basic and diluted	(3.02	)	(0.75	)	(14.01	)	(7.90	)
Weighted average shares outstanding
Basic and diluted	3,019,712		3,011,065		3,019,259		2,724,467

EX-99.2

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 99.2

INDEPENDENT AUDITORS' REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of
DragonWave Inc.

        We have audited the accompanying consolidated financial statements of DragonWave Inc., which comprise the consolidated balance sheets as at February 29, 2016 and February 28, 2015 and the consolidated statements of operations, comprehensive loss, cash flows and changes in equity for each of the years in the two-year period ended February 29, 2016, and a summary of significant accounting policies and other explanatory information.

Management's responsibility for the consolidated financial statements

        Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with United States generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' responsibility

        Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

        An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

        We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

        In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of DragonWave Inc. as at February 29, 2016 and February 28, 2015, and the results of its operations and its cash flows for each of the years in the two-year period ended February 29, 2016 in accordance with United States generally accepted accounting principles.

Emphasis of matter

        The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has recurring losses from operations and has a capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Ottawa, Canada
May 18, 2016

/s/ Ernst & Young LLP
Chartered Professional Accountants
Licensed Public Accountants

1 -- Page

CONSOLIDATED BALANCE SHEETS

Expressed in US $000's except share amounts

	Note		As at February 29, 2016			As at February 28, 2015
Assets
Current Assets
Cash and cash equivalents		4		4,277			23,692
Trade receivables		5		18,986			48,626
Inventory		6		22,702			24,294
Other current assets		7		2,777			5,895
				48,742			102,507
Long Term Assets
Property and equipment		8		3,702			4,322
Deferred tax asset		20		—			1,485
Deferred financing cost				—			18
Intangible assets		9		623			794
Goodwill		9		—			11,927
				4,325			18,546
Total Assets		11		53,067			121,053
Liabilities
Current Liabilities
Debt facility		11		22,152			—
Accounts payable and accrued liabilities		10		23,557			40,677
Deferred revenue				1,944			830
Deferred tax liability		20		294			—
Warrant liability		13, 17		117			—
				48,064			41,507
Long Term Liabilities
Debt facility		11		—			32,400
Other long term liabilities		12		773			1,139
Warrant liability		13, 17		3			1,239
				776			34,778
Commitments		15
Shareholders' equity
Capital stock		13		221,128			220,952
Contributed surplus		13		9,235			8,388
Deficit				(218,225	)		(175,921	)
Accumulated other comprehensive loss				(9,618	)		(9,618	)
Total Shareholders' equity				2,520			43,801
Non-controlling interests		3		1,707			967
Total Equity				4,227			44,768
Total Liabilities and Equity				53,067			121,053
Shares issued & outstanding		14		3,020,069			3,011,632

(Signed) CLAUDE HAW
Director
(Signed) LORI O'NEILL
Director

See Note 1: Nature of Business, Basis of Presentation and Going Concern
See accompanying notes

2 -- Page

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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

			Twelve months ended
	Note		February 29, 2016			February 28, 2015
REVENUE
Hardware and other		18		71,393			150,432
Services		18		14,902			7,334
				86,295			157,766
COST OF SALES
Hardware and other		6		58,991			123,950
Services		6		8,917			3,051
Inventory provision		6		4,416			2,771
				72,324			129,772
Gross profit				13,971			27,994
EXPENSES
Research and development				13,406			18,657
Selling and marketing				10,572			13,975
General and administrative				13,798			15,085
				37,776			47,717
Loss before other items				(23,805	)		(19,723	)
Goodwill impairment		9		(11,927	)		—
Restructuring costs		22		(1,549	)		—
Amortization of intangible assets		9		(577	)		(1,188	)
Accretion expense				(205	)		(168	)
Interest expense		11, 17		(2,014	)		(1,557	)
Warrant issuance expenses				—			(221	)
Gain on change in estimate				—			67
Gain on sale of fixed assets				—			18
Fair value adjustment — warrant liability		13		1,119			2,007
Foreign exchange (loss) gain				(331	)		846
Loss before income taxes				(39,289	)		(19,919	)
Income tax expense		20		2,275			717
Net loss and comprehensive loss				(41,564	)		(20,636	)
Net income attributable to non-controlling interest				(740	)		(884	)
Net loss and comprehensive loss attributable to shareholders				(42,304	)		(21,520	)
Net loss and comprehensive loss per share
Basic and diluted		14		(14.01	)		(7.90	)
Weighted average shares outstanding
Basic and diluted		14		3,019,259			2,724,467

See accompanying notes

3 -- Page

CONSOLIDATED STATEMENTS OF CASH FLOWS

Expressed in US $000's

			Twelve months ended
	Note		February 29, 2016			February 28, 2015
Operating activities
Net loss				(41,564	)		(20,636	)
Items not affecting cash
Goodwill impairment		9		11,927			—
Amortization of property and equipment		8		1,931			2,320
Amortization of intangible assets		9		577			1,188
Accretion expense				205			168
Interest expense				—			28
Gain on change in estimate				—			(67	)
Gain on contract amendment				—			(530	)
Fair value adjustment – warrant liability		13		(1,119	)		(2,007	)
Stock-based compensation		13		988			1,270
Unrealized foreign exchange loss				485			913
Deferred income tax expense				1,841			59
				(24,729	)		(17,294	)
Changes in non-cash working capital items		16		18,236			(14,343	)
				(6,493	)		(31,637	)
Investing activities
Acquisition of property and equipment				(1,311	)		(3,474	)
Acquisition of intangible assets				(406	)		(347	)
				(1,717	)		(3,821	)
Financing activities
Repayments on capital lease obligation				(507	)		(739	)
Contribution by non-controlling interest in DW-HFCL		3		—			164
Proceeds from issuance of warrant				—			2,551
Proceeds from debt facility		11		1,300			17,400
Repayment of debt facility		11		(11,548	)		—
Issuance of common shares, net				35			21,695
				(10,720	)		41,071
Effect of foreign exchange on cash and cash equivalents				(485	)		(913	)
Net increase / (decrease) in cash and cash equivalents				(19,415	)		4,700
Cash and cash equivalents at beginning of period				23,692			18,992
Cash and cash equivalents at end of period				4,277			23,692
Cash paid during the year for interest				2,335			1,190
Cash paid during the year for taxes				522			802

See accompanying notes

4 -- Page

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Expressed in US $000's except share amounts

	Common Shares		Capital Stock		Contributed Surplus			Deficit			AOCL			Non- Controlling Interest			Equity
Balance at February 28, 2014		2,320,349	$	198,593	$	7,118		$	(154,505	)	$	(9,682	)	$	(81	)	$	41,443
Stock-based compensation		—		—		1,270			—			—			—			1,270
Public offering		637,100		21,631		—			—			—			—			21,631
Exercise of warrants		52,042		664		—			—			—			—			664
Share issuance		2,141		64		—			104			64			—			232
Other comprehensive loss		—		—		—			—			—			164			164
Net (loss) / income		—		—		—			(21,520	)		—			884			(20,636	)
Balance at February 28, 2015		3,011,632	$	220,952	$	8,388		$	(175,921	)	$	(9,618	)	$	967		$	44,768
Stock-based compensation		—		—		988			—			—			—			988
Exercise of restricted share units		2,400		133		(133	)		—			—			—			—
Share issuance		6,037		43		(8	)		—			—			—			35
Net (loss)/income		—		—		—			(42,304	)		—			740			(41,564	)
Balance at February 29, 2016		3,020,069	$	221,128	$	9,235		$	(218,225	)	$	(9,618	)	$	1,707		$	4,227

See accompanying notes

5 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

1. NATURE OF BUSINESS, BASIS OF PRESENTATION AND GOING CONCERN

        DragonWave Inc. [the "Company"], incorporated under the Canada Business Corporations Act in February 2000, is a provider of high-capacity packet microwave solutions that drive next-generation IP networks.

        The Company's common shares are traded on the Toronto Stock Exchange under the trading symbol DWI and on the NASDAQ Capital Market under the symbol DRWI.

        The Company's warrants issued from the public issuance on August 1, 2014 are traded on the Toronto Stock Exchange under the symbol DWI.WT and on the NASDAQ Capital Market under the symbol DRWIW.

        These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: DragonWave Corp., incorporated in the state of Delaware, USA, DragonWave PTE. LTD., incorporated in Singapore, DragonWave S.à r.l., incorporated in Luxembourg, DragonWave Telecommunication Technology (Shanghai) Co., Ltd., incorporated in China, DragonWave Mexico S.A. de C.V., incorporated in Mexico, Axerra Networks Asia Pacific Limited, incorporated in Hong Kong, DragonWave India Private Limited, incorporated in India and DragonWave Inc.'s majority owned subsidiary, DragonWave HFCL India Private Limited, incorporated in India. All intercompany accounts and transactions have been eliminated upon consolidation.

        The consolidated financial statements of the Company have been prepared in United States dollars following United States Generally Accepted Accounting Principles ["U.S. GAAP"].

        The consolidated financial statements for the year ended February 29, 2016 has been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the disbursement of liabilities and commitments in the normal course of business in the foreseeable future. The Company has a history of losses and has consumed significant cash resources in the past, and has continued to do so in the year ended February 29, 2016. Recently, additional pressure has been placed on the Company's liquidity position as a result of reduced revenue from a significant OEM channel and a dispute over inventory shipped to a customer in India in June 2015.

        The Company has been able to make progress in restructuring the business. This progress includes the following highlights:

•

Reduced operating expenses by 33% in the fourth quarter of fiscal year 2016 compared to the same period in the previous year primarily through reduction in international staff levels;

•

Raised $4,350 in equity in a registered direct offering on April 7, 2016;

•

Reduced outstanding debt on the Company's credit facility by $10,248 between February 28, 2015 and February 29, 2016 by leveraging its working capital;

•

Negotiated forbearance terms with its credit facility partners;

•

Initiated arbitration proceedings to seek resolution to its customer dispute in India.

        Despite the progress identified above, the Company remains in breach of the terms of its debt facility and is currently operating under its second forbearance period. See Note 11 for further details on the debt facility. No long term debt facility agreement has been reached. The continued consumption of cash has raised substantial doubt about DragonWave Inc.'s ability to continue as a going concern. Management's plans to restructure the business and overcome these difficulties include initiatives in a number of areas including:

•

Targeting its sales efforts to direct and indirect opportunities in markets with higher gross margins, and lower working capital requirements;

•

Adjusting its business focus and resources away from Nokia in order to support new sales channels;

6 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

1. NATURE OF BUSINESS, BASIS OF PRESENTATION AND GOING CONCERN (Continued)

•

Renegotiating the terms of existing debt facilities;

•

Continuing to minimize fixed and variable operating expenses, by tightly controlling discretionary spending and headcount growth;

•

Actively investigating and pursuing alternative forms of financing;

•

Reducing inventory levels in both raw material and finished goods inventory; and,

•

Working closely with vendors to ensure supply continuity.

        These plans may be difficult to achieve. They are dependent on a number of key assumptions including the timing of significant new customer projects, and success in arbitration with the customer located in India. It is possible that the plans described above may not be fully executed or may occur too slowly to solve the Company's current liquidity concerns. There can be no assurance that the existing financing facility can be renegotiated or that any other forms of financing can be arranged on satisfactory terms. These consolidated financial statements do not include any adjustments to the accounts and classification of assets and liabilities that may be necessary if the Company is unable to continue as a going concern. Such adjustments could be material.

2. SIGNIFICANT ACCOUNTING POLICIES

Use of accounting estimates

        The preparation of the consolidated financial statements in conformity with U.S. GAAP requires the Company's management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent amounts of assets and liabilities as at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods presented. Actual results could differ from the estimates made by management.

        The following include estimates by management: allowance for doubtful accounts, inventory allocations, inventory provisions, accrued liabilities, warranty provisions, warrant liability, property and equipment amortization, tax valuation allowance, impairment of intangible assets and goodwill, vendor specific objective evidence, estimated selling price and estimated returns as it relates to revenue recognition, and stock-based compensation.

        These estimates and assumptions are based on management's historical experience, best knowledge of current events and conditions and actions that the Company may undertake in the future. Certain of these estimates require subjective or complex judgments by management about matters that are uncertain and changes in those estimates could materially impact the amounts reported in the consolidated financial statements and accompanying notes.

Foreign currency translation

        The Company's operations and balances denominated in foreign currencies, including those of its foreign subsidiaries which are primarily a direct and integral component or extension of the Company's operations, are translated into US dollars (USD) using the following: monetary assets and liabilities are translated at the period end exchange rate, non-monetary assets are translated at the historical exchange rate, and revenue and expense items are translated at the average exchange rate. Gains or losses resulting from the translation adjustments are included in the consolidated statement of operations.

7 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue recognition

        The Company derives revenue from the sale of broadband wireless backhaul equipment which includes embedded software and a license to use said software and extended product warranties. Software is considered to be incidental to the product. Services range from installation and training to basic consulting. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred and there are no significant remaining vendor obligations, collection of receivables is reasonably assured and the fee is fixed and determinable. Where conditions to final acceptance of the product is specified by the customer, revenue is deferred until acceptance criteria have been met.

        The Company's sales agreements may also contain multiple elements. Accordingly, the Company is required to determine the appropriate accounting, including whether the deliverables specified in a multiple element arrangement should be treated as separate units of accounting for revenue recognition purposes, the fair value of these separate units of accounting and when to recognize revenue for each element. For arrangements involving multiple elements, the Company allocates revenues to each element based on a selling price hierarchy. The selling price for a deliverable is based on its vendor specific objective evidence ("VSOE") if available, third party evidence ("TPE") if VSOE is not available, or estimated selling price ("ESP") if neither VSOE nor TPE is available. In multiple element arrangements, revenues are allocated to each separate unit of accounting for each of the deliverables using the relative selling prices of each of the deliverables in the arrangement based on the aforementioned selling price hierarchy. The Company has determined the selling price for both the undelivered items and the delivered items using ESP.

        The Company generates revenue through direct sales and sales to distributors. The Company defers the recognition of a portion of sales to distributors based on estimated sales return 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.

        The Company accrues estimated potential product liability as warranty costs when revenue on the sale of equipment is recognized. Warranty liability is estimated based on recent actual return experience and repair costs. Where product defects have been identified which would cause the cost or warranty experience to change, additional warranty costs are recognized.

        Shipping and handling costs borne by the Company are recorded in cost of sales. Shipping and handling costs charged to customers are recorded as revenue, if billed at the time of shipment. Costs charged to customers after delivery are recorded in cost of sales.

        The Company generates revenue through royalty agreements as a result of the use of its Intellectual Property. Royalty revenue is recognized as it is earned.

Cash and cash equivalents

        The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

8 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial instruments

        The Company classifies its financial instruments as assets held at fair value, loans and receivables, other financial liabilities, or liabilities held at fair value. The classification depends on the purpose for which the financial instruments were acquired, their characteristics and management's intent. Management determines the classification of financial assets and liabilities at initial recognition and the classification is not changed subsequent to initial recognition.

        The Company designated its cash and cash equivalents and foreign exchange contracts as assets held at fair value which are measured at fair value, with changes in fair value being recorded in net earnings. Trade receivables and other receivables have been classified as loans and receivables which are measured at amortized cost. Accounts payable, accrued liabilities and the debt facility have been classified as other financial liabilities, which are measured at amortized cost. Liabilities held at fair value include the warrant liability which is measured at fair value, with changes in fair value being recorded in net earnings.

        Transaction costs directly attributable to the acquisition of financial assets are recorded in net loss in the period in which they are incurred.

Inventory

        Inventory is valued at the lower of cost and net realizable value ["NRV"]. The cost of inventory is calculated on a standard cost basis, which approximates average actual cost. NRV is determined as the market value for finished goods, replacement cost for raw materials, and finished goods market value less cost to complete for work in progress inventory.

        The Company regularly reviews inventory quantities on hand and records a provision for excess and obsolete inventory based on factors including its estimated forecast of product demand, the stage of the product life cycle and production requirements for the units in question.

        The Company carries inventory for the purposes of supporting its product warranty. Standard warranty is typically 13 to 36 months but the Company earns 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.

        Indirect manufacturing costs and direct labour expenses are allocated systematically to the total production inventory.

