DataWave Earns US$22,667 During Its Third Quarter Year to Date Profit of $124,820.

Business Editors

VANCOUVER, British Columbia--(BUSINESS WIRE)--Feb. 19, 2002

DataWave Systems (CDNX:DTV)(OTCBB:DWVSF) announces net income of US$22,667 for the third quarter ended December 31, 2001 compared to a (US$357,910) loss for the same period last year. Revenues increased 60% to US$3,675,070 from US$2,290,990. Net income for the nine months ended December 31, 2001 is US$124,820 compared to a (US$558,125) loss for the same nine months last year. Year to date fiscal 2002 revenues increased by 58% to US$11,584,394 compared to US$7,344,813 for the same period last year.

DataWave considerably expanded its involvement in the Canadian prepaid long distance telephone market by purchasing AT&T's Canadian prepaid card business in July 2001. This business has generated revenues of US$3.6 million since July 13, 2001, the date of acquisition. Revenue generated from the sale of prepaid long distance phone cards in the United States increased 9% for the nine months ended December 31, 2001 compared to same period last year. However, in the quarter ended December 31, 2001 revenue from the sale of prepaid long distance phone cards in the United States declined 6% due to the unprecedented decline in travel and the economic slowdown in the United States resulting from the September 11 terrorist attacks. DataWave's United States revenue is directly tied to the travel-related industry that was hit especially hard.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were US$136,263 for the quarter compared to a negative (US$223,290) in the same quarter last year. Year to date EBITDA is US$482,267 compared to a negative (US$128,835) for the nine months ended December 31, 2000.

Gross margin improved to 32.2% during the quarter ended December 31, 2001 from 26.5% for the same quarter last year. On a year to date basis, gross margin improved to 31.2% for the nine months ended December 31, 2001 from 29.5% for comparable period last year. The improvement in gross margin is primarily due to renegotiating lower rates on cost of time. Year to date gross margin is 30.8% on the U.S. portion of the business and 32.1% on the Canadian portion of the business.

Mr. Emanuel, CEO reports, "We are encouraged by the results during the quarter of the prepaid MasterCard 52 store pilot. The pilot is expected to run for three to four more months which should be sufficient time for DataWave and the other entities involved to verify the business case before we make a decision regarding a possible rollout beginning late in 2002." Prepaid MasterCards are being issued by Standard Federal Bank through Coinstar machines in supermarkets in three markets using DataWave enabling technology.

The Company has entered into new agreements to install DataWave Merchandisers ("DTM's") into the four new airports detailed below and add ten new locations in the Atlanta airport. Forty-one DTM's will be or are in the process of being installed in San Francisco, 20 in Pittsburgh, 8 in Nashville and 8 in Indianapolis.

Also during the 3rd quarter the Company entered into a sub-servicing agreement as a turnkey solution provider of pre-paid phone cards to AT&T for a major global retailer in Canada.

Pace, the suburban Chicago public transportation company has been piloting the use of bus passes dispensed from DataWave machines at two locations. At this stage revenues have been immaterial. The Company is waiting to hear from Pace if it will receive funding to expand the program.

During the quarter the Company decided that for the time being it will not be proceeding with development work regarding a host to host relationship with a large North American ATM manufacturer as was first described in the Company's 2001 Annual Report. This relationship has not resulted in any material revenue and is not expected to in the near term.

The Company announced in a June 15, 2001 press release that its joint venture with Lipman USA Inc. would no longer develop and manufacture ATM's incorporating DataWave technology to dispense prepaid phone cards.

DataWave has identified several Prepaid opportunities that leverage the existing DataWave technology infrastructure. The DataWave financial middleware infrastructure, integrated with financial banking partners, affords opportunities to deliver Prepaid Cash Card programs to multiple niche markets. The DataWave Point of Sale ("POSA") activation technology, integrated with Prepaid Wireless, Prepaid Internet, and PrePaid Voice Over Internet providers, offers new distribution of POSA products to our new and existing customers. DataWave is actively working on product development in these areas. DataWave will continue evaluating opportunities and announce any agreements that will have a material impact on the Company.

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in US$000's          3 months    3 months    9 months    9 months
                       ended       ended       ended       ended
                       Dec 31,     Dec 31,     Dec 31,     Dec 31,
                       2001        2000        2001        2000
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Revenues               3,675       2,290       11,584      7,345
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EBITDA                   136        (223)         482       (129)
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Net Income (loss)         23        (358)         125       (558)
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Net Income (loss)
 per share          $  0.001    $ (0.008)    $  0.003   $ (0.013)
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Net Income (loss)
 per share fully
  diluted           $  0.001    $ (0.008)    $  0.003   $ (0.013)
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About DataWave (http://www.datawave.ca)

DataWave has pioneered the concept of online, point-of-sale activation through a vending unit, ensuring the secure distribution of high value, high shrinkage prepaid products, such as cash cards and phone cards, since it was founded in Vancouver, British Columbia in 1994.

Wireless communications are combined with point-of-sale technologies in the DataWave System to enable it to process transactions, accept a variety of payment methods and generate a number of different reports aimed at assisting the customer. The System works equally well over the Internet, through intelligent free-standing vending machines (DTMs) or with over-the-counter "swipe" units (OTC). As of December 31, 2001 the Company has placed over 2,000 DTMs, OTCs and traditional vending machines and provides prepaid card 'batch activation' services to an additional 500 sites. The Company also wholesales prepaid phone cards to over 8,000 retail locations in Canada.

In addition to its successful prepaid phone card business, the company is currently working with Standard Federal Bank and Coinstar on a three-city pilot with 52 machines, selling MasterCard Prepaid Cards.

DataWave Systems Inc.

Marc L. Belsky, CFO 

Legal Notice Regarding Forward-Looking Statements 

"This press release contains 'forward-looking statements'. Statements in this document which are not purely historical are forward-looking statements, including any statements regarding beliefs, plans, expectations or intentions regarding the future. Forward-looking statements in this release include statements regarding: revenue and income expectations related to the acquired Prepaid Card Company, expansion into new markets and airport locations, sales under the sub-servicing agreement as a turn-key provider of prepaid phone services to AT&T, margin expectations; and new prepaid card products opportunities. It is important to note that actual outcomes and the Company's actual results could differ materially from those contained in any forward-looking statements contained in this press release. Factors that could cause actual results to differ materially include, but are not limited to, risks and uncertainties such as when the travel industry will return to its pre-September 11th level of activity, customer defections at the acquired company, insufficient demand for and market acceptance of DataWave's present or future products, emergence of companies with competing or superior products and/or services, unforeseen changes in the software and hardware technology used in connection with DataWave's technology and products, the unforeseen delays or costs of entering new markets, technical difficulties in developing new products, or the Company's ability to obtain a bank sponsor for prepaid cash card products and a BIN for POSA products. Although DataWave believes that the beliefs, plans, expectations and intentions contained in this press release are reasonable; there can be no assurance that such beliefs, plans, expectations or intentions will prove to be accurate. Readers should also refer to the risk disclosures outlined in the Company's annual report and regulatory filings for the 2001 fiscal year and the Company's quarterly reports filed from time-to-time with the CDNX, BC Securities Commission and SEC."

"DataWave" is a registered trademark of the Company. All other trademarks and trade names referred to are the property of their respective owners.

The Canadian Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.