Form 6-K DRAGONWAVE INC For: Aug 31

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

FORM 6-K

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

FOR THE MONTH OF OCTOBER, 2016

COMMISSION FILE NUMBER: 001-34491

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):                             

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):                             

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

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        The following exhibits are issued by DragonWave Inc.:

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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.

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SIGNATURES

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Exhibit 99.1

DragonWave Reports Second Quarter Fiscal Year 2017 Results

        OTTAWA, CANADA — October 12, 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 second quarter of fiscal year 2017. All figures are in U.S. dollars and were prepared in accordance with U.S. generally accepted accounting principles ("GAAP").

        Revenue for the second quarter of fiscal year 2017 was $13.2 million, compared with $12.5 million in the first quarter of fiscal year 2017. Revenue excluding the Nokia channel grew by 30% compared to the first quarter of fiscal year 2017. Revenue from the Nokia channel decreased to 24% of total revenue, versus 38% in the first quarter of fiscal year 2017.

        Gross profit before inventory provisions was 31.9% in the second quarter of fiscal year 2017, compared to 31.0% in the first quarter of fiscal year 2017. There was a $0.4 million inventory provision taken in the second quarter of fiscal year 2017, while there were no inventory provisions taken in the first quarter of fiscal year 2017.

        See "Non-GAAP Financial Measures" below for the most directly comparable measure to gross profit before inventory provisions when calculated in accordance with GAAP and presented in DragonWave's financial statements.

        Operating expenses were reduced by $0.4 million from $7.3 million in the first quarter of fiscal year 2017 to $6.9 million in the second quarter of the current fiscal year.

        Net loss attributable to shareholders in the second quarter of fiscal year 2017 was ($3.9) million or ($0.96) per basic and diluted share. This compares to a net loss attributable to shareholders of ($4.1) million or ($1.23) per basic and diluted share in the first quarter of fiscal year 2017.

        "We are pleased with the growth in our direct revenue in the quarter and the progress that we have seen on our renewal and restructuring approach. We expect to continue this progress in coming quarters" said DragonWave President & CEO, Peter Allen. "We remain focused on revenue and margin growth opportunities presented by our new feature rich products while maintaining strong cost control."

        Cash and cash equivalents totaled $7.5 million at the end of the second quarter of fiscal year 2017, compared to $4.0 million at the end of the first quarter of fiscal year 2017.

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 October 13, 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 are 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.

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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 six months ended August 31, 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 October 12, 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.

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CONSOLIDATED BALANCE SHEETS

Expressed in US $000's except share amounts
(Unaudited)

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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

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Exhibit 99.1

DragonWave Reports Second Quarter Fiscal Year 2017 Results
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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Exhibit 99.2

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CONSOLIDATED BALANCE SHEETS

Expressed in US $000's except share amounts
(Unaudited)

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

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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

See accompanying notes

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CONSOLIDATED STATEMENTS OF CASH FLOWS

Expressed in US $000's
(Unaudited)

See accompanying notes

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Expressed in US $000's except share amounts
(Unaudited)

Three and six months ended August 31, 2016

Three and six months ended August 31, 2015

See accompanying notes

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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.

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

        The consolidated interim financial statements for the three and six months ended August 31, 2016 have 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 three and six months ended August 31, 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 34% in the six months of fiscal year 2017 compared to the same period in the previous year primarily through reduction in staff levels internationally;



•

Raised $9,502 in cash (net of commissions and expenses) with a public offering in August 2016 and a registered direct offering in April 2016 which in both cases included common shares and warrants;



•

Reduced outstanding debt on the Company's credit facility by $15,772 between August 31, 2015 and August 31, 2016 by leveraging its working capital;



•

Improved the gross profit percentage in the second quarter of fiscal year 2017 to 29.2% from 14.8% in the second quarter of fiscal year 2016;



•

Continued to work closely with its credit facility partners; and



•

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

        Despite the progress identified above, the Company remains in breach of the original terms of its debt facility, and is negotiating a new long-term debt facility. See Note 11 for further details on the debt facility. The continued consumption of cash has raised substantial doubt about DragonWave Inc.'s ability to

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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;



•

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, success in arbitration with the customer located in India, and accommodations from the Company's suppliers and credit lenders. 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 interim 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

        The consolidated interim financial statements follow the same accounting policies as the most recent annual consolidated financial statements, except for the changes in accounting policies and methods described below. The consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended February 29, 2016.

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

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 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 November 2015, the FASB issued ASU 2015-17, "Balance Sheet Classification of Deferred Taxes". The amendments in this Update eliminate the current requirement for companies to separate deferred income tax liabilities and assets into current and non-current amounts in a classified statement of financial position. Instead, companies will be required to classify all deferred tax liabilities and assets as non-current. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016, with early adoption is 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 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.

        In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting". The amendments in this Update simplify several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statements of cash flows. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016, with early adoption is 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.

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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.

        In accordance with the fourth forbearance agreement which is valid until April 1, 2017 the Company is required to have a minimum of $1,000 held at Comerica Bank [February 29, 2016 – $1,000].

        The Company could elect to repatriate funds from its foreign subsidiaries and this may result in withholding taxes.

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.

        As at August 31, 2016, two customers exceeded 10% of the total receivable balance. These customers represented 37% and 14% of the trade receivables balance [February 29, 2016 – two customers represented 52% and 16% of the trade receivables balance].

        Included in general and administrative expenses is a recovery of $24 and an expense of $13 related to bad debt expense for the three and six months ended August 31, 2016 [three and six months ended August 31, 2015 – expense of $112 and $148].

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

6. INVENTORY

        Inventory is comprised of the following:

        Cost of sales for the three and six months ended August 31, 2016 was $9,373 and $18,026 respectively [three and six months ended August 31, 2015 – $22,932 and $43,723 respectively], which included $6,756 and $12,455 of product costs respectively [three and six months ended August 31, 2015 – $18,550 and $35,777 respectively]. The remaining costs of $2,617 and $5,571 respectively [three and six months ended August 31, 2015 – $4,382 and $7,946 respectively] related principally to the costs of sub-contractors for services, warehousing, freight, warranty, overhead and other direct costs of sales.

        For the three and six months ended August 31, 2016, the Company recognized an impairment loss on inventory of $365 [three and six months ended August 31, 2015 – $730 and $1,025 respectively].