Income taxes

        Income taxes are accounted for using the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are determined based on differences between the tax and accounting basis of assets and liabilities as well as for the benefit of losses available to be carried forward to future years for tax purposes that are more likely than not to be realized. Deferred income tax assets and liabilities are measured using enacted tax rates that apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The Company provides a valuation allowance against its deferred tax assets when it believes that it is more likely than not that the assets will not be realized.

        The Company determines whether it is more likely than not that an uncertain tax position will be sustained upon examination by the tax authorities. The tax benefit of any uncertain tax position that meets the more likely than not recognition threshold is calculated as the largest amount that is more than 50% likely of being realized upon successful resolution. To the extent a full benefit is not expected to be realized, an income tax liability is

9 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

effectively established. The Company recognizes accrued interest and penalties on unrecognized tax benefits as interest expense.

        Management periodically reviews the Company's provision for income taxes and valuation allowance to determine whether the overall tax estimates are reasonable. When management performs its assessments of the provision and valuation allowance, it may be determined that an adjustment is required. This adjustment may have a material impact on the Company's financial position and results of operations.

Property and equipment

        Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the anticipated useful lives of the assets as follows:

Test equipment and research and development equipment	4 - 5 years
Computer hardware	2 years
Production fixtures	3 years
Leasehold improvements	5 years
Furniture and fixtures	5 years
Communication equipment	3 years
Other	3 - 5 years

        Management evaluates the carrying value of its property and equipment assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. To the extent the estimated undiscounted future net cash inflows attributable to the asset are less than the carrying amount, an impairment loss is recognized. The amount of impairment loss to be recorded is the difference between the asset's carrying value and fair value.

Goodwill and intangible assets

        Intangible assets include Infrastructure Systems Software and Computer Software and are amortized over their estimated useful life of 2 and 3 years. Management evaluates the carrying value of its intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. To the extent the estimated undiscounted future net cash inflows attributable to the asset are less than the carrying amount, an impairment loss is recognized. The amount of impairment loss to be recorded is the difference between the asset's carrying value and the net discounted estimated future cash flows.

        Goodwill represents the excess of the purchase price over the estimated fair value of net tangible and intangible assets acquired in business combinations. The Company reviews the carrying value of goodwill on an annual basis or more frequently if circumstances indicate that it is more likely than not that the fair value of the goodwill is below its carrying amount. The goodwill impairment test is a two-step process which requires management to make judgmental assumptions regarding fair value. The Company looks at any qualitative factors that would suggest that further analysis is required. The first step consists of estimating the fair value of its reporting unit. When the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not to be impaired and the second step of the impairment test is unnecessary. If the fair value is less than the carrying amount, the Company compares the implied fair value of the goodwill, determined as if a purchase had just occurred, to the carrying amount to determine the amount of impairment charge to be recorded. Changes in the estimates and assumptions used in assessing the projected cash flows could materially affect the results of management's evaluation.

10 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Share based compensation plan and employee share purchase plan

        The Company has a share based compensation plan and an employee share purchase plan which are described in note 13. The Company accounts for stock options granted to employees using the fair value method. In accordance with the fair value method, the Company recognizes estimated compensation expense related to stock options over the vesting period of the options granted, with the related credit being charged to contributed surplus.

        The Company launched an employee share purchase plan on October 20, 2008. The plan includes provisions to allow employees to purchase common shares. The Company will match the employees' contribution at a rate of 25%. Proceeds from employees are received and the cost of the matching shares are recorded in share capital, with the related debit applied to contributed surplus at the time the shares are issued. The shares contributed by the Company will vest 12 months after issuance with a corresponding compensation expense recognized in loss.

Research and development

        Research costs are expensed as incurred. Development costs are expensed as incurred unless they meet generally accepted accounting criteria for deferral and amortization. Development costs incurred prior to establishment of technological feasibility do not meet these criteria, and are expensed as incurred.

Loss per share

        Basic loss per share is calculated by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. For all periods presented, the net loss available to common shareholders equates to the net loss.

        In the computation of diluted earnings per share, the Company includes the number of additional common shares that would have been outstanding if the dilutive potential equity instruments had been issued.

Non-controlling interest

        Non-controlling interest consists of the minority owned portion of the Company's 50.1% owned subsidiary, DragonWave HFCL India Private Limited.

FUTURE ACCOUNTING PRONOUNCEMENTS

        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. In August 2015, the FASB issued ASU No. 2015-14, "Revenue from Contracts with Customers" which reflects decisions reached by the FASB at its meeting earlier in the year to defer the effective date to fiscal years beginning after December 15, 2017, with early adoption permitted for the year beginning after December 15, 2016. The Company is currently assessing the impact this amendment will have on the Company's consolidated financial statements.

        In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements – Going Concern". The update provides U.S. GAAP guidance on management's responsibility in evaluating whether

11 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

there is substantial doubt about a company's ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company's ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in this ASU are effective for reporting periods beginning after December 15, 2016, with early adoption permitted. The Company is currently assessing the impact this amendment will have on the Company's consolidated financial statements.

        In February 2016, the FASB issued ASU No. 2016-02, "Leases". The amendments in this Update create Topic 842, Leases, and supersede the lease requirements in Topic 840, Leases. The Update will require companies to recognize a right-of-use (ROU) asset and a lease liability in their balance sheets, while still distinguishing between finance leases and operating leases. For finance leases, the lessee would recognize interest on the lease liability separately from amortization of the right-of-use asset in the statement of comprehensive income, and for operating leases, the lessee would recognize a straight-line lease expense. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently assessing the impact this amendment will have on the Company's consolidated financial statements.

3. BUSINESS COMBINATIONS

DragonWave HFCL India Private Limited

        Non-controlling interest consists of the minority owned portion of the Company's 50.1% owned subsidiary, DragonWave HFCL India Private Limited. During the year ended February 29, 2016, the minority owner, HFCL, made a capital contribution of nil (2015 – $164).

4. CASH AND CASH EQUIVALENTS

        The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

	February 29, 2016								February 28, 2015
Native Currency	Native Currency $		Foreign Exchange Rate to USD		USD Amount		% of Total		USD Amount		% of Total
US Dollar		1,600		1.000		1,600		37.4%		15,010		63.4%
Canadian Dollar		53		0.736		39		0.9%		4,106		17.3%
Indian Rupee		158,951		0.015		2,317		54.2%		2,497		10.5%
Other						321		7.5%		2,079		8.8%
Total Cash and Cash Equivalents						4,277		100.0%		23,692		100.0%

        The Company is required to have a minimum of $1,000 held at Comerica Bank [2015 – $10,000].

12 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

5. TRADE RECEIVABLES

        The Company is exposed to credit risk with respect to trade receivables in the event that its counterparties do not meet their obligations. The Company minimizes its credit risk with respect to trade receivables by performing credit reviews for each of its customers. The Company's allowance for doubtful accounts reflects the Company's assessment of collectability across its global customer base.

	February 29, 2016			February 28, 2015
Trade receivables		19,209			49,295
Allowance for doubtful accounts		(223	)		(669	)
Total trade receivables		18,986			48,626

        As at February 29, 2016, two customers exceeded 10% of the total receivable balance. These customers represented 52% and 16% of the trade receivables balance [2015 – two customers represented 37% and 34% of the trade receivables balance].

        Included in general and administrative expenses is an expense of $240 related to bad debt expense for the year ended February 29, 2016 [2015 – expense of $160].

6. INVENTORY

        Inventory is comprised of the following:

	February 29, 2016		February 28, 2015
Raw materials		2,389		7,469
Work in progress		614		577
Finished goods		16,986		13,709
Total production inventory		19,989		21,755
Inventory held for customer service/warranty		2,713		2,539
Total inventory		22,702		24,294

        Cost of sales for the year ended February 29, 2016 was $72,324 [2015 – $129,772], which included $56,296 of product costs [2015 – $115,309]. The remaining costs of $16,028 [2015 – $14,463] related principally to warehousing, freight, warranty, overhead and other direct costs of sales.

        For the year ended February 29, 2016, the Company recognized an impairment loss on inventory of $4,416 [2015 – $2,771]. This impairment loss related primarily to raw material and finished goods for certain older product lines.

        The Company allocates overhead and labour to inventory. Included in cost of sales for the year ended February 29, 2016 were overhead and labour allocations of $1,746 [2015 – $3,860]. Included in inventory at February 29, 2016 were overhead and labour allocations of $551 [2015 – $461].

        The Company uses an outsourced manufacturing model in which most of the component acquisition and assembly of its products is executed by third parties. The Company's contract manufacturers currently have inventory intended for use in the production of its products, and the Company has purchase orders or demand forecasts in place for raw materials and manufactured products with these contract manufacturers. The value of

13 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

6. INVENTORY (Continued)

the inventory held by the Company's primary contract manufacturer at February 29, 2016 was $16,848 [February 28, 2015 – $13,565]

7. OTHER CURRENT ASSETS

        Other current assets are comprised of the following:

	February 29, 2016		February 28, 2015
Deposits on inventory		670		1,240
Prepaid expenses		1,355		2,082
Indirect taxes		610		1,079
Income tax receivable		—		390
Deferred financing costs		18		55
Deferred tax asset		—		61
Receivable from contract manufacturers and other items		124		988
Total other current assets		2,777		5,895

8. PROPERTY AND EQUIPMENT

        Property and equipment are apportioned as follows:

	February 29, 2016						February 28, 2015
	Cost		Accumulated Amortization		Net Book Value		Net Book Value
Test and research and development equipment		24,236		21,581		2,655		3,056
Computer hardware		3,702		3,489		213		260
Production fixtures		2,433		1,874		559		661
Leasehold improvements		1,081		978		103		146
Furniture and fixtures		864		761		103		145
Communication equipment		289		285		4		8
Other		448		383		65		46
Total property and equipment		33,053		29,351		3,702		4,322

        Depreciation expense relating to the above property and equipment was allocated to operating expenses as follows:

	February 29, 2016		February 28, 2015
Research and development ("R&D")		364		1,067
Selling and marketing ("S&M")		40		56
General and administrative ("G&A")		1,527		1,197
Total		1,931		2,320

        Depreciation expense includes amortization of assets recorded under capital lease.

14 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

9. INTANGIBLE ASSETS AND GOODWILL

        Intangible assets and goodwill are apportioned as follows:

	February 29, 2016								February 28, 2015
	Cost		Accumulated Amortization		Impairment		Net Book Value		Net Book Value
Infrastructure Systems Software and Computer Software		7,046		6,423		—		623		794
Goodwill		11,927		—		11,927		—		11,927

        For the year ended February 29, 2016, the Company recognized amortization of intangible assets of $577 [2015 – $1,188]. The Company estimates that it will recognize $305, $304 and $14 respectively for the next three succeeding years.

        The Company tests goodwill for impairment annually on August 31 and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. Consistent with the Company's assessment that it has only one reporting unit, the Company tests goodwill for impairment at the entity level. The Company tests goodwill using a two-step process. The Company looks at any qualitative factors that would suggest that further analysis is required. The Company determined that the continuing decline of DragonWave's market capitalization and continued losses in fiscal year 2016 warranted further analysis. The first step consists of estimating the fair value of the Company's single reporting unit and comparing that to the carrying amount of the Company's net assets. At August 31, 2015 management used both an income-based and market-based approach to value the single reporting unit. Under the income-based approach, the Company used a discounted cash flow methodology, while under the market-based approach, the Company considered its market capitalization in addition to an estimated control premium based on a review of comparative market transactions. In the second step, the Company compared the implied carrying value of the goodwill to the values determined previously in the process and concluded that its goodwill was fully impaired. As a result, the Company recorded a non-cash impairment charge of $11,927 in the three month period ended August 31, 2015.

10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

        Accounts payable and accrued liabilities are apportioned as follows:

	February 29, 2016		February 28, 2015
Trade payables		11,858		23,474
Accrued liabilities		5,830		9,394
Termination fee		3,337		4,227
Payroll related accruals		1,257		2,076
Warranty accrual		651		335
Income taxes payable		555		657
Capital lease obligation		69		514
Total accounts payable and accrued liabilities		23,557		40,677

        On April 10, 2013, the Company announced changes to its existing operational framework with Nokia. Included in the changes was an agreement to a termination fee in the amount of $8,668 to be paid to Nokia in installments. During the year ended February 28, 2015, the Company revised the termination fee liability which

15 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Continued)

resulted in a gain of $301. Payments totaling $3,287 were made during the year ended February 28, 2015. During the year ended February 29, 2016 the Company made a payment of $1,119. As at February 29, 2016 the liability is valued at $3,337 and is considered short term in nature [2015 – $4,383; short term: $4,227 and long term: $156].

        Warranty accrual:

        The Company records a liability for future warranty costs based on management's best estimate of probable claims within the Company's product warranties. The accrual is based on the terms of the warranty, which vary by customer, product, or service and historical experience. The Company regularly evaluates the appropriateness of the remaining accrual.

        The following table details the changes in the warranty accrual for the respective periods:

	February 29, 2016			February 28, 2015
Balance at the beginning of the period		678			619
Accruals		2,057			1,031
Utilization		(1,809	)		(972	)
Ending Balance		926			678
Short term Portion		651			335
Long term Portion		275			343

11. DEBT FACILITY

        The Company has established a credit facility with Comerica Bank and Export Development Canada. As at February 29, 2016, this asset based credit facility was for a total of $40,000 plus $4,000 for letters of credit and foreign exchange facilities. Credit availability is subject to ongoing compliance with borrowing covenants and short term assets on hand. The Company had drawn $22,152 on the facility as at February 29, 2016 [2015 – $32,400], and $1,853 against its letter of credit facility [2015 – $1,864].

        The credit facility which was extended on January 6, 2014, matures on June 1, 2016 and is secured by a first priority charge on all of the assets of DragonWave Inc. and its principal direct and indirect subsidiaries. The terms of the credit facility include other customary terms, conditions, covenants, and representations and warranties. Borrowing options under the credit facility include US dollar, 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. 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 30 month term of the facility. During the year ended February 29, 2016 the weighted average debt outstanding was $29,765 [2015 – $20,304] and the Company recognized $2,007 in interest expense related to the debt facility [2015 – $1,401] and expensed $55 in deferred financing cost [2015 – $187].

        The credit facility contains financial covenants including minimum tangible net worth requirements, minimum cash levels to be held at Comerica bank and minimum liquidity ratio requirements. The credit facility also imposes certain restrictions on the Company's ability to acquire capital assets above a threshold over a trailing six month period.

        The Company has in place a forbearance agreement until May 18, 2016, which identifies new minimum covenant levels reflecting the Company's revised financial plans. The forbearance agreement includes a

16 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

11. DEBT FACILITY (Continued)

requirement to hold a minimum of $1,000 at Comerica Bank. In addition, the forbearance agreement reduces the facility commitment from $40,000 to $35,000 and implements more frequent monitoring. Subsequent to February 29, 2016, DragonWave Inc. repaid $3,285 on the debt facility. As of May 18, 2016 the Company is in compliance with the financial terms of the forbearance agreement.

12. OTHER LONG TERM LIABILITIES

        Other long term liabilities are apportioned as follows:

	February 29, 2016		February 28, 2015
Warranty accrual		275		343
Deferred revenue		498		578
Termination fee		—		156
Capital lease obligation		—		62
Total other long term liabilities		773		1,139

13. SHAREHOLDERS' EQUITY

Number of shares authorized

        The Company has an unlimited amount of common shares authorized for issuance.

        On September 23, 2013 the Company completed a public equity offering. Under the terms of the offering, the Company issued and sold 11,910,000 units at $2.10 on a pre-consolidation basis, for aggregate gross proceeds of $25,011. After deducting commissions and listing expenses, the Company realized net proceeds of $22,434. Each unit consisted of one common share of the Company and three quarters of one warrant. Each whole warrant entitles the holder to purchase one common share of the Company at an exercise price of $2.70 per share, subsequently changed to purchase 1/25^th of one common share at an exercise price of $67.50 per share following the share consolidation, until September 23, 2018, subject to certain adjustments. Upon issuance, the Company recognized a liability in the amount of $6,425 for the warrants, see Warrants section for further details.

        On August 1, 2014 the Company completed a public equity offering. Under the terms of the offering, the Company issued and sold 15,927,500 units at $1.80 CAD on a pre-consolidation basis, for aggregate gross proceeds of $28,670 CAD. After deducting commissions and listing expenses, the Company realized net proceeds of $23,960 ($26,184 CAD). Each unit consisted of one common share of the Company and one half of one warrant. Each whole warrant entitles the holder to purchase one common share of the Company at an exercise price of $2.25 CAD per share, subsequently changed to purchase 1/25^th of one common share at an exercise price of $56.25 CAD per share following the share consolidation, until August 1, 2016. Upon issuance, the Company recognized a liability in the amount of $2,551 for the warrants, see Warrants section for further details.

