DataWave Reports Earnings Of $116,854 in the First Quarter for Fiscal 2004


VANCOUVER, B.C., August 12, 2003 (PRIMEZONE) -- DataWave (TSX Venture Exchange:DTV) (OTCBB:DWVSF) announces earnings for the first quarter in fiscal 2004 of US$116,854 compared with $102,249 for the same period last year.

Mr. Emanuel, Chairman and CEO, reports, "We have had eight consecutive quarters with positive earnings which show our continued commitment to developing and growing the Company on a profitable basis. Our POS technology has established a dominant position in the Canadian market place and is driving the change in our business from being a seller of prepaid long distance cards to becoming the market leader in adding value to all point of sale stored value telecom and financial products."

A complete analysis of our quarterly results ending June 30, 2003 is provided on our Form-10QSB quarterly report filed on Edgar and will be available on the U.S. Securities and Exchange Commission's web site (www.sec.gov) under DataWave's Central Index Number (CIK) 0001000157.

Fiscal 2004 First Quarter Consolidated Financial Statements:

These financial statements have been prepared by Management in accordance with generally accepted accounting principles in the United States and are reported in U.S. dollars.


                           DATAWAVE SYSTEMS INC.
                      CONSOLIDATED BALANCE SHEETS
    (Expressed in United States dollars and presented in accordance
     with US GAAP) 
                                               (Unaudited)
                                         June 30            March 31
 Assets                                     2003                2003
                                   ---------------     --------------

 Current
   Cash and cash equivalents       $   1,228,115       $   2,139,063
   Accounts receivable and
     other                             3,834,453           2,031,895
   Inventories                         1,601,478           1,225,391
   Prepaid expenses and deposits         565,792             482,549
   Deferred income taxes                  79,000              79,000
                                   ---------------     --------------
 Total current assets                  7,308,838           5,957,898
 Restricted cash                          54,000              54,000

 Machinery and equipment, net          1,985,435           1,488,682
 Goodwill                              1,926,550           1,750,639
 Other intangible assets                 451,637             442,510
                                   ---------------     --------------
 Total assets                      $  11,726,460       $   9,693,729
                                   ---------------     --------------
                                   ---------------     --------------

 Liabilities

 Current
   Accounts payable and
     accrued liabilities           $   7,637,001       $   6,092,828
   Deferred revenue                       96,100             146,420
                                   ---------------     --------------
 Total liabilities                     7,733,101           6,239,248
                                   ---------------     --------------

 Shareholders' equity

 Common shares
   Authorized
    100,000,000 common shares, no par value
 Issued
   43,889,334 and 43,889,334 shares issued and
    outstanding at June 30, 2003 and
    March 31,2003 respectively        15,006,743         15,006,743
 Additional paid-in capital            2,725,492          2,725,492
 Accumulated other comprehensive
   income                                467,869             45,845
 Accumulated deficit                 (14,206,745)       (14,323,599)
                                  ---------------     --------------
 Total shareholders' equity            3,993,359          3,454,481
                                  ---------------     --------------
 Total liabilities and
   shareholders' equity            $  11,726,460       $  9,693,729
                                  ---------------     --------------
                                  ---------------     --------------

                                 DATAWAVE SYSTEMS INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
   (Expressed in United States dollars and presented in accordance
    with US GAAP) 
                                               (Unaudited)
                                  For the Three Months ended June 30
                                            2003               2002
                                  ---------------     --------------

 Revenue
   Sales                           $   2,366,988       $  2,692,960
   Net agency sales                    1,756,870          1,744,190
                                  ---------------     --------------
 Total revenue                         4,123,858          4,437,150
                                  ---------------     --------------