        The Company allocates overhead and labour to inventory. Included in cost of sales for the three and six months ended August 31, 2016 were overhead and labour allocations of $213 and $397 respectively [three and six months ended August 31, 2015 – $580 and $1,196 respectively]. Included in inventory at August 31, 2016 were overhead and labour allocations of $523 [February 29, 2016 – $551].

        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 the inventory held by the Company's primary contract manufacturer at August 31, 2016 was $13,585 [February 29, 2016 – $16,848].

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

7. OTHER CURRENT ASSETS

        Other current assets are comprised of the following:

8. PROPERTY AND EQUIPMENT

        Property and equipment are apportioned as follows:

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

        Depreciation expense includes amortization of assets recorded under capital lease.

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

9. INTANGIBLE ASSETS

        Intangible assets are apportioned as follows:

        For the three and six months ended August 31, 2016, the Company recognized amortization of intangible assets of $94 and $184 respectively [August 31, 2015 – $149 and $332 respectively]. The Company estimates that it will recognize $251, $239 and $5 respectively for the next three succeeding years.

10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

        Accounts payable and accrued liabilities are apportioned as follows:

        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. Payments totaling $4,351 were made by the year ended February 29, 2016. As at August 31, 2016 the liability is valued at $3,486 and is considered short term in nature [February 29, 2016 – $3,337 short term].

        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.

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Continued)

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

11. DEBT FACILITY

        The Company has established a credit facility with Comerica Bank and Export Development Canada. 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 $17,030 on the facility as at August 31, 2016 [February 29, 2016 – $22,152], and $1,862 against its letter of credit facility [February 29, 2016 – $1,853].

        The credit facility which was extended on January 6, 2014, matured 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 were amortized over the 30 month term of the facility. During the three and six months ended August 31, 2016 the weighted average debt outstanding was $17,823 and $18,787 [three and six months ended August 31, 2015 – $33,436 and $33,038] and the Company recognized $328 and $680 in interest expense related to the debt facility [three and six months ended August 31, 2015 – $560 and $1,104] and expensed nil and $18 in deferred financing cost [three and six months ended August 31, 2015 – $14 and $28].

        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.

        On October 12, 2016, the Company has signed a fourth forbearance agreement which is valid until April 1, 2017, which identifies new minimum covenant levels reflecting the Company's revised financial plans. The forbearance agreement includes a requirement to hold a minimum of $1,000 at Comerica Bank. In addition, the forbearance agreement reduces the facility commitment from $40,000 to $30,000, includes additional compliance requirements and implements more frequent monitoring. Warrants to purchase 375,000 common shares will be issued to the lenders at an exercise price of $4.00 per share and will expire five years from the date of issuance. The Company is in ongoing negotiations with its lending partners to put in place a new long term debt facility.

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

11. DEBT FACILITY (Continued)

        Subsequent to August 31, 2016, DragonWave Inc. has not made any payments on the debt facility.

12. 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 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 1/25^th of one common share at an exercise price of $2.80 per share following the August 8, 2016 public offering, 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 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 interim financial statements.

        On April 11, 2016 the Company completed a registered direct offering. Under the terms of the offering, the Company issued and sold 599,998 units at $7.25, for aggregate gross proceeds of $4,350. After deducting commissions and listing expenses, the Company realized net proceeds of $4,014. 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 $8.50 per share until April 11, 2021. Upon issuance, the Company recognized a liability in the amount of $1,175 for the warrants, see Warrants section for further details.

        On August 8, 2016 the Company completed a public offering. Under the terms of the offering, the Company issued and sold 1,760,880 Class A units at $3.35 and 30,164 Class B units at $3.34, for aggregate gross proceeds of $6,000. After deducting commissions and expenses, the Company realized net proceeds of $5,277. Concurrent with the underwritten public offering in the United States, the Company issued an additional 63,000 Class A Units on a private placement basis to purchasers in Canada for additional gross proceeds of $211. Each Class A unit consisted of one common share, one five-year warrant (the "Long-Term Warrant") to purchase one common share and two six-month warrants (the "Short-Term Warrant"). Each Class B unit consisted of a pre-funded warrant (the "Pre-Funded Warrant") to purchase one common share, one Long-Term Warrant and two Short-Term Warrants. The Long-Term Warrants have an exercise price of $4.37 per share, are exercisable immediately and will expire on August 8, 2021. The Short-Term Warrants have an exercise price of $4.00 per share, are exercisable immediately and will expire on February 8, 2017. The Pre-Funded Warrants are exercisable immediately with no expiration date, are deemed purchased for a price of $3.34 per underlying common share by virtue of purchasing a Class B

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

12. SHAREHOLDERS' EQUITY (Continued)

Unit and have an exercise price of $0.01 per share. Upon issuance, the Company recognized a liability in the amount of $4,028 for the warrants, see Warrants section for further details.

Share based compensation plan

        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. 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 between six months to four years from the date of the option grant. 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 Plan is 548,678, which represents 10% of the common shares issued and outstanding as at August 31, 2016.

        The following is a summary of stock option activity:

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

12. SHAREHOLDERS' EQUITY (Continued)

        The following table shows the weighted average values used in determining the fair value of options granted during the three months ended August 31, 2016 and August 31, 2015:

        The 5,120 and 87,145 options granted during the three and six months ended August 31, 2016 were determined to have a fair value of $20 and $295 respectively [three and six months ended August 31, 2015 – 160 options valued at $1 and 59,768 options valued at $521].

        The following table summarizes the various exercise prices inherent in the Company's stock options outstanding and exercisable on August 31, 2016:

        The Company has recognized $160 and $375 for the three and six months ended August 31, 2016 as compensation expense for stock-based grants, with a corresponding credit to contributed surplus [three and six months ended August 31, 2015 – $212 and $460]. Stock compensation expense was allocated to operating expenses as follows:

16

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

12. SHAREHOLDERS' EQUITY (Continued)

        As at August 31, 2016, compensation costs not yet recognized relating to stock option awards outstanding is $1,184 [February 29, 2016 – $1,476] net of estimated forfeitures. Performance vesting awards will vest as performance conditions are met. Compensation will be adjusted for subsequent changes in estimated forfeitures.

        The total intrinsic value of options exercised during the three and six months ended August 31, 2016 is $22 [August 31, 2015 – Nil].