        On February 2, 2016, the Company effected a share consolidation of the Company's common shares at a ratio of 1-for-25. As a result of the share consolidation, every 25 shares of the issued and outstanding common shares consolidated into one newly-issued outstanding common share. Each fractional share remaining after the share consolidation was cancelled. The number of outstanding stock options and restricted share units were proportionately adjusted by the consolidation ratio and the exercise prices correspondingly increased by the same consolidation ratio. All shares and exercise prices are presented on a post-consolidation basis in these consolidated financial statements.

17 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

13. SHAREHOLDERS' EQUITY (Continued)

Share based compensation plan

        The Company had previously established the DragonWave Inc. Key Employee Stock Option/Stock Issuance Plan (the "Previous Plan") applicable to full-time employees, directors and consultants of the Company for purchase of common shares. Options are granted with an exercise price equal to the fair value of the common shares of the Company, and generally vest at a rate of 25% one year from the date of the option grant, and 1/36^th of the remaining 75% per additional month of full-time employment with the Company. All remaining outstanding options expire five years from the grant date, or upon termination of employment. The maximum number of common shares issuable under the previous plan was 10% of the common shares issued and outstanding.

        On June 20, 2014 the Shareholders approved the adoption of a new Share Based Compensation Plan (the "Plan") to replace the Previous Plan. The Plan includes provision for granting of performance share units ("PSUs"), restricted share units ("RSUs"), deferred share units ("DSUs"), Bonus Shares (as defined in the Plan) and options to purchase common shares. Settlement of vested PSUs, RSUs and DSUs is effected by delivering common shares acquired in the open market and/or issued from treasury, or by making a cash payment equal to the number of PSUs, RSUs or DSUs multiplied by the volume weighted average trading price of the common shares on the applicable stock exchange for the five trading days preceding the settlement date, or by a combination of these methods. The manner of settlement for RSUs, PSUs and DSUs is determined by the Compensation Committee in its sole discretion. The maximum number of common shares issuable under the Plan is 302,007, which represents 10% of the common shares issued and outstanding as at February 29, 2016.

        The following is a summary of stock option activity:

	February 29, 2016					February 28, 2015
	Options			Weighted Average Exercise Price (CAD)		Options			Weighted Average Exercise Price (CAD)
Opening balance		159,421		$	76.34		127,149		$	92.70
Granted		172,974		$	8.64		43,156		$	52.76
Forfeited		(55,667	)	$	82.34		(10,884	)	$	173.94
Closing balance		276,728		$	32.82		159,421		$	76.34

        The following table shows the weighted average values used in determining the fair value of options granted during the years ended February 29, 2016 and February 28, 2015:

	February 29, 2016		February 28, 2015
Volatility		95.6%		75.8%
Risk free rate		0.58%		1.35%
Dividend yield		Nil		Nil
Average expected life		3.97 yrs		4 yrs

        The 172,974 options granted during the year ended February 29, 2016 were determined to have a fair value of $683 [2015 – 43,156 options valued at $1,204].

18 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

13. SHAREHOLDERS' EQUITY (Continued)

        The following table summarizes the various exercise prices inherent in the Company's stock options outstanding and exercisable on February 29, 2016:

Exercise Price				Options Outstanding						Options Exercisable
Low (CAD)		High (CAD)		Quantity of options		Weighted average remaining contractual life (yrs)		Weighted average exercise price (CAD)		Quantity of options		Weighted average remaining contractual life (yrs)		Weighted average exercise price (CAD)
$	3.00	$	3.25		102,737		4.73	$	3.00		51,616		4.73	$	3.00
$	3.26	$	16.88		4,017		4.73	$	3.97		969		4.86	$	3.50
$	16.89	$	21.00		50,016		4.22	$	19.25		—		0.00	$	0.00
$	21.01	$	46.88		19,764		2.78	$	30.54		17,567		2.74	$	30.55
$	46.89	$	52.88		15,589		2.44	$	51.80		10,244		2.40	$	51.81
$	52.89	$	54.88		33,245		3.37	$	53.75		14,579		3.37	$	53.75
$	54.89	$	62.13		21,677		2.19	$	56.00		15,287		2.19	$	56.00
$	62.14	$	79.25		16,705		1.41	$	73.32		14,941		1.40	$	73.35
$	79.26	$	169.25		12,978		0.22	$	166.23		12,978		0.22	$	166.23
					276,728		3.60	$	32.82		138,181		3.10	$	44.28

        The Company has recognized $941 for the year ended February 29, 2016 as compensation expense for stock-based grants, with a corresponding credit to contributed surplus [2015 – $1,177]. Stock compensation expense was allocated to operating expenses as follows:

	February 29, 2016		February 28, 2015
Research and development		172		297
Sales and marketing		204		333
General and administrative		565		547
Total		941		1,177

        As at February 29, 2016, compensation costs not yet recognized relating to stock option awards outstanding is $1,476 [2015 – $1,926] net of estimated forfeitures. Performance vesting awards will vest as performance conditions are met. Compensation will be adjusted for subsequent changes in estimated forfeitures.

Restricted Share Units (RSU's)

        The Company has entered into restricted stock agreements with certain of its independent directors. These units which were issued during July 2014 were subject to each director's continued engagement on the Board for a period of one year from the date of issuance. All of the originally issued RSUs vested during the second quarter of fiscal year 2016 with the exception of 800 RSUs which were cancelled on April 14, 2015.

19 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

13. SHAREHOLDERS' EQUITY (Continued)

        The following table sets forth the summary of restricted share activity under the Company's Share Based Compensation Plan for the year ended February 29, 2016:

	Year ended February 29, 2016
	RSU's			Weighted Average Price (CAD)
RSU balances at February 28, 2014		—			—
Granted		3,200		$	53.75
RSU balances at February 28, 2015		3,200		$	53.75
Forfeited		(800	)	$	53.75
Vested		(2,400	)	$	53.75
RSU balances at February 29, 2016		—			—

        The Company has recognized $39 for the year ended February 29, 2016 as compensation expense for restricted share units, with a corresponding credit to contributed surplus [2015 – $93].

Restricted shares & employee share purchase plan

        The Company launched an Employee Share Purchase Plan ["ESPP"] on October 20, 2008. The plan includes provisions to allow employees to purchase common shares. The Company will match the employees' contribution at a rate of 25%. During the year ended February 29, 2016 a total of 5,207 common shares were purchased by employees at fair market value, while the Company issued 1,227 common shares, net of forfeitures, as its matching contribution during the year ended February 29, 2016. The shares contributed by the Company will vest 12 months after issuance.

        The Company records an expense equal to the fair value of shares granted pursuant to the employee share purchase plan over the period the shares vest, with a corresponding credit to contributed surplus. The total fair value of the shares earned during the year ended February 29, 2016 was $13 [2015 – $13]. The fair value of the unearned ESPP shares as at February 29, 2016 was $8 [2015 – $13]. The number of shares held for release, and still restricted under the plan at February 29, 2016 was 978 [2015 – 440].

Warrants

        Effective May 30, 2007, the Company granted warrants to purchase up to 5,050 common shares of the Company at a price of $88.75 CAD per share. The warrants expire 10 years after the date of issuance. The warrants vested based on the achievement of pre-determined business milestones and resulted in 31,562 warrants being eligible for exercise. Each whole warrant entitles the holder to purchase 1/25^th of one common share of the Company.

        On September 23, 2013 the Company completed a public equity offering. Under the terms of the offering, the Company issued and sold 11,910,000 units at $2.10 on a pre-consolidation basis, for aggregate gross proceeds of $25,011. Equity issuance expenses relating to the offering totaled $2,576 of which $662 was expensed as the proportionate warrant costs. Each unit consisted of one common share of the Company and three quarters of one warrant (warrants issued – 8,932,500). Each whole warrant entitles the holder to purchase 1/25^th common share of the Company at an exercise price of $67.50 per share until September 23, 2018. On August 1, 2014 the warrant exercise price was adjusted to $32.50 as a result of a subsequent equity financing undertaken by the

20 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

13. SHAREHOLDERS' EQUITY (Continued)

Company. In the event of a fundamental transaction the Company may be required to settle the warrants with a cash payment. As a result, the Company recognized a warrant liability of $6,425 which represented the estimated fair value of the liability as at September 23, 2013. The warrant liability is adjusted quarterly to its estimated fair value. Increases or decreases in the fair value of the warrants are presented as "Fair value adjustment – warrant liability" in the consolidated statement of operations. As at February 29, 2016, 2,088,750 warrants were outstanding and the liability for warrants was decreased to $3. In the year ended February 29, 2016 the Company realized a gain in the amount of $600 in the consolidated statement of operations which represented the change in fair value of the remaining warrant liability of $3.

        On August 1, 2014 the Company completed a public equity offering. Under the terms of the offering, the Company issued and sold 15,927,500 units at $1.80 CAD on a pre-consolidation basis for aggregate gross proceeds of $28,670 CAD. Each unit consisted of one common share of the Company and one half of one warrant. Each whole warrant entitles the holder to purchase 1/25^th of one common share of the Company at an exercise price of $56.25 CAD per share until August 1, 2016, subject to certain adjustments. Equity issuance expenses relating to the offering totaled $2,275 of which $221 was expensed as the proportionate warrant costs. As a result of the offering, the Company issued warrants totaling 7,963,750 and recognized a warrant liability of $2,551 which represented the estimated fair value of the liability as at August 1, 2014. During the year ended February 29, 2016 the Company realized a gain in the amount of $519 in the consolidated statement of operations which represented the change in fair value of the remaining warrant liability of $117.

        The following is a summary of outstanding warrants:

	February 29, 2016
	Warrants Outstanding		Shares Purchasable		Exercise Price
May 2007 Issuance		31,562		1,262	$	88.75
September 2013 Issuance		2,088,750		83,550	$	32.50
August 2014 Issuance		7,963,750		318,550	$	56.25	CAD

14. NET LOSS PER SHARE

        Basic loss per share is calculated by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. In the computation of diluted earnings per share, the Company includes the number of additional common shares that would have been outstanding if the dilutive potential equity instruments had been issued.

        As at February 29, 2016 a total of 276,728 options and 10,084,062 warrants have been excluded from the diluted net loss per share calculations, as their effect would have been anti-dilutive.

        The following table illustrates the dilutive impact on net loss per share during the year ended including the effect of outstanding options and warrants:

	Year ended
	February 29, 2016			February 28, 2015
Net loss attributable to shareholders		(42,304	)		(21,520	)
Weighted average number of shares outstanding		3,019,259			2,724,467
Basic net loss/dilutive net loss per share	$	(14.01	)	$	(7.90	)

21 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

15. COMMITMENTS AND CONTINGENCIES

        Future minimum operating lease payments which relate to office and warehouse space in various countries as at February 29, 2016 per fiscal year are as follows:

2017	1,144
2018	134
2019	10
	1,288

        In January 2016, a customer in India initiated an arbitration process with the Company to resolve the dispute over inventory shipped to this customer in June 2015, with a value of $4,707. The customer has submitted a claim statement which the Company feels has no merit. The Company will submit a counter-claim in June 2016. Since the arbitration hearing is set for July 2016, the outcome of this matter is not determinable as of the date of this report.

        See Note 6 for the discussion on the purchase order commitments with contract manufacturers.

16. SUPPLEMENTAL CASH FLOW INFORMATION

	Year ended
	February 29, 2016			February 28, 2015
Changes in non-cash working capital balances:
Trade receivables		29,640			(31,218	)
Inventory		1,592			6,122
Other current assets		3,074			65
Accounts payable and accrued liabilities		(16,880	)		10,173
Deferred revenue		1,114			(154	)
Other long term liabilities		(304	)		669
		18,236			(14,343	)

17. FINANCIAL INSTRUMENTS

        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.

22 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

17. FINANCIAL INSTRUMENTS (Continued)

Categories for financial assets and liabilities

        The following table summarizes the carrying values of the Company's financial instruments:

	February 29, 2016		February 28, 2015
Assets held at fair value (A)		4,277		23,692
Loans and receivables (B)		19,110		49,614
Other financial liabilities (C)		44,434		71,728
Liabilities held at fair value (D)		120		1,239

(A)

Includes cash and cash equivalents

(B)

Includes trade receivables and other miscellaneous receivables

(C)

Includes accounts payable, accrued liabilities, payroll related accruals, debt facility and termination fee

(D)

Warrant liability

        The Company classifies its 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.

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

        Cash and cash equivalents are measured using Level 1 inputs.

        The August 1, 2014 warrant liability is classified as Level 1 as the warrants are traded on the Toronto Stock Exchange and on the NASDAQ Capital Market.

        The September 23, 2013 warrant liability is classified as Level 3 as it is measured at fair value using significant unobservable inputs. Significant assumptions used at February 29, 2016 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 February 29, 2016 the Company held the following Level 3 financial instruments carried at fair value on the consolidated balance sheet.

	Level 3		Total
Financial Liabilities
Warrant liability		3		3

23 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

17. FINANCIAL INSTRUMENTS (Continued)

        As at February 28, 2015, the Company held the following Level 3 financial instruments carried at fair value on the consolidated balance sheet.

	Level 3		Total
Financial Liabilities
Warrant liability		603		603

        A reconciliation of the Level 3 warrant liability measured at fair value for the year ended February 29, 2016 follows:

	Warrants		$
Balance at February 28, 2015		2,088,750		603
Fair value adjustment – warrant liability		—		(600	)
Balance at February 29, 2016		2,088,750		3

Interest rate risk

        Cash and cash equivalents and the Company's debt facility which has interest rates with market rate fluctuations expose the Company to interest rate risk on these financial instruments. Net interest expense, excluding deferred financing costs, recognized during the year ended February 29, 2016 was $1,959 on the Company's cash, cash equivalents, and debt facility [2015 – expense of $1,369].

Credit risk

        In addition to trade receivables and other receivables, the Company is exposed to credit risk on its cash and cash equivalents in the event that its counterparties do not meet their obligations. The Company does not use credit derivatives or similar instruments to mitigate this risk and, as such, the maximum exposure is the full carrying value or fair value of the financial instrument. The Company minimizes credit risk on trade receivables and other receivables, and cash and cash equivalents by transacting with only reputable financial institutions and customers.

Foreign exchange risk

        Foreign exchange risk arises because of fluctuations in exchange rates. To mitigate exchange risk, the Company may utilize forward contracts to secure exchange rates with the objective of offsetting fluctuations in the Company's operating expenses incurred in foreign currencies with gains or losses on the forward contracts.

        As of February 29, 2016, if the US dollar had appreciated 1% against all foreign currencies to which the Company is exposed, with all other variables held constant, the impact of this foreign currency change on the Company's foreign denominated financial instruments would have resulted in an increase in after-tax net loss of $27 for the year ended February 29, 2016 [2015 – decrease of $42], with an equal and opposite effect if the US dollar had depreciated 1% against all foreign currencies at February 29, 2016.

Liquidity risk

        A risk exists that the Company will encounter difficulty in satisfying its financial obligations as they become due. The Company manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities. As at February 29, 2016, the Company had cash and cash equivalents totaling $4,277 [

24 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

17. FINANCIAL INSTRUMENTS (Continued)

2015 – $23,692]. See Note 1 for further discussion of liquidity risk associated with the Company and Note 11 for details of the debt facility requirement.

18. SEGMENTED INFORMATION

        The Company operates in one operating segment–broadband wireless backhaul equipment.

