Wave Systems Corp. (fka WAVXQ)

[Fullmoon]

Wave's Q4 and Full Year Net Revenues Rose 75% to $3.3 Million and 40% to $8.8 Million -- Each Record Levels

Market Wire
4:03 PM Eastern Daylight Time Mar 12, 2009
Wave Systems Corp.

LEE, MA, Mar 12 (MARKET WIRE) --
Wave Systems Corp. (NASDAQ: WAVX), a leading developer of PC security
software and services, today reported results for the fourth quarter (Q4)
and year ended December 31, 2008 and reviewed recent corporate progress
and developments. Wave's Q4 2008 net revenues rose 75% to $3,291,000,
compared with Q4 2007 net revenues of $1,875,000, reflecting increased
software royalties, as well as growth in software license upgrades. For
the full year 2008, net revenues grew 40% to $8,810,000, compared to 2007
net revenues of $6,307,000.

Reflecting continued increases in Wave's software license activity, Q4
2008 billings, a non-GAAP measure of demand which reflects shipments and
license upgrade contracts signed during the period but which may be
recognized over future periods, rose 121% to $3,724,000 versus Q4 2007
billings of $1,686,000, and rose 62% versus Q3 2008 billings of
$2,297,000. For the full year 2008, billings grew 62% to $10,005,000,
compared to 2007 billings of $6,192,000.

As disclosed in prior quarters, Wave's software license upgrade sales are
recorded as deferred revenue and recognized generally over a 365-day
period. As a result of this treatment and the additional growth in Wave's
license upgrades during Q4 2008 (net of revenue recognized), deferred
revenue increased 41% or $433,000 to $1,484,000 at December 31, 2008,
compared with the deferred revenue of $1,051,000 at September 30, 2008.
For the full year of 2008, deferred revenue grew over 400% to $1,484,000
from deferred revenue of $289,000 at December 31, 2007.

As a result of expense-reduction programs initiated during the quarter,
Wave's Q4 2008 operating expenses (including cost of sales) decreased to
$6,560,000 versus Q4 2007 operating expenses of $7,230,000 and Q3 2008
operating expenses of $7,433,000.

For Q4 2008, Wave reported a net loss of $3,295,000, compared with a Q4
2007 net loss of $5,288,000, and a Q3 2008 net loss of $5,605,000. Wave's
Q4 2008 net loss attributable to common stockholders after accounting for
the accretion of a non-cash beneficial conversion feature on the Series J
and Series K convertible preferred stock issuances during the quarter was
$3,952,000, or $0.07 per basic and diluted share, compared with a Q4 2007
net loss attributable to common stockholders of $5,288,000, or $0.11 per
basic and diluted share, and a Q3 2008 net loss attributable to common
stockholders of $5,605,000, or $0.10 per basic and diluted share.
Per-share figures are based on a weighted average number of basic shares
outstanding in the fourth quarters of 2008 and 2007 of 58,708,000 and
49,699,000, respectively, and 57,896,000 for Q3 2008.

For the full year 2008, Wave reported a net loss of $20,549,000, compared
with a 2007 net loss of $19,952,000. Net loss attributable to common
stockholders after accounting for the accretion of a non-cash beneficial
conversion feature on the Series J and Series K convertible preferred
stock issuances in Q4 2008 was $21,206,000 for 2008, or $0.38 per basic
and diluted share, compared with a 2007 net loss attributable to common
stockholders of $19,952,000, or $0.43 per basic and diluted share.
Per-share figures are based on a weighted average number of basic shares
outstanding in 2008 and 2007 of 55,379,000 and 46,661,000, respectively.

As of December 31, 2008, Wave had total assets of $3,429,774.