        The intrinsic value associated with fully vested options at August 31, 2016 is $55 [February 29, 2016 – Nil].

Restricted Share Units (RSU's)

        The Company has recognized nil for the three and six months ended August 31, 2016 as compensation expense for restricted share units, with a corresponding credit to contributed surplus [three and six months ended August 31, 2015 – $13 and $39].

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 three and six months ended August 31, 2016 a total of 218 and 384 common shares were purchased by employees at fair market value, while the Company issued 54 and 94 common shares, net of forfeitures, as its matching contribution during the three and six months ended August 31, 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 three and six months ended August 31, 2016 was $3 and $6 [three and six months ended August 31, 2015 – $3 and $6]. The fair value of the unearned ESPP shares as at August 31, 2016 was $2 [August 31, 2015 – $13]. The number of shares held for release, and still restricted under the plan at August 31, 2016 was 679 [August 31, 2015-915].

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 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 $2.80 per share until September 23,

17

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

12. SHAREHOLDERS' EQUITY (Continued)

2018 following the August 8, 2016 equity financing undertaken by the 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 August 31, 2016, 2,088,750 warrants were outstanding. During the three and six months ended August 31, 2016 the Company realized a gain in the amount of $42 and a loss of $100 in the consolidated statement of operations which represented the change in fair value of the remaining warrant liability of $103.

        On August 1, 2014 the Company completed a public 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 three and six months ended August 31, 2016 the Company realized a gain in the amount of $122 and $117 in the consolidated statement of operations which represented the change in fair value of the warrant liability.

        On April 11, 2016 the Company completed a registered direct offering. Under the terms of the offering, the Company issued and sold 599,998 units at $7.25, for aggregate gross proceeds of $4,350. 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 $8.50 per share until April 11, 2021, subject to certain adjustments. Equity issuance expenses relating to the offering totaled $428 of which $92 was expensed as the proportionate warrant costs. As a result of the offering, the Company issued 299,999 warrants and recognized a warrant liability of $1,175 which represented the estimated fair value of the liability as at April 11, 2016. During the three and six months ended August 31, 2016 the Company realized a gain in the amount of $438 and $829 in the consolidated statement of operations which represented the change in fair value of the remaining warrant liability of $346.

        On August 8, 2016 the Company completed a public offering. Under the terms of the offering, the Company issued and sold 1,760,880 Class A units at $3.35 and 30,164 Class B units at $3.34, for aggregate gross proceeds of $6,000. After deducting commissions and expenses, the Company realized net proceeds of $5,277. Concurrent with the underwritten public offering in the United States, the Company issued an additional 63,000 Class A Units on a private placement basis to purchasers in Canada for additional gross proceeds of $211. Each Class A unit consisted of one common share, one five-year warrant (the "Long-Term Warrant") to purchase one common share and two six-month warrants (the "Short-Term Warrant"). Each Class B unit consisted of a pre-funded warrant (the "Pre-Funded Warrant") to purchase one common share, one Long-Term Warrant and two Short-Term Warrants. The Long-Term Warrants have an exercise price of $4.37 per share, are exercisable immediately and will expire on August 8, 2021. The Short-Term Warrants have an exercise price of $4.00 per share, are exercisable immediately and will expire on February 8, 2017. The Pre-Funded Warrants are exercisable immediately with no expiration date, are

18

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

12. SHAREHOLDERS' EQUITY (Continued)

deemed purchased for a price of $3.34 per underlying common share by virtue of purchasing a Class B Unit and have an exercise price of $0.01 per share. The Pre-Funded Warrants were fully exercised on August 25, 2016. Equity issuance expenses relating to the offering totaled $723 of which $469 was expensed as the proportionate warrant costs. As a result of the offering, the Company issued 1,854,044 Long-Tem Warrants and 3,708,088 Short-Term Warrants and recognized a warrant liability of $4,028 which represented the estimated fair value of the liability as at August 31, 2016.

        The following is a summary of outstanding warrants:

13. 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 August 31, 2016 a total of 309,370 options and 7,982,443 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 net loss per share during the three and six months ended excluding the effect of outstanding options and warrants:

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

14. COMMITMENTS AND CONTINGENCIES

        Future minimum operating lease payments per fiscal year that relate to office and warehouse space in various countries as at August 31, 2016 are as follows:

        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 now submitted its claim statement, which discloses an aggregate claim amount of approximately $5,100 in respect of, among other things, damages claimed with respect to lost revenue, import duties, and inventory replacement costs. The Company believes that the claim has no merit. The Company has booked the value of the inventory provided to the customer as an asset with a value of $4,600. The Company has not received any payment with respect to this inventory. The Company submitted a counter-claim in June 2016 for the full value of the contract and damages. The arbitration meetings are held on a regular basis but since no decision has been made as of the date of this report, the outcome of this matter is not determinable.

        A complaint for patent infringement against the Company was filed but not served on September 9, 2016. The Company believes that it has no merit and intends to vigorously defend itself in this matter.

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

15. 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.

Categories for financial assets and liabilities

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

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(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

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

15. FINANCIAL INSTRUMENTS (Continued)

(D)

Includes 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 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 August 31, 2016 for the warrants include a dividend yield of 0%, a 1% assumption that the fundamental transaction will happen every year, volatility of 75%, and a risk free spot rate term structure.

        The April 11, 2016 warrant liability is classified as Level 3 as it is measured at fair value using significant unobservable inputs. Significant assumptions used at August 31, 2016 for the warrants include a dividend yield of 0%, a 1% assumption that the fundamental transaction will happen every year, volatility of 75%, and a risk free spot rate term structure.

        The August 8, 2016 warrant liability is classified as Level 3 as it is measured at fair value using significant unobservable inputs. Significant assumptions used at August 31, 2016 for the warrants include a dividend yield of 0%, a 1% assumption that the fundamental transaction will happen every year, volatility of 75%, and a risk free spot rate term structure.

        As at August 31, 2016 the Company held the following Level 3 financial instruments carried at fair value on the consolidated balance sheet.

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

15. FINANCIAL INSTRUMENTS (Continued)

        As at February 29, 2016, the Company held the following Level 3 financial instruments carried at fair value on the consolidated balance sheet.