        The following table presents total net book value of property and equipment, intangible assets and goodwill by geographic location:

	Year Ended
	February 29, 2016				February 28, 2015
	Amount		%		Amount		%
Canada		1,860		43%		2,017		12%
United States		—		0%		11,927		70%
Malaysia		1,492		34%		2,004		12%
Other		973		23%		1,095		6%
Total		4,325		100%		17,043		100%

        The Company analyzes its sales according to geographic region and targets product development and sales strategies by region. The following table presents total revenues by geographic location through direct and indirect sales and through its Original Equipment Manufacturer (OEM) partner, Nokia:

	Year Ended February 29, 2016								Year Ended February 28, 2015
	Direct & Indirect Sales		OEM Sales through Nokia		Total		% of total revenue		Direct & Indirect Sales		OEM Sales through Nokia		Total		% of total revenue
Canada		2,255		—		2,255		3%		4,358		—		4,358		3%
Europe, Middle East & Africa		6,753		31,109		37,862		44%		12,554		61,467		74,021		47%
India		13,993		3,787		17,780		21%		26,291		10,854		37,145		24%
United States		19,577		19		19,596		23%		23,451		—		23,451		15%
Rest of World		6,095		2,707		8,802		9%		6,825		11,966		18,791		11%
		48,673		37,622		86,295		100%		73,479		84,287		157,766		100%

        The Company has shown revenue by the customers' purchasing entities' geographic location, except in cases where the geographic location of the product deployment is explicitly known.

        During each of the periods presented, revenue is comprised of:

	For the year ended
	February 29, 2016				February 28, 2015
	Amount		%		Amount		%
Product Sales		71,393		83%		150,432		95%
Services		14,902		17%		7,334		5%
Total Revenue		86,295		100%		157,766		100%

25 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

19. ECONOMIC DEPENDENCE

        For the year ended February 29, 2016, the Company was dependent on three key customers with respect to revenue. These customers represented approximately 44%, 15% and 11% of sales during that twelve month period [2015 – two customers represented 53% and 16%].

20. INCOME TAXES

        The components of the Company's income (loss) before income taxes, by taxing jurisdiction, were as follows:

	February 28, 2016			February 28, 2015
Canada		(22,994	)		(24,558	)
Luxembourg		(7,222	)		322
India		1,756			2,721
China		706			991
Other		(11,535	)		605
		(39,289	)		(19,919	)

        Income tax expense, both current and deferred, relates to jurisdictions outside of Canada where losses are not sufficient to cover the tax liability in the region. For the year ended February 29, 2016, the current income tax expenses was $434 [2015 – $658] and the deferred income tax expense was $1,841 [2015 – $59].

        The reported income tax provision differs from the amount computed by applying the Canadian statutory rate to the net income (loss), for the following reasons:

	2016			2015
Income (loss) before income taxes		(39,289	)		(19,919	)
Statutory income tax rate		26.5	%		26.5	%
Expected income tax expense		(10,412	)		(5,279	)
Change in valuation allowances		6,043			6,682
Goodwill impairment		4,420			—
Prior year adjustments		1,444			859
Foreign tax rate differences		578			(177	)
Other		165			66
Non-deductible expenses and non-taxable income		37			(105	)
Share issue costs		—			(435	)
Research and development tax credits		—			(894	)
		2,275			717

26 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

20. INCOME TAXES (Continued)

        The Company's deferred tax assets and liabilities include the following significant components:

	2016			2015
Income tax loss carryforwards		39,322			32,643
Capital Loss		19,011			19,015
Research and development tax credits		13,180			14,052
SR&ED Expenditures		6,872			7,845
Book and tax differences on assets		1,256			1,486
Share issue expenses		443			591
Income and expense reserves		236			192
Total gross deferred tax assets		80,320			75,824
Valuation allowance		(80,320	)		(74,278	)
Income and expense reserves		(294	)
Net deferred tax (liability)/asset		(294	)		1,546

        As at February 29, 2016, the Company had cumulative tax loss carryforwards in the following jurisdictions: Canada – $136,221, United States – $7,888, Luxembourg – $36,077. The Company also has capital losses being carried forward in the following jurisdictions: Canada – $16,302; United States – $45,543.

        The losses in Canada expire starting in fiscal 2031 until fiscal 2036. The losses in Luxembourg can be carried forward indefinitely. Income tax benefits relating to the losses in Canada and Luxembourg have not been recognized in the consolidated financial statements as the recognition requirements under the liability method of accounting for income taxes have not been met.

        The losses in the U.S. expire between fiscal 2022 and fiscal 2032. Internal Revenue Code Section 382 imposes an annual limitation on the use of a company's net operating loss carryforwards when a company has an ownership change. The acquisition of Axerra Networks, Inc by the Company resulted in an ownership change as understood by Section 382. As a result, the annual restriction of the amount of losses of Axerra Networks, Inc that may be used has been calculated as $521.

        As at February 29, 2016, the Company had $14,720 of investment tax credits available to reduce future federal Canadian income taxes payable. These investment tax credits begin to expire in 2022. In addition, the Company had provincial research and development tax credits of $2,361, which are available to reduce future provincial income taxes payable. These provincial tax credits begin to expire in 2029. The tax benefit of the federal and provincial tax credits has not been recognized in the consolidated financial statements.

        As at February 29, 2016, the Company has not recorded any liabilities associated with uncertain tax positions.

        The Company remains subject to examination by tax authorities in Canada for years 2009 to 2016 and in the other jurisdictions for tax years 2011 to 2016.

        No deferred income taxes have been provided on undistributed earnings or relating to cash held in foreign jurisdictions, as the Company has determined that any income or withholding taxes on repatriation would either not be significant, or the Company has decided to permanently reinvest the earnings in the foreign jurisdiction.

27 -- Page

DragonWave Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

21. COMPARATIVE FIGURES

        Certain comparative figures have been reclassified to conform to the presentation adopted in the current fiscal year.

22. RESTRUCTURING COSTS

        In September 2015, the Company implemented a restructuring plan in line with its objective of reducing its net losses and cash usage. The plan included a 23% reduction of the workforce across a variety of functional areas of the business. The restructuring plan impacted staff primarily in China and Canada, and to a lesser extent other countries globally. The corresponding reduction in compensation related spending is intended to help better align the Company's costs with its revenues.

        Restructuring charges of $1,549 related to severance costs have been recognized during the year ended February 29, 2016 [2015 – nil]. As at February 29, 2016 the Company has paid $1,257 in restructuring costs and has a liability of $292 related to restructuring activities on the consolidated balance sheet [2015 – nil].

23. SUBSEQUENT EVENT

        On April 11, 2016, the Company issued 599,998 common shares in a Registered Direct Offering, and concurrently in a private placement, issued warrants to purchase 299,999 common shares exercisable in the future at an exercise price of $8.50. The price per common share and one half of a warrant was $7.25 and resulted in total gross proceeds to the Company of $4,350 million. The warrants are not exercisable for six months and one day from issuance and will expire five years from the date of issuance.

        The exercise price of the September 23, 2013 warrants was adjusted to $6.76 as a result of the Offering.

28 -- Page

QuickLinks

Exhibit 99.2

INDEPENDENT AUDITORS' REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM
CONSOLIDATED BALANCE SHEETS Expressed in US $000's except share amounts
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS Expressed in US $000's except share and per share amounts
CONSOLIDATED STATEMENTS OF CASH FLOWS Expressed in US $000's
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Expressed in US $000's except share amounts
DragonWave Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Expressed in US $000's except share and per share amounts

EX-99.3

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 99.3

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
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 twelve months ended February 29, 2016. This MD&A should be read in conjunction with our audited consolidated financial statements and corresponding notes for the three and twelve months ended February 29, 2016 and our Annual Information Form for the year ended February 29, 2016 (the "AIF") filed on SEDAR at www.sedar.com (SEDAR) and on EDGAR at www.sec.gov/edgar/searchedgar/companysearch.html (EDGAR). Our audited consolidated financial statements and corresponding notes for the three and twelve months ended February 29, 2016, as well as additional information about us, are available on SEDAR and EDGAR.

        Our audited 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 in this MD&A is dated as of May 18, 2016 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 contents of this MD&A have been approved by our Board of Directors, on the recommendation of its Audit Committee.

        We refer to both Nokia Solutions and Networks and its predecessor business Nokia Siemens Networks as "Nokia" in this MD&A. Nokia is a trademark of Nokia Corporation or its affiliates.

        Unless otherwise indicated, all currency amounts referenced in this MD&A are denominated in USD.

Forward-Looking Statements

        This MD&A contains "forward-looking information" and "forward-looking statements" within the meaning of applicable Canadian and U.S. 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 cash resources and liquidity; our strategic plans and objectives; growth strategy; customer diversification and expansion initiatives; our expectations with respect to our relationships with channel partners; 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 set forth 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.

1

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Risks and Uncertainties

        We are exposed to risks and uncertainties in our business, including the risk factors set forth below:

•

limited cash resources and our dependence on our credit facilities and accommodations by our lenders and certain suppliers;

•

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

•

our need for working capital will intensify if we are successful in winning new business;

•

intense competition from several competitors;

•

competition from indirect competitors;

•

our history of losses;

•

our ability to implement our ongoing program of operating cost reductions;

•

our dependence on our ability to develop new products, enhance existing products and execute product roll-outs on a basis that meets customer requirements;

•

our exposure to product warranty claims, and inventory and account receivables exposure in relation to recent product quality issues;

•

our ability to successfully manage our resources;

•

our dependence on our ability to manage our workforce and recruit and retain management and other qualified personnel;

•

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

•

a lengthy and variable sales cycle;

•

our reliance on suppliers, including outsourced manufacturing, third party component suppliers and suppliers of outsourced services;

•

our ability to manage the risks related to increasingly complex engagements with channel partners and end-customers;

•

pressure on our pricing models from existing and potential customers and as a result of competition;

•

our exposure to credit risk for accounts receivable;

•

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

•

the allocation of radio spectrum and regulatory approvals for our products;

•

the ability of our customers to secure a license for applicable radio spectrum;

•

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

•

currency fluctuations;

2

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

•

our ability to protect our own intellectual property and potential harm to our business if we infringe the intellectual property rights of others;

•

risks associated with software licensed by us;

•

a change in our tax status or assessment by domestic or foreign tax authorities;

•

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

•

our exposure to potential product defects and product liability claims and health and safety risk relating to wireless products;

•

the impact that general economic weakness and volatility may be having on our customers; and

•

disruption resulting from economic and geopolitical uncertainty.

        Additional risks related specifically to our securities include:

•

risks associated with our outstanding warrants and the impact that the terms of such warrants have on our ability to raise capital and to undertake certain business transactions;

•

risks associated with our ability to raise additional capital;

•

large fluctuations in the trading price of our common shares;

•

our actual financial results may vary from our publicly disclosed forecasts;

•

expense and risks associated with being a U.S. public company and possible loss of our foreign private issuer status;

•

expense and risks associated with the loss of our ability to use the multi-jurisdictional disclosure system ("MJDS") adopted by the United States and Canada;

•

an investor may not be able to bring actions or enforce judgment against us and certain of our directors and officers;

•

we do not currently intend to pay dividends on our common shares;

•

tax consequences associated with an investment in our securities;

•

future sales of common shares by our existing shareholders could cause our share price to fall;

•

our management's broad discretion over the use of proceeds of financings; and

•

certain Canadian laws could prevent or deter a change of control.

        In our most recent fiscal year ended on February 29, 2016, approximately 44% of our sales were through the Nokia channel. Recent developments within Nokia, including Nokia's combination with Alcatel-Lucent, have resulted in our conclusion that new product sales through this channel are unlikely. See "Nokia Sales Channel Update".

        Also see the discussion under "Recent Developments-Liquidity Discussion" in this MD&A, as well as the discussion under "Risk Factors" contained in our most recently filed AIF.

3

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        Any of the risks referred to above could cause actual results or outcomes to differ materially from those discussed in forward-looking statements. 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 and uncertainties, the forward-looking events described in this MD&A might not occur or might not occur when stated.

Non-GAAP Performances Measures

        Readers are cautioned that this MD&A contains certain information that is not consistent with financial measures prescribed under GAAP. See discussion below under "Use of Non-GAAP Performance Measures".

4

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

SELECTED FINANCIAL INFORMATION

	Three Months Ended									Twelve Months Ended
	February 29, 2016			February 28, 2015			February 28, 2014			February 29, 2016			February 28, 2015			February 28, 2014
REVENUE
Hardware and other		8,601			41,654			16,228			71,393			150,432			84,960
Services		3,440			2,088			1,629			14,902			7,334			5,051
		12,041			43,742			17,857			86,295			157,766			90,011
COST OF SALES
Hardware and other		7,794			32,923			14,418			58,991			123,950			77,625
Services		1,563			1,135			324			8,917			3,051			645
		9,357			34,058			14,742			67,908			127,001			78,270
Gross profit before inventory provisions (note 1)		2,684			9,684			3,115			18,387			30,765			11,741
		22.3%			22.1%			17.4%			21.3%			19.5%			13.0%
Inventory provision		3,181			1,187			526			4,416			2,771			1,078
Gross profit		(497	)		8,497			2,589			13,971			27,994			10,663
		(4.1%	)		19.4%			14.5%			16.2%			17.7%			11.8%
EXPENSES
Research and development		2,425			4,271			4,863			13,406			18,657			19,948
Selling and marketing		1,858			3,745			3,165			10,572			13,975			13,201
General and administrative		3,311			3,288			3,762			13,798			15,085			17,087
		7,594			11,304			11,790			37,776			47,717			50,236
Loss before other items		(8,091	)		(2,807	)		(9,201	)		(23,805	)		(19,723	)		(39,573	)
Other Expenses
Goodwill impairment		—			—			—			(11,927	)		—			—
Restructuring costs		(130	)		—			—			(1,549	)		—			—
Amortization of intangible assets		(96	)		(207	)		(404	)		(577	)		(1,188	)		(1,900	)
Accretion expense		(37	)		(59	)		(48	)		(205	)		(168	)		(222	)
Interest expense		(424	)		(452	)		(440	)		(2,014	)		(1,557	)		(1,750	)
Warrant issuance expenses		—			—			—			—			(221	)		(662	)
Gain on change in estimate		—			(234	)		(553	)		—			67			2,759
Gain on contract amendment		—			—			—			—			—			5,702
Gain on sale of fixed assets		—			—			—			—			18			—
Fair value adjustment — warrant liability		(69	)		979			(352	)		1,119			2,007			3,235
Foreign exchange (loss) gain		(307	)		327			(311	)		(331	)		846			(1,530	)
Loss before income taxes		(9,154	)		(2,453	)		(11,309	)		(39,289	)		(19,919	)		(33,941	)
Income tax expense/(recovery)		129			(330	)		128			2,275			717			398
Net Loss		(9,283	)		(2,123	)		(11,437	)		(41,564	)		(20,636	)		(34,339	)
Net (income) loss attributable to non-controlling interest		152			(145	)		(162	)		(740	)		(884	)		97
Net Loss attributable to shareholders		(9,131	)		(2,268	)		(11,599	)		(42,304	)		(21,520	)		(34,242	)
Basic & Diluted loss per share		(3.02	)		(0.75	)		(17.86	)		(14.01	)		(7.90	)		(20.66	)
Basic & Diluted weighted average shares outstanding		3,019,712			3,011,065			1,521,744			3,019,259			2,724,469			1,657,535

Note 1: "Gross profit before inventory provisions" is a non-GAAP financial measure. See "Use of Non-GAAP Performance Measures".

5

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        The principal differences between the three and twelve months ended February 29, 2016 and February 28, 2015 are explained as follows:

•

Revenue changes between these two periods can be attributed to lower sales through all sales channels, most significantly through the Nokia channel. Higher services revenue in fiscal year 2016 relative to the prior year relates to installation services to tier 1 carriers in India and North America.

•

Before considering inventory provisions, our gross profit percentage increased by 1.8% in the twelve months ended February 29, 2016 when compared to the same period one year prior. A higher percentage of sales in fiscal year 2015 was made through both original equipment manufacturers (OEMs) channels and through a customer in India. These channels have inherently lower gross profit percentage levels than other sales channels.

•

The inventory provisions taken in fiscal year 2016 were higher in both the three and twelve months ended February 29, 2016 than they were in the same periods in the prior fiscal year. (Fourth quarter higher by $2.0 million; full year higher by $1.6 million) The increase was driven by the inventory provisions taken in fiscal year 2016 which related primarily to excess inventory.

•

Operating expenses were lower as a result of the steps taken to restructure the business in fiscal year 2016 in order to reduce spending. In addition, a weakened Canadian dollar ("CAD") reduced our USD-translated operating expenses in fiscal year 2016.

        The principal differences between the three and twelve months ended February 29, 2016 and February 28, 2014 are explained as follows:

•

Revenue was lower in fiscal year 2016 compared to fiscal year 2014 as a result of lower sales through most customer channels globally. Higher sales to India in fiscal year 2016 offset this downward trend. Services revenue in fiscal year 2016 was dominated by installation services to tier 1 carriers in India and North America. These installation contracts did not exist in fiscal year 2014.

