Mr. Suneet Tuli reports

DATAWIND REPORTS FISCAL Q3 2016 REVENUES UP 81% TO RECORD $15.5 MILLION

DataWind Inc. has released its financial results for its fiscal third quarter 2016, ended Dec. 31, 2015.

Fiscal Q3 2016 highlights:

• Record revenues for the sixth consecutive quarter, totalling $15.5-million, up 11 per cent sequentially and up 81 per cent from the same year ago quarter;
• Record unit sales of 251,000, up 7 per cent sequentially and up 73 per cent from the same year ago quarter;
• Gross profit totalled a record $4.6-million, up 15 per cent from the previous quarter and up 199 per cent from the same year ago quarter;
• Gross margins reached a record 29.4 per cent, compared with 28.2 per cent in the previous quarter and 17.8 per cent in the same year ago quarter;
• Adjusted earnings before interest, taxes, depreciation and amortization totalled a record $106,000 compared with $5,000 in the previous quarter and an adjusted EBITDA loss of $2.0-million in the year ago quarter;
• Began selling smart phones and tablets in Nigeria with the signing of Airtel, one of the country's largest wireless operators, and partnering with Intel Nigeria.

Management commentary

"Another quarter of record revenue and adjusted EBITDA demonstrates our strategies to expand our sales channel and production capacity, along with lowering our cost of goods, are well on track," said Suneet Singh Tuli, president and chief executive officer of DataWind.

"While we expanded our sales channels in India during the quarter, we also entered our second major market with the signing of one of the largest wireless operators in Nigeria, Airtel Africa and partnering with Intel Nigeria.

"We plan to build upon this momentum through further expansion of our carrier relationships, as we work to bring our low-cost Internet solutions to millions of people around the world."

Financial summary

Revenue for the third quarter of 2016 increased 81 per cent to $15.5-million compared with $8.5-million in the same year ago quarter. The increase was driven by sales channel expansion and greater ability to meet demand as the result of increased production capacity. The increased production capacity supported record unit sales of 251,000, up 7 per cent from 235,000 sequentially and up 73 per cent from 145,000 in the same year ago quarter.

Gross profit was $4.6-million or 29.4 per cent of sales in Q3 2016, compared with $1.5-million or 17.8 per cent in the same year ago period. Gross margins continued to improve due to the improvement of product distribution mix which more effectively met channel requirements, as well as improved cost control with subcontracted manufacturers, and the final assembly of both smart phones and tablets in India reducing import duties.

Research and development costs were $385,000 in the quarter, compared with $557,000 in the year ago period. The decrease in R&D spending was due to a decrease in non-recurring engineering costs.

General and administrative costs, which include sales, marketing expenses and salaries, were $4.1-million in the third quarter, as compared with $3.2-million in the same year ago period. The increase in expenses were due increased salaries related to the significant growth in sales channels, logistics and customer support.

Comprehensive net loss in Q3 2016 was $611,000 or two cents per common share, compared with $2.0-million or nine cents per common share in Q3 2015. The narrowing loss was due to increased sales and the related improvement in gross margins offset by an increase in G&A costs.

Adjusted EBITDA for the quarter totalled $106,000, improving from $5,000 in the previous quarter and a loss of $2.0-million in the year ago quarter.

Working capital was $10.7-million at Dec. 31, 2015, compared with $11.2-million at Sept. 30, 2015.

DataWind plans to file its management's discussion and analysis and full financial statements with SEDAR before the filing deadline.

           CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS 
                        (In thousands, except per share)
                                    
                       Three months ended Dec. 31, Nine months ended Dec. 31,
                                2015         2014          2015         2014

Revenue                  $    15,501  $     8,541   $    41,913  $    20,718
Cost of goods sold            10,949        7,021        30,402       17,367
Gross profit                   4,552        1,520        11,511        3,351
Operating expenses
Research and development         385          557         1,138        1,380
Administration cost            4,086        3,169        10,749        7,165
IPO transaction costs              -         (156)            -        1,902
Foreign exchange
loss/(gain)                     (269)        (101)          709         (226)
Total operating expenses       4,202        3,469        12,596       10,221
Operating profit/(loss)          350       (1,949)       (1,085)      (6,870)
Finance and other income           -           36            21           72
Finance (expense)               (859)         (99)       (2,638)        (124)
(Loss) before income taxes      (509)      (2,012)       (3,702)      (6,922)
Tax expense                        -            -             -            -
Net (loss)                      (509)      (2,012)       (3,702)      (6,922)
Other comprehensive
income
Unrealized foreign
exchange translation
gain/(loss)                     (102)         (19)          310           66
Net comprehensive (loss)
for the period           $      (611) $    (2,031)  $    (3,392) $    (6,856)
Net (loss per share),
basic                    $     (0.02) $     (0.09)  $     (0.17) $     (0.35)

We seek Safe Harbor.