        A reconciliation of the Level 3 warrant liability measured at fair value for the three and six months ended August 31, 2016 follows:

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 three and six months ended August 31, 2016 was $354 and $718 on the Company's cash, cash equivalents, and debt facility [three and six months ended August 31, 2015 – expense of $547 and $1,064].

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

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

15. FINANCIAL INSTRUMENTS (Continued)

forward contracts. As at August 31, 2016 and August 31, 2015, the Company had no forward contracts in place.

        As of August 31, 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 $10 for the three and six months ended August 31, 2016 [three and six months ended August 31, 2015 – increase of $35], with an equal and opposite effect if the US dollar had depreciated 1% against all foreign currencies at August 31, 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 August 31, 2016, the Company had cash and cash equivalents totaling $7,471 [February 29, 2016 – $4,277]. See Note 1 for further discussion of liquidity risk associated with the Company and Note 11 for details of the debt facility requirement.

16. SEGMENTED INFORMATION

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

        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:

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DragonWave Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

16. SEGMENTED INFORMATION (Continued)

        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.

17. ECONOMIC DEPENDENCE

        For the three months ended August 31, 2016, the Company was dependent on three key customers with respect to revenue. These customers represented approximately 24%, 13% and 11% of sales during that three month period [three months ended August 31, 2015 – three customers represented 37%, 26% and 10%].

        The Company was dependent on three key customers with respect to revenue in the six months ended August 31, 2016. These customers represented approximately 31%, 14% and 10% of sales for the six months ended August 31, 2016 [six months ended August 31, 2015 – two customers represented 44% and 19%].

18. INCOME TAXES

        The Company accrues tax expenses for entities located in foreign jurisdictions that are anticipated to be profitable for fiscal year 2017. The determination of the Company's 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 six months ended August 31, 2016, the Company recognized tax expenses of $220 and $382 [three and six months ended August 31, 2015 – $1,620 and $1,687].

19. COMPARATIVE FIGURES

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

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QuickLinks

Exhibit 99.2

CONSOLIDATED BALANCE SHEETS Expressed in US $000's except share amounts (Unaudited)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS Expressed in US $000's except share and per share amounts (Unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS Expressed in US $000's (Unaudited)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Expressed in US $000's except share amounts (Unaudited)
DragonWave Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Expressed in US $000's except share and per share amounts (Unaudited)

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 99.3

        

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 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 six months ended August 31, 2016. This MD&A should be read in conjunction with our unaudited consolidated interim financial statements and corresponding notes for the three and six months ended August 31, 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 unaudited consolidated interim financial statements and corresponding notes for the three and six months ended August 31, 2016 are available on SEDAR and EDGAR.

        Our unaudited consolidated interim 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 October 12, 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 our 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 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

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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.

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;



•

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;



•

uncertainty with the size of any future revenue opportunities through the Nokia channel;



•

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;

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

•

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



•

currency fluctuations;



•

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 the three and six months ended August 31, 2016, approximately 24% and 31% of our sales were through the Nokia channel. Recent developments within Nokia, including Nokia's combination with

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Alcatel-Lucent, have increased uncertainty for the future of this channel. See "Recent Developments – 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.

        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".

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

SELECTED FINANCIAL INFORMATION

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

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        The principal differences between the three and six months ended August 31, 2016 and August 31, 2015 are explained as follows:

•

In the three and six month period ended August 31, 2016 the most significant contributors to the decrease in revenue over the same period in the prior fiscal year were decreases in sales through the Nokia channel, combined with decreases in sales a Tier 1 carrier in India.



•

Our gross profit percentage was higher during the three and six months ended August 31, 2016 compared to the same periods in fiscal year 2016 primarily due to a change in the mix of customers and products.



•

Operating expenses in the three and six months ended August 31, 2016 were $3.6 million and $7.3 million lower than they were in the same period in the previous year primarily as a result of restructuring initiatives taken in fiscal year 2016 which reduced the size of the staff internationally and cut spending on contractors and material purchased for the creation of prototypes.

        The principal differences between the three and six months ended August 31, 2016 and August 31, 2014 are explained as follows:

•

The reduction in revenue can be primarily attributed to reduced sales through the Nokia channel in addition to reduced sales to a Tier 1 carrier in India.



•

The gross profit percentage improved due to decreases in material costs and a change in customer mix with a less significant percentage of the total revenue coming from lower margin customers.



•

Operating expenses decreased primarily as a result of decreased spending across a number of areas, most significantly compensation related spending following the restructuring initiatives in fiscal year 2016.

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Consolidated Balance Sheet Data

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 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.

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

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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.

        We support product lines branded under the names Horizon, Avenue and Avenue Lite, Harmony and Harmony Lite, Harmony Eband, Harmony Enhanced and Harmony Enhanced MC. 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 six months ended August 31, 2016, the Nokia channel accounted for 24% and 31% of our sales. See "Recent Developments – Nokia Sales Channel Update" 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 $1.8 million and $2.9 million of our total revenue in the three and six months ended August 31, 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

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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, 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, 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 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 second quarter ended August 31, 2016, compared to the same periods in the prior fiscal year:

•

Our revenue decreased by $13.7 million and $27.5 million when comparing the three and six month periods ended August 31, 2016 and August 31, 2015.

•

Our gross profit percentage in the second quarter of fiscal year 2017 increased to 29.2% from 14.8% in the second quarter of fiscal year 2016. The improvement was driven by a decrease in the

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

proportion of sales made through lower margin customers and a shift toward the sale of higher capacity products.

•

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

•

We recorded a warrant issuance expense associated with the August 2016 public offering of $0.5 million in the three months ended August 31, 2016. The results on a year to date basis also include $0.1 million of warrant issuance costs associated with the April, 2016 registered direct offering, so that on a year to date basis the warrant issuance expense is $0.6 million.



•

A fair value adjustment gain of $0.6 million and $0.8 million was realized during the three and six months ended August 31, 2016, respectively as a result of a change in the warrant valuation on the warrants outstanding from the equity offerings completed in August 2016, April 2016, August 2014 and September 2013.



•

Other items before taxes impacting the loss in the second quarter and six months ended August 31, 2016 totaled $0.5 million and $1.2 million and included amortization of software assets, accretion expense, interest expense, and a foreign exchange loss.



•

In the three and six months ended August 31, 2016 we recognized a tax expense of $0.2 million and $0.4 million related to tax liabilities in regions in which we are profitable but do not have loss carry-forwards available.