•

Before considering inventory provisions, the gross profit percentage increased by 4.9% and 8.3% respectively between the fourth quarter and full fiscal year 2016 compared to the same periods two years prior. Improvements relate primarily to material cost improvements since fiscal year 2014 which have resulted in improved gross profit percentages.

•

Inventory provisions were $2.7 million higher in the fourth quarter, and $3.3 million higher for the fiscal year 2016 than they were in the same periods in fiscal year 2014. Inventory provisions were taken in fiscal year 2016 to reflect the continued evolution of the product portfolio and the risk of excess inventory as a result of the change in the relationship with Nokia.

•

Operating expenses were $4.2 million and $12.5 million lower respectively in the three and twelve months ended February 29, 2016 than they were in the same periods two years prior. This reduction is primarily the result of lower compensation related spending following global restructuring activities in fiscal year 2016 and lower depreciation levels as well. A weakened CAD also reduced our USD-translated operating expenses in fiscal year 2016.

6

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Consolidated Balance Sheet Data

	As at February 29, 2016			As at February 28, 2015
Assets
Current Assets
Cash and cash equivalents		4,277			23,692
Trade receivables		18,986			48,626
Inventory		22,702			24,294
Other current assets		2,777			5,895
		48,742			102,507
Long Term Assets
Property and equipment		3,702			4,322
Deferred tax asset		—			1,485
Deferred financing cost		—			18
Intangible assets		623			794
Goodwill		—			11,927
		4,325			18,546
Total Assets		53,067			121,053
Liabilities
Debt facility		22,152
Accounts payable and accrued liabilities		23,557			40,677
Deferred revenue		1,944			830
Deferred tax liability		294			—
Warrant liability		117			—
		48,064			41,507
Long Term Liabilities
Debt facility		—			32,400
Other long term liabilities		773			1,139
Warrant liability		3			1,239
		776			34,778
Shareholders' equity
Capital stock		221,128			220,952
Contributed surplus		9,235			8,388
Deficit		(218,225	)		(175,921	)
Accumulated other comprehensive loss		(9,618	)		(9,618	)
Total Shareholder's equity		2,520			43,801
Non-controlling interests		1,707			967
Total Equity		4,227			44,768
Total Liabilities and Equity		53,067			121,053
Shares issued & outstanding		3,020,069			3,011,632

7

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

SELECTED CONSOLIDATED QUARTERLY FINANCIAL INFORMATION

        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.

        Historically, our financial 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 reflect the project nature of network installations. In addition, results may vary as a result of staffing levels, infrastructure additions required to support our operations and material costs required to support design initiatives.

	FY15												FY16
	May 31 2014			Aug 31 2014			Nov 30 2014			Feb 28 2015			May 31 2015			Aug 31 2015			Nov 30 2015			Feb 29 2016
Revenue		28,771			37,933			47,320			43,742			26,340			26,917			20,997			12,041
Gross Profit before inventory provisions (note 1)		5,976			7,116			7,990			9,684			5,844			4,715			5,144			2,684
Gross Profit %		20.8%			18.8%			16.9%			22.1%			22.2%			17.5%			24.5%			22.3%
Inventory provisions		90			1,223			272			1,187			295			730			210			3,181
Gross Profit after inventory provisions		5,886			5,893			7,718			8,497			5,549			3,985			4,934			(497	)
Gross Profit % after inventory provisions		20.5%			15.5%			16.3%			19.4%			21.1%			14.8%			23.5%			(4.1%	)
Operating Expenses		12,056			12,165			12,192			11,304			10,963			10,530			8,689			7,594
Loss before other items — (gross profit less operating expenses)		(6,170	)		(6,272	)		(4,474	)		(2,807	)		(5,414	)		(6,545	)		(3,755	)		(8,091	)
Loss for the period		(6,667	)		(8,410	)		(3,436	)		(2,123	)		(5,824	)		(20,703	)		(5,754	)		(9,283	)
Net loss per share
Basic and Diluted		(2.75	)		(3.50	)		(1.25	)		(0.75	)		(1.98	)		(7.00	)		(2.07	)		(3.02	)
Weighted average number of shares outstanding
Basic & Diluted		2,327,766			2,555,762			3,010,178			3,011,065			3,011,941			3,014,892			3,018,034			3,019,712
Total Assets		86,130			110,597			120,291			121,053			113,587			88,327			69,241			53,067

Note 1: Gross profit before inventory provisions is a non-GAAP financial measure. See "Use of Non-GAAP Performance Measures".

Overview

        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.

8

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        We support product lines branded under the names Horizon, Avenue and Avenue Lite, Harmony and Harmony Lite, Harmony Eband and Harmony Enhanced. The key elements of our solutions include: high performance; carrier-grade availability; cost-competitiveness; support of legacy networking standards; and the availability of advanced network management and wireless network IP planning.

        The demand for our products is driven by global trends, including IP convergence and pressure on backhaul capacity caused by increased functionality of mobile devices, the shift in demand from voice to multimedia content and services, growing demand for wireless coverage, increasing number of subscribers, and investment in radio access network spectrum. In our target markets, network traffic is shifting from legacy TDM traffic to IP-based traffic to improve network efficiency and enable IP-based services. Principally, we target the global wireless communications service provider market and, in particular, those service providers offering high-capacity wireless communication services, including traditional cellular service providers and emerging broadband wireless access (BWA) service providers.

        We sell our products both directly and indirectly through our channel partners.

        Our direct customers are typically service providers that operate networks in large geographical areas. The sales cycle to this class of customer typically involves a trial (or trials), and typically requires twelve to eighteen months from first contact before orders are received, but can be longer, particularly in greenfield situations. Once the order stage is reached, a supply agreement is usually established and multiple orders are processed under one master supply agreement. Master supply agreements provide the framework for future business and do not generally include any volume commitments.

        Our channel partners are distributors, value-added resellers and OEMs including system integrators and network equipment vendors. In 2012, we acquired Nokia's microwave product line. Nokia rebrands our Harmony product as FlexiPacket. During the three and twelve months ended February 29, 2016, the Nokia channel accounted for 47% and 44% respectively of our sales. See "Relationship with Nokia" below.

        We also have a 50.1% owned subsidiary, DragonWave HFCL India Private Limited ("DragonWave HFCL") to address the Indian market. Because we have a controlling interest in the subsidiary we consolidate its results. Our sales of services and locally sourced material in India flowed through DragonWave HFCL and accounted for $1.6 million and $10.1 million of our total revenue in the three and twelve months ended February 29, 2016.

        We outsource most of our manufacturing and certain elements of the supply chain management and distribution functions. Outsourcing these functions allows us to focus on designing, developing, selling and supporting our products. Our research and development expenses have historically been, and will continue to be, a significant portion of our overall cost structure as we will continue to invest in new product features and new platforms to better serve the current and future needs of our customers.

        Our industry is global and highly competitive. We face competition in our target markets from two types of microwave equipment suppliers: hybrid equipment suppliers (including NEC Corporation, Alcatel-Lucent (recently acquired by Nokia), Ericsson and Huawei) and suppliers, like us, of Ethernet equipment (including SIAE Microelettronica, Ceragon Networks Ltd. and Aviat Networks, Inc.). We also face competition from full service network integrators such as Huawei, NEC Corporation, Alcatel-Lucent (recently acquired by Nokia) and Ericsson, who have developed competing Ethernet-based products for IP networks.

        Our business priorities include: managing resources to minimize cash demands; strengthening our balance sheet; maintaining our global reach while focusing on key revenue growth areas; maintaining and growing our

9

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

relationships with channel partners; building on customer wins; and building toward leadership in outdoor smallcell backhaul.

        Our primary operational objective is to achieve cash flow break-even and reduce our net losses. To this end, we plan to focus on revenue opportunities with higher gross margin potential and lower working capital requirements, at the same time as we restructure the size of the organization to stay in line with our current revenue levels and geographic focus.

Recent Developments

Highlights of Our Financial Results

        The following are key points on our results of operations for the fourth quarter and full year ended February 29, 2016, compared to the same periods in the prior fiscal year:

•

Our revenue decreased by $31.7 million when comparing the three month periods ended February 29, 2016 and February 28, 2015. When comparing the twelve month periods, revenue decreased by $71.5 million between fiscal year 2015 and fiscal year 2016.

	Three months period			Twelve months ended
Revenue ended February 28, 2015		43,742			157,766
Decrease in sales through Nokia Channel		(14,681	)		(46,665	)
Decrease in direct sales to a Tier 1 carrier located in India		(6,065	)		(12,298	)
Decrease in direct and indirect sales in North America		(7,229	)		(5,977	)
Decrease in direct sales in Europe, Middle East & Africa		(3,790	)		(5,801	)
Other		64			(730	)
Total Change		(31,701	)		(71,471	)
Revenue ended February 29, 2015	$	12,041		$	86,295

•

Our gross profit percentage, before inventory provisions, in the fourth quarter of fiscal year 2016 remained consistent with the same period in the prior year despite the significant decline in revenue. The gross profit percentage, before inventory provisions, improved to 21.3% in the twelve months ended February 29, 2016 from 19.5% for the same twelve month period in the prior year. A change in customer and product mix has driven this improvement.

•

Operating expenses decreased as well. The following table highlights the key factors contributing to lower operating expenses.

10

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

	Q4 FY2016 vs. Q4 FY2015			YTD FY2016 vs. YTD FY2015
Key Drivers:
Compensation related spending		(2.7	)		(3.6	)
Travel & living		(0.4	)		(1.3	)
Material spending on prototypes & tooling costs		0.1			(1.2	)
Contractor and professional services spending		(0.3	)		(0.6	)
Depreciation		—			(0.4	)
DragonWave HFCL (India) spending		0.2			0.4
Foreign exchange benefit to operating expenses of translating Canadian dollar expenses to USD		(0.6	)		(3.2	)
(as the Canadian dollar has weakened our USD translated expenses have decreased)		(3.7	)		(9.9	)

•

We recorded a restructuring expense in the amount of $0.1 million and $1.5 million respectively in the three and twelve months ended February 29, 2016 related to staff reductions which took place in the third quarter of fiscal year 2016.

•

We recorded a non-cash impairment charge of $11.9 million in the three months ended August 31, 2015 after performing our annual goodwill impairment test. This adjustment is reflected in the twelve months ended February 29, 2016.

•

A fair value adjustment gain of $1.1 million was realized during the twelve months ended February 29, 2016, as a result of a change in the warrant valuation on the remaining warrants outstanding from the public equity offerings completed in September 2013 and August 2014. A small loss of $0.1 million was recognized in the three months ended February 29, 2016 as the warrant valuation increased during this period.

•

Other items before taxes impacting the loss in the fourth quarter and during the twelve months ended February 29, 2016 totaled $0.9 million and $3.1 million, respectively, and included amortization of software assets, accretion expense, interest expense, and a foreign exchange loss.

•

In the three and twelve months ended February 29, 2016 we recognized a tax expense of $0.1 million and $2.3 million respectively. The tax expense was comprised of an increase in a valuation allowance on a deferred tax asset related to net operating loss carry-forwards in the United States in the amount of $1.6 million, (recognized in the second quarter of fiscal year 2016), a tax expense associated with taxes owing in profitable jurisdictions (fourth quarter of fiscal year 2016 — $0.1 million; full fiscal year 2016 — $0.4 million) and a deferred tax liability in the amount of $0.3 million related to income in India (recognized in the fourth quarter of fiscal year 2016).

•

The net loss applicable to shareholders was $9.1 million and $42.3 million, respectively, for the three and twelve months ended February 29, 2016.

•

In the three months ended February 29, 2016, we repaid $4.5 million on our line of credit which decreased the outstanding debt balance to $22.2 million. Before the debt repayment we generated cash of $0.9 million during this period primarily as a result of our receivable collection efforts. Our ending cash position at February 29, 2016 was $4.3 million.

11

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

•

We repaid a further $3.3 million between March 1, 2016 and the date of this MD&A. As at May 18, 2016 the balance of our outstanding debt is $18.9 million.

Liquidity and Cash Resources

        The consolidated financial statements for the year ended February 29, 2016 have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and the disbursement of liabilities and commitments in the normal course of business in the foreseeable future. We have a history of losses and we have consumed significant cash resources in the past, and we have continued to do so in the year ended February 29, 2016. Recently, we have experienced additional liquidity pressure as a result of reduced revenue from a significant OEM channel and a dispute over inventory shipped to a customer in India in June 2015.

        We have been able to make progress in restructuring the business. This progress includes the following highlights:

•

Reduced operating expenses by 33% in the fourth quarter of fiscal year 2016 compared to the same period in the previous fiscal year primarily through a reduction in staff levels;

•

Raised $4.4 million in equity in an offering completed on April 11, 2016;

•

Reduced outstanding debt on our credit facility by $10.2 million between February 28, 2015 and February 29, 2016 by leveraging our working capital;

•

Negotiated forbearance terms with our credit facility partners; and

•

Engagement in arbitration proceedings to seek resolution to our customer dispute in India.

        Despite the progress identified above, we remain in breach of the terms of our debt facility and we are currently operating under our second forbearance period pursuant to the terms of a forbearance agreement which expires on May 18, 2016. No long term debt facility agreement has been reached. The continued consumption of cash has raised substantial doubt about our ability to continue as a going concern. Our plans to restructure the business and overcome these difficulties include initiatives in a number of areas including:

•

Targeting our sales efforts to direct and indirect opportunities in markets with higher gross margins, and lower working capital requirements;

•

Adjusting our business focus and resources away from Nokia in order to support new sales channels;

•

Renegotiating the terms of existing debt facilities;

•

Continuing to minimize fixed and variable operating expenses, by tightly controlling discretionary spending and headcount growth;

•

Actively investigating and pursuing alternative forms of financing;

•

Reducing inventory levels in both raw material and finished goods inventory; and

•

Working closely with vendors to ensure supply continuity.

        These plans may be difficult to achieve. They are dependent on a number of key assumptions including the timing of significant new customer projects, and success in arbitration with the customer located in India. It is possible that the plans described above may not be fully executed or may occur too slowly to solve our current

12

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

liquidity concerns. There can be no assurance that the existing financing facility can be renegotiated or that any other forms of financing can be arranged on satisfactory terms. These consolidated financial statements do not include any adjustments to the accounts and classification of assets and liabilities that may be necessary if we are unable to continue as a going concern. Such adjustments could be material.

Expense Reduction Actions

        As part of an overall plan to decrease our operating expenses we reduced our global workforce early in the third quarter of fiscal year 2016 by approximately 23%. The reductions impacted our Shanghai design center as well as a number of sales and customer support centers around the world. Staff changes also occurred across a variety of functional areas in Canada. We recognized a restructuring expense of $0.1 million and $1.5 million in the fourth quarter and full year of fiscal 2016 respectively. Approximately $0.3 million of that amount remains as a liability on the balance sheet at February 29, 2016. It is expected that the reduction in staff will enable us to reduce operating expenses by approximately $7.0 million annually.

Arbitration Process in India

        In January 2016, a customer in India initiated an arbitration process with us to resolve the dispute over inventory shipped to them in June 2015. The value of the inventory shipped is $4.7 million. The customer has submitted their claim statement which we feel has no merit. We will submit a counter-claim for the material shipped, orders cancelled and other damages in June 2016. The arbitration hearing is set for July, 2016. As of the date of this MD&A, the outcome of this matter is not determinable.

Nokia Sales Channel Update

        Following Nokia's announced combination with Alcatel-Lucent, which has a vertically integrated microwave business unit, we announced that we have reshaped our channel strategy. Our revised strategy primarily positions our latest and new products directly to customers. We will continue to provide software maintenance and level 3 hardware support to Nokia for the large installed base of network elements deployed by both our Company and Nokia to date. In addition, we expect to sell the Harmony FlexiPacket Multiradio (Harmony Radio) product family and legacy products through the Nokia channel to customers who wish to continue with this platform, although we do expect these sales levels to decrease over time. To facilitate these ongoing activities, our global framework agreements will continue in place.

Debt Facility

        In light of our liquidity issues, our credit facility and our relationship with our lenders is a primary focus for us.

