DataWave Reports 20th Consecutive Quarter of Profitability.

WAYNE, N.J. -- DataWave Systems Inc. (OTCBB: DWVS), a premier provider of prepaid and stored value delivery systems, today reported financial results for the second quarter and six months ended September 30, 2006.

Total revenue for the second quarter of fiscal 2007 increased 31% to $10.9 million, compared to $8.4 million for the same period in fiscal 2006. Operating income for the second quarter of fiscal 2007 was $550,000 versus operating income of $435,000 for the same period last year. Net income for the second quarter of fiscal 2007 was $493,000, or $0.01 per diluted share, versus net income of $297,000, or $0.01 per diluted share, for the same period last year.

Total revenue for the six months ended September 30, 2006 increased 39% to $21.3 million, compared to $15.3 million for the same period in fiscal 2006. Operating income for the six months ended September 30, 2006 was $817,000 versus operating income of $533,000 for the same period last year. Net income for the six months ended September 30, 2006 was $781,000, or $0.01 per diluted share, versus net income of $434,000, or $0.01 per diluted share, for the same period last year. The Company generated approximately $3.1 million of cash flow from operations during the six months, resulting in approximately $9.6 million of cash and cash equivalents as of September 30, 2006.

As of September 30, 2006, the Company had more than 6,100 terminals installed, and more than 1,200 host-to-host or distributor locations. Daily transactions processed for the quarter averaged more than 52,200 compared with 39,200 a year ago.

Josh Emanuel, Chairman and Chief Executive Officer, stated, "Having penetrated the majority of all major retailers in Canada, we are leveraging our dominant position within Canada and our strong retail relationships in order to introduce new products such as cash cards and third party gift cards through our existing network, as well as new channel partners throughout North America. Overall, we have built a highly scaleable business model, which leverages operating expenses, as illustrated by the 53% gain in operating income we produced on a 39% increase in revenue for the first six months of fiscal 2007, and generates substantial cash flow, providing us more than sufficient capital to continue our strong organic growth."

DataWave's 2006 annual meeting of stockholders will be held on Thursday, December 14, 2006. A proxy statement has been filed with the SEC and will be mailed to stockholders prior to the meeting.

About DataWave

DataWave has been an innovator and developer of prepaid and stored-value programs and merchandising solutions since it was founded in 1994. DataWave pioneered systems that allow for point-of-sale activation of high value, high shrinkage products, such as cash cards, prepaid phone cards and prepaid wireless time. These systems work equally well over the Internet, through intelligent freestanding vending machines and POSA terminals, or with various card activation devices, including cash registers.

This press release contains "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995. Words such as "expect", "believe", "anticipate", "may", "will", "plan", "intend", "estimate", "could", and other similar expressions are intended to identify these forward-looking statements. In particular, statements in this release regarding expansion of the Company's retail network, plans by the Company for introduction of third-party gift cards and cash cards and the Company's anticipated organic revenue growth rate are forward looking. Statements in this press release, and elsewhere, that look forward in time or include anything other than historical information involve risks and uncertainties that may affect the Company's actual results of operations. These statements by the Company are subject to certain risks, including, among others, future demand for its products and brand, competition from other businesses providing similar products, the ability to maintain profitability and control expenses and the Company's ability to successfully execute its business strategy. These and other risks and uncertainties are discussed in more detail in the Company's periodic reports filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, which are available at the SEC website at www.sec.gov.

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

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