•

The net loss attributable to shareholders was $ 3.9 million and $ 8.0 million for the three and six months ended August 31, 2016.



•

In the three and six months ended August 31, 2016, we repaid $1.8 million and $5.1 million on our line of credit which decreased the outstanding debt balance to $17.0 million.



•

We completed an underwritten public offering on August 8, 2016. Under the terms of the offering, we issued and sold 1,823,880 Class A units at $3.35 and 30,164 Class B units at $3.34. Each Class A unit consisted of one common share, one five-year warrant (the "Long-Term Warrant") to purchase one common share and two six-month warrants (the "Short-Term Warrant"). Each Class B unit

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

consisted of a pre-funded warrant (the "Pre-Funded Warrant") to purchase one common share, one Long-Term Warrant and two Short-Term Warrants. The Long-Term Warrants have an exercise price of $4.37 per share, are exercisable immediately and will expire on August 8, 2021. The Short-Term Warrants have an exercise price of $4.00 per share, are exercisable immediately and will expire on February 8, 2017. The Pre-Funded Warrants are exercisable immediately with no expiration date, are deemed purchased for a price of $3.34 per underlying common share by virtue of purchasing a Class B Unit and have an exercise price of $0.01 per share. The net proceeds of the offering, after expenses, were $5.5 million.

•

Our cash balance at August 31, 2016 was $7.5 million which represented a $3.2 million increase from the cash balance at February 29, 2016.

Liquidity and Cash Resources

        The consolidated financial statements for the year ended August 31, 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 three and six months ended August 31, 2016. Recently, we have experienced additional liquidity pressure as a result of reduced revenue from a significant OEM channel and an ongoing 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 34% in the first six months of fiscal year 2017 compared to the same period in the previous year primarily through reductions in staff levels internationally;



•

Raised $9.5 million in cash (net of commission and expenses) with a public offering in August, 2016 and a registered direct offering in April, 2016 which in both cases included common shares and warrants;



•

Reduced outstanding debt on our credit facility by $15.8 million between August 31, 2015 and August 31, 2016 primarily by leveraging our working capital;



•

Improved the gross profit percentage in the second quarter of fiscal year 2017 to 29.2% from 14.8% in the second quarter of fiscal year 2016;



•

Continued to work closely with our credit facility partners;



•

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

        We remain in breach of the original terms of our debt facility, and we are negotiating a new long term debt facility with our lending partners. See the discussion under "Debt Facility" below. The continued consumption of cash has raised substantial doubt about our ability to continue as a going concern. Our

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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, success in arbitration with the customer located in India, and accommodations from our suppliers and credit lenders. It is possible that the plans described above may not be fully executed or may occur too slowly to solve our 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. Our unaudited consolidated interim 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%. Through attrition, staff levels have continued to decline so that the current regular full time global head count is 35% lower than it was twelve months ago. Coupled with this staff reduction, has been a significant decline in the number of external contractors used to fulfill R&D program requirements, particularly in China. Material spending for prototype development has been severely curtailed as well as travel spending. As a result of these initiatives operating expenses have declined $7.3 million between the first six months of fiscal year 2017 and the same period in the prior fiscal year.

Arbitration Process in India

        An arbitration process has been initiated with a customer in India, Bharti Airtel Limited, through an arbitral tribunal to resolve a dispute over the customer's payment for inventory (with a sale value of $4.7 million) shipped to this customer in June, 2015. The customer has now submitted its claim statement, which discloses an aggregate claim amount of approximately $5.1 million in respect of, among other things, damages claimed with respect to lost revenue, import duties, and inventory replacement costs. We believe that the claim has no merit. We do not believe that we will incur a loss related to this claim. As a result, we

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

have not recognized any expense associated with this claim in our financial statements. We have booked the value of the inventory provided to Bharti as an asset with a cost of $4.6 million. We have not received any payment with respect to this inventory. We have submitted a counter-claim and the arbitration meetings are held on a regular basis.

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 may 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.

        We negotiated a termination fee with Nokia in 2013, valued $8.7 million which was to be paid in installments by us to Nokia. At August 31, 2016 the liability is valued at $3.5 million (February 29, 2016 – $3.3). The increase in the valuation of the liability since February 29, 2016 relates to changes in the foreign exchange rates between the EURO and U.S. dollar.

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. We had drawn $17.0 million on the facility as at August 31, 2016 (February 29, 2016 – $22.2 million), and $1.9 million against our letter of credit facility (February 29, 2016 – $1.9 million). The credit facility which was extended on January 6, 2014, matured 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, representations and warranties. Credit availability is subject to ongoing compliance with borrowing covenants and short term assets on hand.

        On October 12, 2016 we signed a fourth forbearance agreement which is valid until April 1, 2017. It 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, reduces the facility commitment from $40.0 million to $30.0 million, includes additional compliance requirements and implements more frequent monitoring. As part of this forbearance agreement, we will be issuing warrants to purchase 375,000 common shares to the lenders at an exercise price of $4.00 per share. These warrants will expire five years from the date of issuance. We are in ongoing negotiations with our lending partners to put in place a new long term debt facility.

        We have not made any debt re-payments on the line of credit subsequent to August 31, 2016.

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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 and the underwritten public offering in August, 2016. Both are discussed further below.

Share Consolidation

        The Board of Directors effected a share consolidation on February 2, 2016 ("the Consolidation") 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 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 unaudited interim consolidated financial statements and in this MD&A.

Equity Offerings

        On August 8, 2016 we completed a public offering. Under the terms of the offering, we issued and sold 1,760,880 Class A units at $3.35 and 30,164 Class B units at $3.34, for aggregate gross proceeds of $6.0 million. Concurrent with the underwritten public offering in the United States, we issued an additional 63,000 Class A Units on a private placement basis to purchasers in Canada for additional gross proceeds of $0.2 million. The total net proceeds after deducting commission and expenses was $5.5 million. Each Class A unit consisted of one common share, one five-year warrant (the "Long-Term Warrant") to purchase one common share and two six-month warrants (the "Short-Term Warrant"). Each Class B unit consisted of a pre-funded warrant (the "Pre-Funded Warrant") to purchase one common share, one Long-Term Warrant and two Short-Term Warrants. The Long-Term Warrants have an exercise price of $4.37 per share, are exercisable immediately and will expire on August 8, 2021. The Short-Term Warrants have an exercise price of $4.00 per share, are exercisable immediately and will expire on February 8, 2017. The Pre-Funded Warrants are exercisable immediately with no expiration date, are deemed purchased for a price of $3.34 per underlying common share by virtue of purchasing a Class B Unit and have an exercise price of $0.01 per share. Upon issuance, we recognized a liability in the amount of $4.0 million for the warrants.