Steven Sprague, Wave's President and CEO, commented,

"2008 was a year of steady progress, increased revenues and important
milestones for Wave, including the shipping of the 44 millionth copy of
our EMBASSY Trust Suite (ETS) software in December. We also continued to
make great strides in delivering an easy-to-use, easy-to-manage security
capability for Dell laptops and desktops. In August, Dell launched its new
E-series family of notebook and workstation PCs, replacing Dell's D-series
line. Dell made security a top priority with the E-Series, creating a new
interface called Dell Control Point with advanced security capabilities
including support for contact and contactless smart cards and integrated
biometrics for user authentication in the preboot mode.

"In other partner news, in Q4 Wave signed a distribution agreement with
Acer, the third-largest PC OEM in the world and an important industry
player in the Asia Pacific region. Acer began shipping ETS on its Veriton
line of business-class desktops in December.

"Wave also played an important role in the industry's debut of new full
disk encryption (FDE) drives from the leading FDE drive manufacturers,"
Sprague continued. "In Q4, we announced support for Fujitsu's new FDE
drives and for Seagate's next-generation of higher capacity, faster 7200
FDE drives. Industry awareness of these drives increased further last
month when the Trusted Computing Group published its much-anticipated Opal
storage security standard. The Opal standard is a significant step in
removing barriers for businesses interested in deploying FDEs, enabling
them to begin buying and using drives today, even in mixed environments.
Wave takes pride in the fact that our software is the only lifecycle
management solution compatible with all FDE drives on the market today, as
well as Opal-compliant drives in development. Full disk encryption is now
a simple security option that we believe new PC buyers should require. It
provides seamless, automatic factory-installed protection of your PC data.

"We have also continued to make progress on our sales of enterprise server
products that enable companies to manage their trusted devices. While we
are making advances, the rate of adoption by IT departments continues to
be challenging. Hardware security as part of the PC can provide any
enterprise with significant benefits. Our objective is to be well
positioned as market adoption of trusted device management technology
continues to grow. We are also seeing growing interest at the federal
government level to leverage TPMs and FDE hard drives to secure the
government networks.

"Lastly, like many businesses trying to adapt to the global economic
downturn, Wave found it necessary to begin a series of cost-cutting
measures," Sprague added. "After successfully supporting NBC Universal's
online distribution of the Beijing Olympics, we elected to suspend the
TVTonic consumer media service and to explore opportunities to sell or
license the technology. Between these reductions in staff, substantially
reducing business travel and cutting other overhead expenses, Wave made
significant progress in reducing its expense rate. As a result of these
measures, which are continuing into 2009, Q4 2008 operating expenses
(including cost of sales) decreased to approximately $6.6 from $7.4
million in Q3 2008. With these and other ongoing expense reductions, we
believe operating expenses per quarter will continue to decrease toward a
range of $5.6 to $5.9 million.

"Despite taking these hard steps to reduce costs and continued concern
over the global economic landscape, we're encouraged by the strong
partnerships we have built with Dell, Acer, Intel and the world's leading
drive vendors. We are working to continue to capitalize on opportunities
in 2009 and beyond, including opportunities presented by the broad
installed base of trusted computing hardware and our EMBASSY Trust Suite."

Auditor's Opinion Letter Disclosure

Pursuant to Rule 4350 of the FINRA Marketplace Rules, Wave is announcing,
as it has done the past four years at this time, that its auditors'
opinion letter which will be contained in Wave's Form-10-K for the year
ended December 31, 2008 raises substantial doubt about Wave's ability to
continue as a going concern given its recurring losses from operations,
working capital position and its accumulated deficit.

Summary of recent progress/developments:


-- Wave Systems Corp. Awarded $750,000 Contract by DoD Agency. In January
2009, Wave filed an 8-K announcing that it will provide consulting services
in connection with a study to evaluate the implementation of trusted
computing solutions for an agency of the U.S. Department of Defense. The
term of the project is expected to be six months.

-- Wave Supports New Hardware Encryptions Industry Standard. Also in
January 2009, the first public version of the Trusted Computing Group's
Opal security subsystem storage specification was announced, giving vendors
a "blueprint" for developing self-encrypting drives that secure data. Wave
announced its support for the specification which will enable stronger data
protection and help organizations comply with increasingly tough
regulations aimed at preventing a data breach. Wave has developed or is
working on Opal-compliant FDE solutions with Fujitsu, Toshiba and Hitachi,
and Wave's FDE solution is currently shipping with Seagate DriveTrust(TM)
technology.