        We have an existing credit facility with Comerica Bank and Export Development Canada which is an asset based credit facility and was structured for a total of $40.0 million plus $4.0 million for letters of credit and foreign exchange facilities. We had drawn $22.2 million on the facility as at February 29, 2016 (February 28, 2015 — $32.4 million), and $1.9 million against our letter of credit facility (February 28, 2015 — $1.9 million). The credit facility which was extended on January 6, 2014, matures on June 1, 2016 and is secured by a first priority charge on all of our assets and our principal direct and indirect subsidiaries. The terms of the credit facility include other customary terms, conditions, covenants, and representations and warranties and credit availability is subject to ongoing compliance with borrowing covenants and short term assets on hand.

13

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        We have in place a forbearance agreement until May 18, 2016, which identifies new minimum covenant levels reflecting our revised financial plans. The forbearance agreement includes a requirement to hold a minimum of $1.0 million at Comerica Bank. In addition, the forbearance agreement reduces the facility commitment from $40.0 million to $35.0 million and implements more frequent monitoring. Subsequent to February 29, 2016, we repaid $3.3 million on the line of credit. As of the date of this MD&A the balance of the line of credit is $18.9 million. We are in compliance with the financial terms of the forbearance agreement at May 18, 2016.

Strategic Review Process

        Our Board of Directors reviews our corporate strategy on an ongoing basis. The Board continues to review all strategic and financial alternatives that may be available, including a potential sale of the Company, debt or equity financing, business combinations, joint ventures and strategic alliances, and ways to optimize our stand alone plan. CIBC World Markets Inc. has been engaged since January, 2014 to assist in the analysis of our strategic and financing alternatives. They continue to be engaged in this capacity. HC Wainwright has been engaged to investigate financing options, and recently represented us in the registered direct offering in April, 2016 discussed further below.

Transfer of Securities to the NASDAQ Capital Market

        On September 1, 2015 we announced that the transfer of the listing of our securities from The NASDAQ Global Market to The NASDAQ Capital Market ("NASDAQ") had been approved by the Staff of the NASDAQ Listing Qualifications Department ("NASDAQ Staff"), effective as of the opening of trading on August 28, 2015. Our common shares continue to trade under the symbol "DRWI".

        As previously announced, on March 5, 2015, we received notice that our closing bid price had been below US$1.00 per share for 30 consecutive business days and that, accordingly, the NASDAQ Staff had granted us an extension through November 30, 2015 to regain compliance with the US$1.00 per share bid price requirement. We were not able to regain compliance with this requirement within such period, and as a result we transferred the listing of our common shares from The NASDAQ Global Market to The NASDAQ Capital Market. In connection with such transfer, we were granted an additional 180 days to regain compliance with the minimum $1.00 bid price per share requirement. The new extension period ran through February 29, 2016. A notice from NASDAQ, received February 19, 2016, noted that the closing bid price of our common shares had been at US$1.00 per share or greater from February 4, 2016 to February 18, 2016. Accordingly, the Company has regained compliance with the US$1.00 per share bid price requirement.

Share Consolidation

        On December 11, 2015 we proposed in a Management Proxy Circular a consolidation of our shares (the "Consolidation"). The resolution to consolidate the shares was passed at a special meeting of shareholders on Tuesday, January 26, 2016. The resolution authorized a consolidation ratio of between 1-for-15 and 1-for-25. The Board of Directors effected the share Consolidation on February 2, 2016 on the basis of twenty-five (25) pre-Consolidation shares for one (1) post-Consolidation share. The Consolidation of our common shares was intended to establish the basis for the shares to trade above US$1.00, as per the listing requirements of the NASDAQ. The Consolidation reduced the number of outstanding common shares from approximately 75,493,513 to approximately 3,019,717. Each fractional share remaining after the share consolidation was cancelled. The number of outstanding warrants, stock options and restricted share units were proportionately

14

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

adjusted by the consolidation ratio and the exercise prices correspondingly increased by the same consolidation ratio. All shares and exercise prices are presented on a post-consolidation basis in our annual consolidated financial statements and in this MD&A.

Registered Direct Offering

        On April 7, 2016 we announced our intention to complete a registered direct offering, which was completed on April 11, 2016. Under the offering, we issued 599,998 common shares and concurrently in a private placement issued warrants to purchase 299,999 common shares exercisable until March 12, 2020 at an exercise price of $8.50. The price per common share and one half of a warrant was $7.25 and resulted in total gross proceeds of $4.35 million. The net proceeds of the offering, before expenses, were approximately US$4.0 million. We expect that any exercise of the warrants will result in the cash proceeds from the exercise of such warrants being paid to us. Rodman & Renshaw, a unit of H.C. Wainwright & Co., LLC acted as the exclusive placement agent for the registered direct offering and concurrent private placement.

Continued Investment in New Technology and New Customer Opportunities

        We continue to invest in new technology in order to meet the changing needs of the market with a focus on both increased capability and operating cost efficiencies for carriers. Evidence of that objective includes the announcement of product offerings like Harmony Care designed to support the extended life of a variety of our hardware and software products and the recently announced joint initiative with Mitel Networks Corporation which will be focused on advancing the development of 5G networking. We continue to work toward the adoption of our products with existing and new customers including the recently launched Harmony Enhanced^MC dual carrier product by supporting active trials throughout the world.

        We are also actively engaged in supporting bids for opportunities which will leverage the high capacity and operating efficiency characteristics that our products are optimized for, including opportunities with a major Tier 1 carrier in North America.

15

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Adjusted Cashflow from Operations/Adjusted EBITDA

Please note: Adjusted Cashflow from Operations/Adjusted EBITDA is a non-GAAP measure. See "Use of Non-GAAP Performance Measures".

	FY16 Q4			FY16 Q3			FY16 Q2			FY16 Q1
Revenue		12,041			20,997			26,917			26,340
Cost of Sales		12,538			16,063			22,236			20,791
Gross Profit		(497	)		4,934			3,985			5,549
		(4.1	%)		23.5	%		14.8	%		21.1	%
Add:
Inventory Provisions		3,181			210			730			295
Gross profit before inventory provisions (Note 1)		2,684			5,144			4,715			5,844
		22.3	%		24.5	%		17.5	%		22.2	%
Operating Expenses		7,594			8,689			10,530			10,963
Less:
Amortization		(467	)		(494	)		(498	)		(472	)
Stock-based compensation		(210	)		(273	)		(228	)		(277	)
		6,917			7,922			9,804			10,214
Adjusted Cashflow from Operations/Adjusted EBITDA		(4,233	)		(2,778	)		(5,089	)		(4,370	)

Note 1: Gross profit before inventory provisions is a non-GAAP financial measure. See "Use of Non-GAAP Performance Measures".

Comparison of the three and twelve months ended February 29, 2016 and February 28, 2015

Revenue

	Three Months Ended							Twelve Months Ended
	February 29, 2016		February 28, 2015		Variance			February 29, 2016		February 28, 2015		Variance
	$		$		$			$		$		$
Hardware and other		8,601		41,654		(33,053	)		71,393		150,432		(79,039	)
Services		3,440		2,088		1,352			14,902		7,334		7,568
		12,041		43,742		(31,701	)		86,295		157,766		(71,471	)

        Hardware and other sales include both the microwave backhaul equipment shipped and the related software upgrades. The Services category includes software maintenance contracts, extended warranty programs and site planning and installation services. The growth in Services revenue in fiscal year 2016 in both the three and twelve months ended February 29, 2016 compared to the same periods in the prior year relates to an increase in installation services in India and North America.

16

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        We analyze our sales according to geographic region and target product development and sales strategies to meet the unique requirements of each region. The table below displays this information for the three months ended February 29, 2016 and February 28, 2015.

	Three Months Ended February 29, 2016								Three Months Ended February 28, 2015
	Direct & Indirect Sales		OEM Sales through Nokia		Total		% of total revenue		Direct & Indirect Sales		OEM Sales through Nokia		Total		% of total revenue
Canada		156		—		156		1%		1,136		—		1,136		3%
Europe, Middle East & Africa		1,357		4,979		6,336		53%		5,147		17,008		22,155		51%
India		1,245		506		1,751		15%		7,310		2,622		9,932		23%
United States		2,179		—		2,179		18%		8,428		—		8,428		19%
Rest of World		1,489		130		1,619		13%		1,425		666		2,091		4%
		6,426		5,615		12,041		100%		23,446		20,296		43,742		100%

        The table below displays the geographic comparatives for the twelve months ended February 29, 2016 and February 28, 2015.

	Year Ended February 29, 2016								Year Ended February 28, 2015
	Direct & Indirect Sales		OEM Sales through Nokia		Total		% of total revenue		Direct & Indirect Sales		OEM Sales through Nokia		Total		% of total revenue
Canada		2,255		—		2,255		3%		4,358		—		4,358		3%
Europe, Middle East & Africa		6,753		31,109		37,862		44%		12,554		61,467		74,021		47%
India		13,993		3,787		17,780		21%		26,291		10,854		37,145		24%
United States		19,577		19		19,596		23%		23,451		—		23,451		15%
Rest of World		6,095		2,707		8,802		9%		6,825		11,966		18,791		11%
		48,673		37,622		86,295		100%		73,479		84,287		157,766		100%

17

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        The following chart identifies the major contributors to the decrease in sales between fiscal year 2016 and fiscal year 2015.

	Three month period
Revenue ended February 28, 2015		43,742
Increased sales to a carrier in Mexico		707
New installation with a Czech carrier (existing customer)		163
New customer in Finland		163
New installation with a customer in the U.A.E.		204
Two new customers in the USA		117
Sales through the Nokia channel in India		181
Nokia channel — outside of India		(14,862	)
Decrease in direct sales to a tier 1 carrier in India		(6,065	)
Decrease in direct and indirect sales in North America		(8,257	)
Decrease in direct sales in Europe, Middle East & Africa		(4,116	)
Other		64
Net Change		(31,701	)
Revenue ended February 29, 2016		12,041

	Twelve Month Period
Revenue for the year ended February 28, 2015		157,766
Increase sales to a tier 1 carrier in the USA (primarily installation services)		1,482
Increase in sales to existing distributors in the USA (2 distributors)		1,104
New installation with a Czech carrier (existing customer)		1,067
Two new customers in the USA		1,010
New customers in Saudi Arabia and the U.A.E.		668
New customer in South Africa (previously purchased through Nokia)		641
Nokia Channel		(46,665	)
Decrease in direct sales to a tier 1 carrier in India		(12,298	)
Decrease in direct and indirect sales in North America		(9,573	)
Decrease in direct sales in Europe, Middle East & Africa		(8,177	)
Other		(730	)
Net change		(71,471	)
Revenue for the year ended February 29, 2016		86,295

18

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Gross Profit

	Three Months Ended								Twelve Months Ended
	February 29, 2016			February 28, 2015		Variance			February 29, 2016		February 28, 2015		Variance
	$			$		$			$		$		$
Hardware and other		7,794			32,923		(25,129	)		58,991		123,950		(64,959	)
Services		1,563			1,135		428			8,917		3,051		5,866
		9,357			34,058		(24,701	)		67,908		127,001		(59,093	)
Gross Profit before inventory provisions		2,684			9,684		(7,000	)		18,387		30,765		(12,378	)
(Note)		22.3%			22.1%		0.1%			21.3%		19.5%		1.8%
Inventory provisions		3,181			1,187		1,994			4,416		2,771		1,645
Gross Profit		(497	)		8,497		(8,994	)		13,971		27,994		(14,023	)
		(4.1%	)		19.4%		(23.6%	)		16.2%		17.7%		(1.6%	)

Note: Gross profit before inventory provision is a non-GAAP financial measure. See "Use of Non-GAAP Performance Measures".

        A large component of our cost of sales for hardware is the cost of products purchased from outsourced manufacturers. Final testing and assembly for the links sold by us is carried out both at our premises and at the premises of our contract manufacturers. Additional costs for logistics and warranty activities are included in the Hardware and other category as well.

        Services costs relate primarily to the cost of third party installation service providers.

        Despite the decrease in sales, our gross profit percentage before inventory provisions remained consistent during the three months ended February 29, 2016 and increased by 1.8% in the twelve months ended February 29, 2016 compared to the same periods in the prior fiscal year. The primary reasons for the improvement relates to a change in the mix of customers, and an increase in the percentage of higher margin products in fiscal year 2016.

        The increase in the inventory provision in fiscal year 2016 relates to the excess provisions taken in this year associated with products sold substantially through the Nokia sales channel given the decrease in future demand through this customer.

19

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Expenses

        The foreign exchange benefit on the charts below is the estimated reduction in the expenses paid in Canadian dollars when translated to USD. The Canadian dollar has weakened relative to the USD between fiscal year 2015 and fiscal year 2016.

	Fiscal Year 2016		Fiscal Year 2015		Difference			% Difference
Average foreign exchange rate CAD to USD		0.768		0.893		(0.125	)		(14%	)

Research and Development

Three Months Ended			Twelve Months Ended
February 29, 2016	February 28, 2015	Variance	February 29, 2016	February 28, 2015	Variance
$	$	$	$	$	$
2,425	4,271	(1,846)	13,406	18,657	(5,251)

        Research and development ("R&D") costs relate mainly to the compensation of our engineering group and the material consumption associated with prototyping activities. Staff employed in this functional area are located in Canada and China. Staff levels declined by approximately 47% between February 28, 2015 and February 29, 2016 primarily as a result of restructuring initiatives.

Changes to R&D Expenses in USD Millions:

	Q4 FY2016 vs. Q4 FY2015			YTD FY2016 vs. YTD FY2015
Key Drivers:
Compensation related spending		(1.2	)		(1.5	)
Depreciation		(0.1	)		(0.7	)
Material spending on prototypes		(0.1	)		(1.8	)
Rent (China)		(0.2	)		(0.4	)
Foreign exchange — benefit of Canadian to USD conversion		(0.2	)		(0.9	)
		(1.8	)		(5.3	)

Sales and Marketing

Three Months Ended			Twelve Months Ended
February 29, 2016	February 28, 2015	Variance	February 29, 2016	February 28, 2015	Variance
$	$	$	$	$	$
1,858	3,745	(1,887)	10,572	13,975	(3,403)

20

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        Sales and marketing ("S&M") expenses include the remuneration of sales, marketing, product line management and customer service staff, including their associated travel and other spending. Recent staff reductions which were part of the restructuring efforts undertaken in September, 2015 impacted the S&M organization as well.

Changes to S&M Expenses in USD Millions:

	Q4 FY2016 vs. Q4 FY2015			YTD FY2016 vs. YTD FY2015
Key Drivers:
Compensation related spending		(0.8	)		(1.1	)
Variable compensation (program changes and lower revenue)		(0.4	)		(0.7	)
Travel & living		(0.3	)		(0.7	)
External contracted services		(0.2	)		(0.1	)
Foreign exchange		(0.2	)		(0.8	)
		(1.9	)		(3.4	)

General and Administrative

	Three Months Ended							Twelve Months Ended
	February 29, 2016		February 28, 2015		Variance			February 29, 2016		February 28, 2015		Variance
	$		$		$			$		$		$
		3,311		3,288		23			13,798		15,085		(1,287	)
Breakdown by functional area:
Finance, human resources and exec office		1,363		1,750		(387	)		5,962		7,416		(1,454	)
Operations groups not in Cost of Sales		1,639		1,442		197			6,202		6,788		(586	)
DragonWave HFCL spending		309		96		213			1,634		881		753
		3,311		3,288		23			13,798		15,085		(1,287	)

        General and administrative ("G&A") expenses include finance, human resources and the executive office, as well as the portion of the costs of the operations organization which does not flow directly into Cost of Sales. This operations team includes inventory and production management, as well as IT and purchasing.

21

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Changes to G&A Expenses in USD Millions:

	Q4 FY2016 vs. Q4 FY2015			YTD FY2016 vs. YTD FY2015
Key Drivers:
Compensation related spending		(0.4	)		(0.3	)
DragonWave HFCL related spending		0.2			0.8
Travel & living		(0.2	)		(0.5	)
Professional fees and insurance costs		(0.1	)		(0.2	)
Warehousing costs		0.3			0.3
Operations/IT related contractor spending		(0.4	)		(0.3	)
Operations spending not recovered through Cost of Sales		0.9			0.4
(results from lower volumes)
Foreign exchange		(0.3	)		(1.5	)
		—			(1.3	)

Goodwill Impairment

Three Months Ended			Twelve Months Ended
February 29, 2016	February 28, 2015	Variance	February 29, 2016	February 28, 2015	Variance
$	$	$	$	$	$
—	—	—	11,927	—	11,927

        We recorded a non-cash impairment charge of $11.9 million in the twelve months ended February 29, 2016 after performing our annual goodwill impairment test which indicated the carrying value of the goodwill was fully impaired.