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        On April 11, 2016 we completed a registered direct offering. 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 April 11, 2021 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, after expenses, were $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.

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".

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

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Comparison of the three and six months ended August 31, 2016 and August 31, 2015

Revenue

        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. Hardware and related software sales revenue declined, primarily as a result of decreases in sales through the Nokia Channel. The change in services revenue relates to the timing of installation services contracts with Tier 1 carriers in both India and North America.

        We analyze our sales according to geographic region, and target our product development strategy and the location of our sales and marketing resources according to where we believe opportunity exists. The table below displays this information for the three months ended August 31, 2016 and August 31, 2015.

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        The table below displays the geographic comparatives for the six months ended August 31, 2016 and August 31, 2015.

Gross Profit

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

        Our gross profit percentage improved during the three and six months ended August 31, 2016 compared to the same periods in the prior fiscal year. This improvement relates primarily to a shift in both product and customer mix. A less significant portion of our sales are flowing through OEM channels, which traditionally have a lower margin. In addition a lower percentage of our sales are being derived from shipments to low margin geographic regions like India.

Expenses

Research and Development ("R&D")

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        R&D spending is lower as a result of decreased spending following restructuring activities that took place in FY2016. Not only has there been a significant reduction in the size of our R&D staff in both China and Canada but we have scaled back the number of programs we are working on. As a result, R&D contractor spending and materials spending for prototype development and software have both decreased as well.

Changes to R&D Expense in USD Millions:

Sales and Marketing ("S&M")

        The S&M organization, which includes marketing, product line management, customer service and sales was also impacted by staff reductions in fiscal year 2016. With the objective of reducing spending in the organization we reduced travel & living disbursements as well as professional and consulting fees.

Changes to S&M expense in USD Millions:

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

General and Administrative ("G&A")

        G&A expenses have decreased across all functional areas, however, as sales have declined the recovery of direct operations spending through Cost of Sales has also declined.

Changes to G&A Expenses in USD Millions:

Goodwill Impairment

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        We recorded a non-cash impairment charge of $11.9 million in the second quarter of fiscal year 2016 after performing our annual goodwill impairment test which indicated the carrying value of the goodwill was fully impaired.

Amortization of Intangible Assets

        The amortization of software has decreased as the net book value of Infrastructure Systems Software and Computer Software has declined.

Accretion Expense

        During the three and six months ended August 31, 2016 we incurred accretion expenses associated with a termination liability in connection with the termination of a services agreement with Nokia discussed above under "Recent Developments–Nokia Sales Channel Update". The accretion expense in the three and six months ended August 31, 2015 includes both the accretion expense associated with the termination liability and the accretion expense associated with a capital lease.

Interest Expense

        Interest expense relates primarily to interest on our debt facility, this expense decreased in the three and six month period ending August 31, 2016 compared with the same period in the prior year because the weighted average debt outstanding decreased between fiscal year 2017 and fiscal year 2016.

        During the three and six months ended August 31, 2016 the weighted average debt outstanding was $17.8 million and $18.8 million (three and six months ended August 31, 2015–$33.4 million and $33.0 million). Interest rates vary with market rate fluctuations, with loans bearing interest in the range of 3% to 4% above the applicable base rates.

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Warrant Issuance Expenses

        In April 2016 and August 2016 we completed equity offerings which included the issuance of warrants. Of the total equity issuance costs, a portion was attributed to the warrants specifically and expensed to our consolidated statement of operations for the three and six months ended August 31, 2016.

Fair Value Adjustment–Warrant Liability

(Gain)

        The warrant liability is required to be presented at its estimated fair value as at each balance sheet date. Increases or decreases in fair value of the warrants are included as a component of other income (expense) in our consolidated statement of operations. The income for the three and six months ended August 31, 2016 related to the warrants which were issued pursuant to the offerings in August 2016, April 2016, August 2014 and September 2013.

Foreign Exchange Loss

        The foreign exchange 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 six months ended August 31, 2016 the most significant impact on the foreign exchange loss came from the translation of the foreign denominated liabilities to U.S. dollars.

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

Income Taxes Expense

        The tax expense in both the three and six months ended August 31, 2016 reflects the anticipated payment of cash taxes in India and in entities which perform services for DragonWave internationally including in China.

        In the prior fiscal year the tax expense is comprised of two elements. An expense of $0.1 million and $0.2 million was recognized for the anticipated payment of cash taxes in the three and six months ended August 31, 2015 respectively. The second element relates to the creation of a valuation allowance. As of August 31, 2015 our deferred tax assets related to net operating loss carry-forwards in the United States. During the three months ended August 31, 2015 we recorded an increase in the valuation allowance of $1.5 million as management believed it was more likely than not that the related deferred tax assets would not be realized. There are no deferred tax assets recorded as at August 31, 2016.

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 discontinuance of products. 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 interim financial statements for the three and six months ended August 31, 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

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

period. Adjusted 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 interim financial statements for the three and six months ended August 31, 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.

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

"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

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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 interim financial statements for the three and six months ended August 31, 2016 to "Days Sales Outstanding excluding Tier 1 carrier in India" is "Days Sales Outstanding".

Liquidity and Capital Resources

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

        Note 1: Days Sales Outstanding in accounts receivable excluding a Tier 1 carrier in India at August 31, 2016 were 60 days (68 days at February 29, 2016).This is a non-GAAP measure. See "Use of Non-GAAP performance measures".

Cash and Cash Equivalents

        As at August 31, 2016, we had $7.5 million in Cash and Cash Equivalents ("Cash"), representing a $3.2 million increase from the Cash balance at February 29, 2016.

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 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 six months ended August 31, 2016.

 

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        Key points associated with the Cash increase include:

•

We utilized cash from operations during both the three and six month periods because we continue to operate in a net loss position;



•

Net working capital changes provided cash for the business;



•

Investments in the acquisition of property and equipment as well as in software continue to be small;



•

We increased our cash resources through the issuance of common shares and warrants in both the three and six months ended August 31, 2016; and,



•

We continued to make debt repayments in fiscal year 2017 which depleted our cash resources.