 Operating costs and expenses
   Cost of revenues (Note 2 (k))       2,449,952          2,917,209
   General and administrative            638,329            731,721
   Selling and marketing                 411,265            365,527
   Product development                   375,158            259,054
   Depreciation and amortization         163,545             57,029
                                  ---------------     --------------
 Total operating costs and expenses    4,038,249          4,330,540
                                  ---------------     --------------
 Operating income                         85,609            106,610
 Other income                              9,408              3,675
 Gain (loss) on foreign exchange          21,837             (8,036)
                                  ---------------     --------------
 Net income before income taxes          116,854            102,249
 Income taxes                                  -                  -
                                  ---------------     --------------
 Net income for the period         $     116,854       $    102,249
                                  ---------------     --------------
                                  ---------------     --------------

 Net income per share
   Basic and diluted               $       0.003       $      0.002
                                  ---------------     --------------
                                  ---------------     --------------

 Weighted-average number of
  common shares outstanding
   Basic                              43,889,334         43,889,334
                                  ---------------     --------------
                                  ---------------     --------------
   Diluted                            43,889,334         43,958,317
                                  ---------------     --------------
                                  ---------------     --------------

                               DATAWAVE SYSTEMS INC.
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Expressed in United States dollars and presented in accordance 
  with US GAAP) 
                                               (Unaudited)
                                  For the Three Months ended June 30
                                            2003               2002
                                  ---------------     --------------

 Operating activities
   Net income for the year         $     116,854       $    102,249

   Adjustments to reconcile net
    income to net cash provided by
    (used in) operating activities:
    Depreciation and amortization        163,545             57,029

   Net change in non-cash operating
    assets and liabilities
      Accounts receivable and other   (1,802,558)          (221,463)
      Inventories                       (376,087)           (78,998)
      Prepaid expenses and deposits      (83,243)            60,259
      Accounts payable and other
        accrued liabilities            1,544,173            451,997
      Deferred revenue                   (50,320)          (167,798)
                                  ---------------     --------------
 Net cash provided by operating
   activities                           (487,636)           203,275
                                  ---------------     --------------

 Investing activities
   Restricted cash                             -            (30,000)
   Purchase of machinery
     and equipment                      (477,312)          (116,890)
                                  ---------------     --------------
 Net cash (used in)
   investing activities                 (477,312)          (146,890)
                                  ---------------     --------------

 Increase (decrease) in cash            (964,948)            56,385
 Cash and cash equivalents,
   beginning of year                   2,193,063          1,911,888
                                  ---------------     --------------
 Cash and cash equivalents,
   end of year                     $   1,228,115       $  1,968,273
                                  ---------------     --------------
                                  ---------------     --------------

About DataWave (http://www.datawave.ca)

DataWave has been an innovator and developer of prepaid and stored-value programs since it was founded in 1994. DataWave pioneered a system that allows for point-of-sale authorization and reload of high value, high shrinkage products, such as cash cards and phone cards. The System works equally well over the Internet, through intelligent free-standing vending machines or with various POS devices, including cash registers.

DataWave Systems Inc.

John Gunn General Manager, CFO

Legal Notice Regarding Forward-Looking Statements:

Statements in this news release 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, but are not limited, references to: the potential for our Point of Sale (POS) systems capabilities to significantly increase our volume and market share; our belief that initiatives could bear fruit in fiscal 2004 and positively impact our bottom line; and our belief that we are on the fast track to become an international leader in point of sale stored value products.

It is important to note that the company's actual results and outcomes may differ materially from those contained in the forward-looking statements contained in this release. Factors that could cause actual results to differ materially include, but are not limited to, risks and uncertainties such as: continued market acceptance of our existing products and whether we will achieve broad acceptance of our new products -- particularly our Point of Sale (POS) systems -- in the new markets that we have identified; and the overall success of our company in general.

Although we believe that the beliefs, plans, expectations and intentions contained in this letter are reasonable, there can be no assurance that such beliefs, plans, expectations or intentions will prove to be accurate. Readers should refer to the risk disclosures outlined in our annual report on Form 10-KSB for the year ended March 31, 2003, filed with the United States Securities and Exchange Commission.

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

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



            

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