Restructuring Costs

Three Months Ended			Twelve Months Ended
February 29, 2016	February 28, 2015	Variance	February 29, 2016	February 28, 2015	Variance
$	$	$	$	$	$
130	—	130	1,549	—	1,549

        In September 2015, we implemented a restructuring plan in line with our objective of reducing our net losses and cash usage. Our plan included a 23% reduction of the workforce across a variety of functional areas of the business. The restructuring plan impacted staff primarily in China and Canada and, to a lesser extent, other countries globally. The corresponding reduction in compensation related spending is intended to help better align our costs with our revenues. Restructuring charges take the form of severance paid to employees. We have paid $1.3 million of the total restructuring charge, while $0.3 million remains unpaid and is reflected in our liabilities at February 29, 2016.

22

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Amortization of Intangible Assets

	Three Months Ended			Twelve Months Ended
	February 29, 2016	February 28, 2015	Variance	February 29, 2016	February 28, 2015	Variance
	$	$	$	$	$	$
Amortization of computer software & infrastructure software	96	207	(111)	577	1,188	(611)

        The amortization of software has decreased significantly as the net book value of software on the balance sheet has been declining.

Accretion Expense

Three Months Ended			Twelve Months Ended
February 29, 2016	February 28, 2015	Variance	February 29, 2016	February 28, 2015	Variance
$	$	$	$	$	$
37	59	(22)	205	168	37

        Accretion expenses have been recognized for both capital leases and for the termination liability which exists in connection with the termination of a services agreement with Nokia. In the prior fiscal year capital leases accounted for 100% of the accretion expense. In fiscal year 2016 the accretion expense associated with the termination liability represents approximately 80% of the total expense in this category.

Interest Expense

Three Months Ended			Twelve Months Ended
February 29, 2016	February 28, 2015	Variance	February 29, 2016	February 28, 2015	Variance
$	$	$	$	$	$
424	452	(28)	2,014	1,557	457

        Interest expense relates primarily to interest on our debt facility, this expense increased in the twelve month period ending February 29, 2016 compared with the same period in the prior year because the weighted average debt outstanding has increased between fiscal year 2016 and fiscal year 2015.

        During the three month period ended February 29, 2016 the weighted average debt outstanding was $23.7 million (three month period ended February 28, 2015 — $27.9 million) while for the twelve month period ended February 29, 2016 it was $29.8 million (twelve months ended February 28, 2015 — $20.3 million). Interest rates vary with market rate fluctuations, with loans bearing interest in the range of 3% to 4% above the applicable base rates.

23

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Warrant Issuance Expenses

Three Months Ended			Twelve Months Ended
February 29, 2016	February 28, 2015	Variance	February 29, 2016	February 28, 2015	Variance
$	$	$	$	$	$
—	—	—	—	221	(221)

        On August 1, 2014 we completed an equity offering which included the issuance of warrants. Of the total equity issuance costs of $2.3 million, $0.2 million was attributed to the warrants specifically and expensed to our consolidated statement of operations in the twelve months ended February 28, 2015.

Loss (Gain) on Change in Estimate

Three Months Ended			Twelve Months Ended
February 29, 2016	February 28, 2015	Variance	February 29, 2016	February 28, 2015	Variance
$	$	$	$	$	$
—	234	(234)	—	(67)	67

        During the twelve months ended February 28, 2015, we revised the Nokia termination fee estimate, received the final invoice, and determined the payment schedule of the Italian operations termination fee. This resulted in a gain in change in estimate.

        The total termination fee liability is valued at $3.3 million as at February 29, 2016. All of this liability is considered short term in nature.

Fair Value Adjustment — Warrant Liability

Three Months Ended			Twelve Months Ended
February 29, 2016	February 28, 2015	Variance	February 29, 2016	February 28, 2015	Variance
$	$	$	$	$	$
69	(979)	1,048	(1,119)	(2,007)	888

        The warrant liability is required to be presented at its estimated fair value as at each balance sheet date. As DragonWave's share price has decreased, the liability has decreased as well, which has resulted in a recognition of a gain in the consolidated statement of operations. In the three months ended February 29, 2016 our share price increased which resulted in a $0.1 million loss during this period as the corresponding value of the liability on the balance sheet also increased.

24

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Foreign Exchange (Gain)/Loss

Three Months Ended			Twelve Months Ended
February 29, 2016	February 28, 2015	Variance	February 29, 2016	February 28, 2015	Variance
$	$	$	$	$	$
307	(327)	634	331	(846)	1,177

        The foreign exchange gains and losses result from the translation of foreign denominated monetary accounts and the strength of the U.S. dollar relative to foreign currencies. During the three and twelve months ended February 29, 2016 the translation of bank and receivable accounts resulted in foreign currency losses of $0.3 million and $0.3 million respectively. These losses are driven by the devaluation of the Indian Rupee in fiscal year 2016.

Income Taxes Expense

	Three Months Ended								Twelve Months Ended
	February 29, 2016			February 28, 2015			Variance		February 29, 2016		February 28, 2015		Variance
	$			$			$		$		$		$
Increase in valuation allowance on deferred tax asset		25			—			25		1,546		—		1,546
Deferred Tax Expense		294			—			294		294		—		294
Current Tax Expense/(Recovery)		(190	)		(330	)		140		435		717		(282	)
		129			(330	)		459		2,275		717		1,558

        As of February 28, 2015, our deferred tax assets related to net operating loss carry-forwards in the United States. During the twelve months ended February 29, 2016, we recorded an increase in the valuation allowance of $1.5 million as we believe it is more likely than not that the related deferred tax assets will not be realized (increase in the valuation allowance in the three and twelve months ended February 28, 2015 — nil).

        We accrue tax expenses for entities located in foreign jurisdictions that are anticipated to be profitable for fiscal year 2016. The determination of our tax provision is based on the statutory tax rates applicable in each region and takes into account any available tax losses in each country. For the three and twelve months ended February 29, 2016, we recognized a deferred tax expense of $0.3 million related DragonWave HFCL. We recognized a current tax true up of ($0.2) million and a tax expense of $0.4 million in the three and twelve months ended February 29, 2016 respectively related to foreign jurisdictions which are anticipated to be profitable within the current fiscal year.

        We have losses available in the following jurisdictions:

	Net Operating Losses		Capital Losses		Investment Tax Credits		Ontario R&D Tax Credits
Canada		136,221		16,302		14,720		2,361
US		7,888		45,543
Luxembourg		36,007

25

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        The losses in Canada expire starting in fiscal 2031 until fiscal 2036. The losses in Luxembourg can be carried forward indefinitely. Income tax benefits relating to the losses in Canada and Luxembourg have not been recognized in the consolidated financial statements as the recognition requirements under the liability method of accounting for income taxes have not been met.

        The losses in the U.S. expire between fiscal 2022 and fiscal 2032. Internal Revenue Code Section 382 imposes an annual limitation on the use of a company's net operating loss carryforwards when a company has an ownership change. Our acquisition of Axerra Networks, Inc. resulted in an ownership change as understood by Section 382. As a result, the annual restriction of the amount of losses of Axerra Networks, Inc. that may be used has been calculated as $0.5 million

        The investment tax credits available to reduce future federal Canadian income taxes payable begin to expire in 2022. The provincial research and development tax credits are available to reduce future provincial income taxes payable and these provincial tax credits begin to expire in 2029. The tax benefit of the federal and provincial tax credits has not been recognized in the consolidated financial statements.

        As at February 29, 2016, we have not recorded any liabilities associated with uncertain tax positions.

        We remain subject to examination by tax authorities in Canada for years 2009 to 2016 and in the other jurisdictions for tax years 2011 to 2016.

        No deferred income taxes have been provided on undistributed earnings or relating to cash held in foreign jurisdictions, as we have determined that any income or withholding taxes on repatriation would either not be significant, or we have decided to permanently reinvest the earnings in the foreign jurisdiction.

Use of Non-GAAP Performance Measures

"Gross profit before inventory provisions"

        In this MD&A, we break out "Gross profit before inventory provisions" as this measure allows management to evaluate our operational performance and compare to prior periods more effectively. "Gross profit before inventory provisions" does not have any standardized meaning prescribed by GAAP, it is therefore unlikely to be comparable to similar measures presented by other issuers and is not designed to replace other measures of financial performance or the statement of operations as an indicator of performance. This measure should not be considered in isolation or as a substitute for other measures of performance calculated according to GAAP. We believe that it is useful to compare gross profit results without the impact of inventory provisions, since our inventory provisions generally relate to technical obsolescence and excess due to market changes. We believe this non-GAAP measure also provides investors with a better ability to understand our operational performance. We calculate "Gross profit before inventory provisions" consistently over each fiscal period.

        The most directly comparable GAAP measure presented in our consolidated financial statements for the three and twelve months ended February 29, 2016 to "Gross profit before inventory provisions" is "Gross profit".

"Adjusted Cashflow from Operations/Adjusted EBITDA"

        In this MD&A, we also break out "Adjusted Cashflow from Operations" also called "Adjusted EBITDA". This measure corresponds to earnings before interest, taxes, depreciation and amortization less elements that are non-cash in nature. Because it omits non-cash items, we feel that Adjusted Cashflow from Operations/Adjusted EBITDA better represents the cash impact of the results of operations in the period. Adjusted

26

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Cashflow from Operations/Adjusted 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 operations as an indicator of performance. This measure should not be considered in isolation or as a substitute for other measures of performance calculated according to GAAP. Consistent improvement in Adjusted Cashflow from Operations/Adjusted EBITDA is one of management's primary objectives. Reducing cash usage from drivers other than working capital and capital investments is an important objective for us and we believe this financial measure is therefore useful to investors in evaluating our operating performance.

        The most directly comparable GAAP measure presented in our consolidated financial statements for the three and twelve months ended February 29, 2016 to "Adjusted Cashflow from Operations/Adjustment EBITDA" is "Net Loss". A reconciliation of "Adjusted Cashflow from Operations/Adjusted EBITDA" to "Net Loss" is set out below.

"Days Sales Outstanding excluding Tier 1 carrier in India"

        In this MD&A we break out "Days Sales Outstanding excluding Tier 1 carrier in India" as this measure allows management to evaluate our Days Sales Outstanding (DSO) performance and compare to prior periods absent the effect of the extended payment terms granted to this customer. "Days Sales Outstanding excluding Tier 1 carrier in India" does not have any standardized meaning prescribed by GAAP, it is therefore not comparable to similar measures presented by other issuers and is not designed to replace other measures of financial performance or the statement of operations as an indicator of performance. This measure should not be considered in isolation or as a substitute for other measures of performance calculated according to GAAP. We believe that it is useful to compare DSO results without the impact of extended payment terms granted to one customer, since these terms are not standard for us and are unlikely to be afforded to other customers. We believe this non-GAAP measure also provides investors with a better ability to understand our operational performance. The most directly comparable GAAP measure presented in our consolidated financial statements for the three months ended February 29, 2016 to "Days Sales Outstanding excluding Tier 1 carrier in India" is "Days Sales Outstanding".

27

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        Reconciliation of Adjusted Cashflow from Operations/Adjusted EBITDA to Net Loss

	FY16 Q4			FY16 Q3			FY16 Q2			FY16 Q1
Adjusted Cashflow from Operations/Adjusted EBITDA		(4,233	)		(2,778	)		(5,089	)		(4,370	)
Include the following items:
Stock-based compensation		(210	)		(273	)		(228	)		(277	)
Inventory provisions		(3,181	)		(210	)		(730	)		(295	)
Amortization of Property Plant and Equipment		(467	)		(494	)		(498	)		(472	)
Goodwill impairment		—			—			(11,927	)		—
Restructuring Costs		(130	)		(1,419	)		—			—
Amortization of intangible assets		(96	)		(149	)		(149	)		(183	)
Accretion expense		(37	)		(36	)		(61	)		(71	)
Interest expense		(424	)		(499	)		(560	)		(531	)
Fair value adjustment — warrant liability		(69	)		293			373			522
Foreign exchange (loss) gain		(307	)		270			(214	)		(80	)
Income taxes		(129	)		(459	)		(1,620	)		(67	)
Net Loss		(9,283	)		(5,754	)		(20,703	)		(5,824	)

Liquidity and Capital Resources

        The following table sets out some of the key balance sheet metrics:

	As at February 29, 2016		As at February 28, 2015
Key Balance Sheet Amounts and Ratios:
Cash and Cash Equivalents		4,277		23,692
Working Capital (Note 1)		678		61,000
Long Term Assets		4,325		18,546
Long Term Liabilities		776		34,778
Working Capital Ratio		1 : 1		2.5 : 1
Days Sales Outstanding in accounts receivable (Note 2)		114 days		96 days
Inventory Turnover		1.6 times		6.5 times

Note 1: The debt facility was included in long term liabilities at February 28, 2015.

Note 2: Days Sales Outstanding in accounts receivable excluding a Tier 1 carrier in India at February 29, 2016 were 68 days (59 days at February 28, 2015). This is a non-GAAP measure. See "Use of Non-GAAP performance measures".

Cash and Cash Equivalents

        As at February 29, 2016, we had $4.3 million in Cash and Cash Equivalents ("Cash"), representing a $19.4 million decrease from the Cash balance at February 28, 2015.

28

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
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 and twelve months ended February 29, 2016.

	Three Months Ended
				Twelve Months Ended
	February 29, 2016
				February 29, 2016
Operating activities
Net loss		(9,283	)		(41,564	)
Items not affecting cash		1,235			16,350
Net loss excluding items not affecting cash		(8,048	)		(25,214	)
Working Capital Changes
Trade receivables		8,580			29,640
Inventory		2,701			1,592
Other current assets		834			3,074
Accounts payable and accrued liabilities		(2,561	)		(16,880	)
Deferred revenue and other long term liabilities		(276	)		810
Changes in non-cash working capital items		9,278			18,236
Investing activities
Acquisition of property and equipment		(21	)		(1,311	)
Acquisition of intangible assets		(15	)		(406	)
		(36	)		(1,717	)
Financing activities — excluding debt repayment
Repayments on capital lease obligation		(204	)		(507	)
Issuance of common shares, net		3			35
		(201	)		(472	)
Cash generated/(used) before debt repayment		993			(9,167	)
Debt repayment		(4,500	)		(10,248	)
Cash and cash equivalents at beginning of period		7,784			23,692
Cash and cash equivalents at end of period		4,277			4,277

        Key points associated with the Cash decrease of $3.5 million in the fourth quarter of fiscal year 2016 include:

•

We repaid $4.5 million on the debt facility.

•

Working capital changes provided $9.3 million in cash.

•

We used $8.0 million in cash as a result of our net loss from operations.

•

Spending on capital acquisitions and software spending have been strictly controlled.

29

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        Key points associated with the Cash decrease of $19.4 million in fiscal year 2016 include:

•

We repaid $10.2 million on the debt facility.

•

Working capital changes provided $18.2 million in cash.

•

We used $25.2 million in cash as a result of our net loss from operations.

•

Spending on capital acquisitions and software spending was limited to $1.7 million

Working Capital

Changes in working capital	November 30, 2015 to February 29, 2016			February 28, 2015 to February 29, 2016
Beginning working capital balance		9,337			61,000
Cash and cash equivalents		(3,507	)		(19,415	)
Trade receivables		(8,580	)		(29,640	)
Inventory		(2,701	)		(1,592	)
Other current assets		(834	)		(3,118	)
Future income tax asset		(25	)		—
Debt facility		4,500			(22,152	)
Accounts payable and accrued liabilities		2,561			17,120
Deferred revenue		80			(1,114	)
Capital lease obligation		(83	)		(294	)
Warrant liability		(70	)		(117	)
Net change in working capital		(8,659	)		(60,322	)
Ending working capital balance		678			678

Trade Receivables

        Our trade receivables balance decreased by $29.6 million between February 29, 2016 and February 28, 2015 primarily due to lower sales levels in the three months ended February 29, 2016, compared to the fourth quarter of fiscal year 2015 (fourth quarter of fiscal year 2016 vs. fourth quarter of fiscal year 2015 — $31.7 million lower). Our rate of collection has remained fairly consistent for most of our customers, so the reduction in accounts receivable is attributed primarily to the lower sales levels. Our allowance for doubtful accounts continues to represent a small percentage of our total trade receivables outstanding (February 29, 2016 — 1.0%; February 28, 2015 — 1.0%).