Working Capital

Trade Receivables

        Our trade receivables balance decreased by $5.1 million between February 29, 2016 and August 31, 2016 due to our continued collection efforts in the three and six months ended August 31, 2016. Our days sales outstanding performance improved from 114 days at February 29, 2016 to 95 days at August 31, 2016. Our allowance for doubtful accounts continues to represent a small percentage of our total trade receivables outstanding (August 31, 2016-1.8%; February 29, 2016-1.2%).

        As at August 31, 2016, two customers exceeded 10% of the total receivable balance. These customers represented 37% and 14% of the trade receivables balance (February 29, 2016 – two customers represented 52% and 16% of the trade receivables balance).

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        Included in G&A expenses is a nominal bad debt expense for the three and six month period ended August 31, 2016 (three and six months ended August 31, 2015 – expense of $0.1 million and $0.1 million).

Inventory

        The inventory balance remained unchanged relative to the closing balance at February 29, 2016. There were however, changes by product category and those changes are outlined below in USD millions:

        We use an outsourced manufacturing model in which most of the component acquisition and assembly of our products is executed by third parties. Our contract manufacturers currently have inventory intended for use in the production of our products, and we have purchase orders or demand forecasts in place for raw materials and manufactured products with these contract manufacturers. The value of the inventory held by our primary contract manufacturer at August 31, 2016 was $13.6 million (February 29, 2016 – $16.8 million).

Accounts Payable and Accrued Liabilities

        The accounts payable and accrued liabilities balance increased by $1.5 million between February 29, 2016 and August 31, 2016 primarily due to increases in purchasing tied to higher sales level. We continue to extend the payment terms with our vendors as we manage the business with limited cash resources.

Debt Facility

        We established an asset based credit facility with Comerica Bank and Export Development Canada which was extended on January 6, 2014 and matured on June 1, 2016. On October 12, 2016 we signed a forbearance agreement (our fourth) related to this credit facility, which will expire on April 1, 2017. Under the forbearance agreement we are required to a minimum of $1.0 million at Comerica Bank. In addition, the forbearance agreement reduces the facility commitment from $40.0 million to $30.0 million, includes other compliance requirements and implements more frequent monitoring. As well, warrants to purchase 375,000 common shares will be issued to the lenders at an exercise price of $4.00 per share. These warrants expire five years from the date of issuance. We are working closely with our lenders to establish a new long term debt facility.

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        Over the past twelve month period, we have reduced the balance of the debt facility by $15.8 million from $32.8 million at August 31, 2015 to $17.0 million at August 31, 2016. (February 29, 2016 – $22.2 million) We also had $1.9 million outstanding against our letter of credit facility at August 31, 2016 (February 29, 2016 – $1.9 million).

        The credit facility 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. During the three and six months ended August 31, 2016 the weighted average debt outstanding was $17.8 million and $18.8 million (three and six months ended August 31, 2015 – $33.4 million and $33.0 million) and we recognized $0.3 million and $0.7 million in interest expense related to the debt facility (three and six months ended August 31, 2015 – $0.6 million and $1.1 million).

        We made no further payments on the debt facility between August 31, 2016 and the date of this MD&A.

Equity Offerings and Use of Proceeds

August 2016 Equity Offering

        On August 8, 2016 we completed a public offering. Under the terms of the offering, we issued and sold 1,760,880 Class A units at $3.35 and 30,164 Class B units at $3.34, for aggregate gross proceeds of $6.0 million. Concurrent with the underwritten public offering in the United States, we issued an additional 63,000 Class A Units on a private placement basis to purchasers in Canada for additional gross proceeds of $0.2 million. The total net proceeds after deducting commission and expenses was $5.5 million. Each Class A unit consisted of one common share, one five-year warrant (the "Long-Term Warrant") to purchase one common share and two six-month warrants (the "Short-Term Warrant"). Each Class B unit consisted of a pre-funded warrant (the "Pre-Funded Warrant") to purchase one common share, one Long-Term Warrant and two Short-Term Warrants. The Long-Term Warrants have an exercise price of $4.37 per share, are exercisable immediately and will expire on August 8, 2021. The Short-Term Warrants have an exercise price of $4.00 per share, are exercisable immediately and will expire on February 8, 2017. The Pre-Funded Warrants are exercisable immediately with no expiration date, are deemed purchased for a price of $3.34 per underlying common share by virtue of purchasing a Class B Unit and have an exercise price of $0.01 per share. Upon issuance, we recognized a liability in the amount of $4.0 million for the warrants.

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

April 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 April 11, 2021 (the "April 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 (net proceeds of $4.0 million). The warrants are not exercisable until October 12, 2016. The proceeds from the April 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.

        Upon issuance, we recognized a liability in the amount of $1.2 million for the April 2016 Warrants.

2013 Equity Offering

        On September 23, 2013, pursuant to the public 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 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. Subsequent to the Consolidation, 25 whole 2013 Warrants entitled the holder to purchase one common share at an exercise price of $32.50 per share. In connection with the August 2016 public 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 $2.80 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 August 31, 2016

        Future minimum operating lease payments as at August 31, 2016 per fiscal year relate to leases of office and warehouse space.

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        They are as follows:

        We are subject to claims and legal actions in the normal course of our business activities. We recognize a provision for estimated loss contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In management's opinion, adequate provisions have been made for all current and future claims.

        A complaint for patent infringement against us was filed but not served on September 9, 2016. We believe that it has no merit and we intend to vigorously defend ourselves in this matter.

Outstanding Share Data

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

        The following table shows common share activity in the three and six months ended August 31, 2016.

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        The following is a summary of stock option activity:

        As at August 31, 2016 the following securities were issued and outstanding: 5,486,776 common shares, options to purchase 309,370 common shares granted under our Share Based Compensation Plan and 7,982,443 warrants exercisable for 5,946,943 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 October 12, 2016 the following securities were issued and outstanding: 5,487,500 common shares, options to purchase 541,822 common shares granted under our Share Based Compensation Plan, and 7,982,443 warrants exercisable for 5,946,943 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 six months ended August 31, 2016 a total of 218 and 384 common shares were purchased by employees at fair market value, while we issued 54 and 94 common shares 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. The total fair value of the shares earned during the three and six months ended August 31, 2016 was $3 thousand and $6 thousand (three and six months ended August 31, 2015 – $3 thousand and $6 thousand). The fair value of the unearned ESPP shares as at August 31, 2016 was $2 thousand (August 31, 2015 – $13 thousand). The number of shares held for release, and still restricted under the ESPP at August 31, 2016 was 679 (August 31, 2015-915).