        As at February 29, 2016, two customers exceeded 10% of the total receivable balance. These customers represented 52% and 16% of the trade receivables balance (February 28, 2015 — two customers represented 37% and 34% of the trade receivables balance).

        Included in G&A expenses is bad debt expense of $0.2 million and $0.2 million for the three and twelve months ended February 29, 2016 (three and twelve months ended February 28, 2015 — nominal and $0.2 million).

30

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Inventory

        The inventory balance decreased by $1.6 million relative to the closing balance at February 28, 2015. By product category the changes in inventory are as follows in USD millions:

Closing inventory February 28, 2015	24.3
Increase in Harmony Enhanced (product built for Tier 1 customer in India)	4.5
Increase in Horizon Compact Plus	1.2
Increase in inventory held for customer support & warranty	0.2
Decrease in Harmony (Flexipacket & Hubs for Enhanced) product porfolio	(7.2	)
driven by a sale of raw material back to a contract manufacturer
Other	(0.3	)
Net Change in Inventory	(1.6	)
Ending inventory at February 29, 2016	22.7

        During the twelve months ended February 29, 2016, we entered into an agreement to sell back inventory to a contract manufacturer. The total reduction of raw material inventory was $10.2 million and we reduced accounts payable owing to the contract manufacturer by the same amount. The balance of inventory held at this contract manufacturer at February 29, 2016 was $16.8 million (February 28, 2015 — $13.6 million).

        We provide for inventory which we believe will not be consumed in the normal course of business either because we believe the part has become technically obsolete or because we believe that the demand for the part is too low to consume the remaining inventory on hand. We created inventory provisions of $2.9 million and $4.4 million in the three and twelve months ended February 29, 2016 to reflect this risk. (Fourth quarter fiscal year 2015 — $1.2 million; Full fiscal year 2015 — $2.8 million)

Accounts Payable and Accrued Liabilities

        The accounts payable and accrued liabilities balance decreased by $17.1 million between February 28, 2015 and February 29, 2016. This decrease was driven by the inventory transaction described above which decreased the payable balance to a contract manufacturer by $10.2 million. In addition we have reduced our inventory purchasing over the year as sales levels have declined.

Equity Offerings

2016 Equity Offering

        On April 11, 2016, we issued 599,998 common shares in a registered direct offering, and concurrently in a private placement, issued warrants to purchase 299,999 common shares (the "2016 Warrants") exercisable at an exercise price of $8.50 until March 12, 2020 (the "2016 Equity Offering"). The price per common share and one half of a warrant was $7.25 and resulted in total gross proceeds of $4.4 million. The warrants are not exercisable until October 12, 2016. The proceed from the 2016 Equity Offering are expected to be used for general corporate purposes, which may include working capital, general and administrative expenses, capital expenditures and implementation of our strategic priorities.

31

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

2014 Equity Offering

        On August 1, 2014 we completed a public equity offering (the "2014 Equity Offering"). Under the terms of the 2014 Equity Offering, we issued and sold 15,927,500 units at CAD$1.80 per unit for aggregate gross proceeds of $26.2 million (CAD$28.7 million). After deducting commissions and expenses, we realized net proceeds of $24.0 million. Each unit consisted of one common share of the Company and one half of one warrant (each whole warrant a "2014 Warrant"). On a pre-Consolidation basis, each whole 2014 Warrant entitled the holder to purchase one common share of the Company at an exercise price of CAD$2.25 per share until August 1, 2016, subject to certain standard adjustments. Subsequent to the Consolidation, 25 whole 2014 Warrants entitle the holder to purchase one common share of the Company at an exercise price of C$56.25 per share.

        Upon issuance, we recognized a liability in the amount of $2.6 million for the 2014 Warrants.

2013 Equity Offering

        On September 23, 2013, pursuant to the public equity offering of units (the "2013 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. The units were offered at a price of $2.10 per unit. Each unit consisted of one common share and three quarters of one warrant (each whole warrant a "2013 Warrant"). Each whole warrant 2013 Warrant originally entitled the holder to purchase one common share at an exercise price of $2.70 per share until September 23, 2018, subject to certain adjustments. In connection with the 2014 Equity Offering, and pursuant to the terms of such warrants, the exercise price of the warrants issued in the 2013 Equity Offering was changed to $1.30 per share (on a pre-Consolidation basis). Subsequent to the Consolidation, 25 whole 2013 Warrants entitle the holder to purchase one common share at an exercise price of $32.50 per share. In connection with the 2016 Equity Offering, and pursuant to the terms of the 2013 Warrants, the exercise price of the 2013 Warrants was changed, such that 25 whole 2013 Warrants entitle the holder to purchase one common share at a price of $6.76 per share.

        As at September 23, 2013 we recognized a liability in the amount of $6.4 million for the 2013 Warrants.

Commitments as at February 29, 2016

        Future minimum operating lease payments as at February 29, 2016 per fiscal year relate to leases of office and warehouse space.

        They are as follows:

			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
Total Operating Lease Obligations		1,288		1,144		134		10		—

        In January 2016, a customer in India initiated an arbitration process with us to resolve the dispute over inventory shipped to this customer in June 2015. The value of the inventory shipped is $4.7 million. The customer submitted a claim statement which we believe has no merit. We will submit a counter claim in June 2016. The arbitration hearing is set for July 2016 and as of the date of this MD&A the outcome of this matter is not determinable.

32

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Off-Balance Sheet Arrangements

(Actual Dollars)

City	Country	Lessor	Lease Expiry	Cost per Month
Dubai	UAE	TECOM Investments FZ-LLC	November, 2016	$	3,450
Luxembourg City	Luxembourg	ME Business Solutions S.à r.l.	Month to Month	$	1,700
Ottawa (Warehouse & Operations at Terry Fox Drive + Office Space at 411 Legget Drive)	Canada	Kanata Research Park	November, 2016	$	90,000
Herzlyia	Israel	Margalin Holdings Ltd.	November, 2016	$	2,500
Shanghai	China	Shanghai Lingang Economic
		Development Group	September, 2017	$	20,800
Gurgaon	India	Narinder Singh & Songs (P) LTD	March, 2018	$	4,430

        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, and have in place subleases in Ottawa which reduce the monthly cost by approximately 10%. We expect that, if any of the above noted leases where terminated, we would be able to lease premises on substantially similar terms.

        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.

        As at February 29, 2016, we have provisions totaling $3.1 million on inventory held by contract manufacturers that we do not expect to be fully used.

Outstanding Share Data

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

        Our warrants issued on August 1, 2014 in connection with the 2014 Equity Offering are traded on the Toronto Stock Exchange under the symbol DWI.WT and on the NASDAQ Capital Market under the symbol DRWIW.

33

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        The following tables show common share activity in the three and twelve months ended February 29, 2016 (on a post-Consolidation basis).

	Common Shares
Balance at February 28, 2015		3,011,632
ESPP		5,473
Exercise of restricted share units		2,400
Balance at November 30, 2015		3,019,505
ESPP		564
Balance at February 29, 2016		3,020,069

        The following is a summary of stock option activity:

	Options			Weighted Average Price (CAD)
Options outstanding at February 28, 2015		159,421		$	76.34
Granted		171,037		$	8.70
Forfeited		(43,675	)	$	96.14
Options outstanding at November 30, 2015		286,783		$	33.48
Granted		1,937		$	3.50
Forfeited		(11,992	)	$	32.09
Options outstanding at February 29, 2016		276,728		$	32.82

        As at February 29, 2016 the following securities were issued and outstanding: 3,020,069 common shares, options to purchase 276,728 common shares granted under our Share Based Compensation Plan, and 10,084,062 warrants exercisable for 403,362 common shares. The number of common shares issuable upon the exercise of the warrants is subject to adjustment in accordance with terms of the warrants.

        As of May 18, 2016 the following securities were issued and outstanding: 3,620,506 common shares, options to purchase 260,442 common shares granted under our Share Based Compensation Plan, and warrants exercisable for 403,362 common shares. The number of common shares issuable upon the exercise of the warrants is subject to adjustment in accordance with terms of the warrants.

Restricted Shares & Employee Share Purchase 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 and twelve months ended February 29, 2016 a total of 470 and 5,207 common shares were purchased by employees at fair market value, while we issued 114 and 1,227 common shares, net of forfeitures, as its matching contribution. The shares we contributed will vest twelve (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, with a corresponding credit to contributed surplus. The total fair value of the shares earned during

34

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

the three and twelve months ended February 29, 2016 was $5 thousand and $13 thousand (three and twelve months ended February 28, 2015 — $3 thousand and $13 thousand). The fair value of the unearned ESPP shares as at February 29, 2016 was $8 thousand (February 28, 2015 — $13 thousand). The number of shares held for release, and still restricted under the ESPP at February 29 2016 was 978 (February 28, 2015 — 440).

Restricted Share Units (RSUs)

        Pursuant to the terms of our Share Based Compensation Plan, we entered into restricted share unit agreements with certain of our independent directors. These units which were issued during July 2014 were subject to each director's continued engagement on the Board for a period of one year from the date of issuance. All of the originally issued RSUs vested during the second quarter of fiscal year 2016 with the exception of 800 RSUs which were cancelled on April 14, 2015.

        The following table sets forth the summary of RSU activity under our Share Based Compensation Plan for the three and twelve months ended February 29, 2016:

	Twelve months ended February 29, 2016
	RSU's			Weighted Average Price (CAD)
RSU balances at February 28, 2015		3,200		$	53.75
Forfeited		(800	)	$	53.75
Vested		(2,400	)	$	53.75
RSU balances at February 29, 2016		—			—

        We have recognized $nil and $39 thousand for the three and twelve months ended February 29, 2016 as compensation expense for restricted share units, with a corresponding credit to contributed surplus.

Financial Instruments

        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.

35

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Categories for financial assets and liabilities

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

	February 29, 2016		February 28, 2015
Assets held at fair value (A)		4,277		23,692
Loans and receivables (B)		19,110		49,614
Other financial liabilities (C)		44,434		71,728
Liabilities held at fair value (D)		120		1,239

(A)

Includes cash and cash equivalents

(B)

Includes trade receivables and other miscellaneous receivables

(C)

Includes accounts payable, accrued liabilities, payroll related accruals, debt facility and termination fee

(D)

Warrant liability

        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.

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

        Cash and cash equivalents are measured using Level 1 inputs.

        The August 1, 2014 warrant liability is classified as Level 1 as the warrants are traded on the Toronto Stock Exchange and on the NASDAQ Capital Market.

36

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        The September 23, 2013 warrant liability is classified as Level 3 as it is measured at fair value using significant unobservable inputs. Significant assumptions used at February 29, 2016 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 February 29, 2016 we held the following Level 3 financial instruments carried at fair value on the consolidated balance sheet.

	Level 3		Total
Financial Liabilities
Warrant liability		3		3

        As at February 28, 2015, we held the following Level 3 financial instruments carried at fair value on the consolidated balance sheet.

	Level 3		Total
Financial Liabilities
Warrant liability		603		603

        A reconciliation of the Level 3 warrant liability measured at fair value for the year ended February 29, 2016 follows:

	Warrants		$
Balance at February 28, 2015		2,088,750		603
Fair value adjustment — warrant liability		—		(600	)
Balance at February 29, 2016		2,088,750		3

Interest rate risk

        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 and twelve months ended February 29, 2016 was $0.4 million and $2.0 million on our cash, cash equivalents and debt facility (three and twelve months ended February 28, 2015 — expense of $0.4 million and $1.4 million).

Credit risk

        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 trade receivables and other receivables, and cash and cash equivalents by transacting with only reputable financial institutions and customers.

37

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Foreign exchange risk

        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.

        As of February 29, 2016, if the U.S. dollar had appreciated 1% against all foreign currencies to which we have exposure, with all other variables held constant, the impact of this foreign currency change on our foreign denominated financial instruments would have resulted in a $27 thousand after-tax net loss for the three and twelve months ended February 29, 2016 (three and twelve months ended February 28, 2015 — $42 thousand) with an equal and opposite effect if the U.S. dollar had depreciated 1% against all foreign currencies at February 29, 2016.

        The risk described above relates to balance sheet accounts. However, as the section under "Expenses" indicates fluctuations in the Canadian dollar relative to the USD make it relatively more or less expensive to operate our R&D and head office functions in Canada.

Economic Dependence

        We were dependent on two key customers with respect to revenue in the three months ended February 29, 2016. These customers represented approximately 47% and 11% of sales for the three months ended February 29, 2016 (three months ended February 28, 2015 — three customers represented 46%, 16% and 10%).

        We were dependent on three key customers with respect to revenue in the twelve months ended February 29, 2016. These customers represented approximately 44%, 15% and 11% of sales for the twelve months ended February 29, 2016 (twelve months ended February 28, 2015 — two customers represented 53% and 16%).

Controls and Procedures

        At the end of the period covered by this MD&A (such period being the three and twelve months ended February 29, 2016), an evaluation was carried out under the supervision of, and with the participation of, our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, which are our principal executive officer and principal financial officer, respectively, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Based upon that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective as at February 29, 2016 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

38

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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 and that there are no material weaknesses in our disclosure controls and procedures as of February 29, 2016.

Changes in Internal Control over Financial Reporting

        During the period covered by this report, no changes occurred in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Critical Accounting Policies and Estimates

Inventory

        Inventory is valued at the lower of cost and net realizable value ("NRV"). The cost of inventory is calculated on a standard cost basis, which approximates average actual cost. NRV is determined as the market value for finished goods, replacement cost for raw materials, and finished goods market value less cost to complete for work in progress inventory.

        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. Our standard warranty is typically between 12 and 36 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. Indirect manufacturing costs and direct labour expenses are allocated systematically to the total production inventory.

Revenue recognition

        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 conditions to final acceptance of the product are 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

39

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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 liability is estimated based on recent actual return experience and repair costs. Where product defects have been identified which would cause the cost or warranty experience to change, additional warranty costs are recognized.

        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

        We offer our customers the option to purchase advanced replacement and extended warranty contracts 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 customers with 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 36 months. Our extended warranty programs enable customers to continue to have repairs made as needed and customer support guidance beyond the standard warranty period.

Training

        We earn a minimal portion of our total revenue from the sale of training services primarily to installation companies. Only in rare circumstances do we provide or sub-contract installation services (see below), as the customers to whom we sell microwave equipment outsource the installation to specialized companies. As a result, installation training revenue is generally not sold as a bundled service because it is sold to a different customer base. Further, any training that is provided is not essential to the functionality of our product offerings,

40

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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

Installation

        Periodically, a customer may request that we arrange for the installation of our equipment. Installations are performed by a third party service provider. 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.

Research and Development

        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

        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 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.

FUTURE ACCOUNTING PRONOUNCEMENTS

        In May 2014, the Financial Accounting Standards Board (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. In August 2015, the FASB issued ASU No. 2015-14, "Revenue

41

DragonWave Inc.
Management's Discussion and Analysis
For the three and twelve months ended February 29, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

from Contracts with Customers" which reflects decisions reached by the FASB at its meeting earlier in the year to defer the effective date to fiscal years beginning after December 15, 2017, with early adoption permitted for the year beginning after December 15, 2016. We are currently assessing the impact this amendment will have on our consolidated financial statements.

        In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements — Going Concern". The update provides U.S. GAAP guidance on management's responsibility in evaluating whether there is substantial doubt about a company's ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company's ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in this ASU are effective for reporting periods beginning after December 15, 2016, with early adoption permitted. We are currently assessing the impact this amendment will have on our consolidated financial statements.

        In February 2016, the FASB issued ASU No. 2016-02, "Leases". The amendments in this Update create Topic 842, Leases, and supersede the lease requirements in Topic 840, Leases. The Update will require companies to recognize a right-of-use (ROU) asset and a lease liability in their balance sheets, while still distinguishing between finance leases and operating leases. For finance leases, the lessee would recognize interest on the lease liability separately from amortization of the right-of-use asset in the statement of comprehensive income, and for operating leases, the lessee would recognize a straight-line lease expense. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We are currently assessing the impact this amendment will have on our consolidated financial statements.

42

QuickLinks

Exhibit 99.3