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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 RSU"s vested during the second quarter of fiscal year 2016 with the exception of 800 RSU's which were cancelled on April 14, 2015.

Off-Balance Sheet Arrangements

(Actual Dollars)

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

        We use an outsourced manufacturing model in which most of the component acquisition and assembly of our products is executed by third parties. Generally, we provide the supplier with a purchase order 90 days in advance of expected delivery. We are responsible for the financial impact of any changes to the product requirements within this period. In some cases when a product has been purchased by a contract manufacturer but not pulled on for a build after a certain amount of time, we provide a deposit against that inventory, but do not take ownership of it.

        Our contract manufacturers currently have inventory intended for use in the production of our products, and we have purchase orders in place for raw materials and manufactured products with these contract manufacturers as well. All of this material is considered to be part of the normal production process and we take provisions against any portion of that inventory that we do not expect to be fully used based on current forecasts and projections. As mentioned previously, we would generally be responsible for the cost of the material approved to be purchased on our behalf by our contract manufacturers should those forecasts or projections change.

        As at August 31, 2016, we have provisions totaling $2.7 million on inventory held by contract manufacturers that we do not expect to be fully used.

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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.

Categories for financial assets and liabilities

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

---

(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)

Includes 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 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 August 31, 2016 for the warrants include a dividend yield of 0%, a 1% assumption that the fundamental transaction will happen every year, volatility of 75%, and a risk free spot rate term structure.

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        The April 11, 2016 warrant liability is classified as Level 3 as it is measured at fair value using significant unobservable inputs. Significant assumptions used at August 31, 2016 for the warrants include a dividend yield of 0%, a 1% assumption that the fundamental transaction will happen every year, volatility of 75%, and a risk free spot rate term structure.

        The August 8, 2016 warrant liability is classified as Level 3 as it is measured at fair value using significant unobservable inputs. Significant assumptions used at August 31, 2016 for the warrants include a dividend yield of 0%, a 1% assumption that the fundamental transaction will happen every year, volatility of 75%, and a risk free spot rate term structure.

        As at August 31, 2016 we held the following Level 3 financial instruments carried at fair value on the consolidated balance sheet.

        As at February 29, 2016, we held the following Level 3 financial instruments carried at fair value on the consolidated balance sheet.

        A reconciliation of the Level 3 warrant liability measured at fair value for the three and six months ended August 31, 2016 follows:

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 six ended August 31, 2016 was $0.4 million and

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

$0.7 million on our cash, cash equivalents and debt facility (three and six months ended August 31, 2015 – expense of $0.6 million and $1.1 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 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, 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 at August 31, 2016 and August 31, 2015, we had no forward contracts in place. All foreign currency gains and losses related to forward contracts are included in foreign exchange gain (loss) in the consolidated statement of operations.

        As of August 31, 2016, if the U.S. dollar had appreciated 1% against all foreign currencies, with all other variables held constant, the impact of this foreign currency change on our foreign denominated financial instruments would have resulted in a nominal increase in after-tax net loss for the three and six months ended August 31, 2016 (three and six months ended August 31, 2015 – increase of $35 thousand) with an equal and opposite effect if the U.S. dollar had depreciated 1% against all foreign currencies at August 31, 2016.

Economic Dependence

        For the three months ended August 31, 2016, we were dependent on three key customers with respect to revenue. These customers represented approximately 24%, 13% and 11% of sales during that three month period [three months ended August 31, 2015 – three customers represented 37%, 26% and 10%].

        We were dependent on three key customers with respect to revenue in the six months ended August 31, 2016. These customers represented approximately 31%, 14% and 10% of sales for the six months ended August 31, 2016 [six months ended August 31, 2015 – two customers represented 44% and 19%].

Controls and Procedures

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

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

CEO and CFO have concluded that our disclosure controls and procedures were effective as at August 31, 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 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 August 31, 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.

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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 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.

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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, 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

39

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

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 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. 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 November 2015, the FASB issued ASU 2015-17, "Balance Sheet Classification of Deferred Taxes". The amendments in this Update eliminate the current requirement for companies to separate deferred income tax liabilities and assets into current and non-current amounts in a classified statement of financial position. Instead, companies will be required to classify all deferred tax liabilities and assets as non-current. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016, with early adoption is permitted. We are currently assessing the impact this amendment will have on our consolidated financial statements.

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DragonWave Inc.
Management's Discussion and Analysis
For the three and six months ended August 31, 2016
Tables are expressed in USD $000's except share and per share amounts unless otherwise indicated

        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 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.

        In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting". The amendments in this Update simplify several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statements of cash flows. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016, with early adoption is permitted. We are currently assessing the impact this amendment will have on our consolidated financial statements.

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Exhibit 99.3

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Exhibit 99.4

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, Peter Allen, Chief Executive Officer of DragonWave Inc. certify the following:

1. Review: I have reviewed the interim financial statements and interim MD&A (together, the "interim filings") of DragonWave Inc., (the "issuer") for the interim period ended August 31, 2016.

2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

4. Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.

5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.

5.1 Control framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is the COSO Framework (Committee of Sponsoring Organizations of the Treadway Commission).

5.2 N/A

5.3 N/A

6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on June 1, 2016 and ended on August 31, 2016 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.

Date: October 12, 2016

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Exhibit 99.4

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Exhibit 99.5

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, Patrick Houston, Chief Financial Officer of DragonWave Inc. certify the following:

1. Review: I have reviewed the interim financial statements and interim MD&A (together, the "interim filings") of DragonWave Inc., (the "issuer") for the interim period ended August 31, 2016.

2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

4. Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.

5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.

5.1 Control framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is the COSO Framework (Committee of Sponsoring Organizations of the Treadway Commission).

5.2 N/A

5.3 N/A

6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on June 1, 2016 and ended on August 31, 2016 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.

Date: October 12, 2016

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Exhibit 99.5