-- Wave Increases Royalties through Amended OEM Software License
Agreement. Under a new arrangement with Wave's largest OEM Customer,
disclosed in an 8-K filing in December, the per-unit royalties that Wave
receives for each OEM PC model shipping with Wave's EMBASSY Trust Suite
(ETS) software were increased by at least 100%, retroactive to November 1,
2008, and apply to all of that OEM's PCs shipped with Wave's software on or
after that date. As noted in the related 8-K, these royalty increases may
be cancelled prospectively by the OEM at any time on 30 days written and
the contract does not provide for guaranteed minimum royalties or shipped
quantities of units containing our software.

-- Fujitsu and Wave Systems Debut FDE Solution. Fujitsu Computer Products
of America, Inc. showcased its full disk encryption hard disk drive at the
Network World IT Roadmap Conference & Expo in San Francisco. The 2.5-inch
HDD is the first technology in the world that will meet the Opal Security
Subsystem Class (SSC) specification. Wave's management software provides
system administrators with capabilities including remote configuration,
lost password recovery and separation of administrative and user roles.



About Wave Systems Corp.

Wave provides software to help solve critical enterprise PC security
challenges such as strong authentication, data protection, network access
control and the management of these enterprise functions. Wave is a
pioneer in hardware-based PC security and a founding member of the Trusted
Computing Group (TCG), a consortium of nearly 140 PC industry leaders that
forged open standards for hardware security. Wave's EMBASSY(R) line of
client- and server-side software leverages and manages the security
functions of the TCG's industry-standard hardware security chip, the
Trusted Platform Module (TPM). TPMs are included on well over 300 million
PCs and are standard equipment on an increasing number of enterprise-class
PCs shipping today. Using TPMs and Wave software, enterprises can
substantially and cost-effectively strengthen their current security
solutions. For more information about Wave and its solutions, visit
http://www.wave.com.

Safe Harbor for Forward-Looking Statements

Under the Private Securities Litigation Reform Act of 1995. This press
release may contain forward-looking information within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended (the
Exchange Act), including all statements that are not statements of
historical fact regarding the intent, belief or current expectations of
the company, its directors or its officers with respect to, among other
things: (i) the company's financing plans; (ii) trends affecting the
company's financial condition or results of operations; (iii) the
company's growth strategy and operating strategy; and (iv) the
declaration and payment of dividends. The words "may," "would," "will,"
"expect," "estimate," "anticipate," "believe," "intend" and similar
expressions and variations thereof are intended to identify
forward-looking statements. Investors are cautioned that any such
forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, many of which are beyond the company's
ability to control, and that actual results may differ materially from
those projected in the forward-looking statements as a result of various
factors.

All brands are the property of their respective owners.


WAVE SYSTEMS CORP. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)

Three Months Ended Twelve months ended
December 31, December 31,
2008 2007 2008 2007
----------- ----------- ----------- -----------
Net revenues:
Licensing 3,248,746 1,869,672 8,691,576 6,223,487
Services 41,990 5,647 118,239 83,473
----------- ----------- ----------- -----------
Total net revenues $ 3,290,736 $ 1,875,319 $ 8,809,815 $ 6,306,960
----------- ----------- ----------- -----------
Operating expenses:
Cost of sales -
licensing 169,207 223,006 736,429 781,675
Cost of sales -
services 30,955 8,902 87,752 30,295
Selling, general,
and administrative 3,785,985 4,127,595 16,375,372 15,222,896
Research and
development 2,126,563 2,870,625 11,702,776 10,557,937
Write-off of
impaired assets 447,128 - 447,128 -
----------- ----------- ----------- -----------
Total operating
expenses 6,559,838 7,230,128 29,349,457 26,592,803
----------- ----------- ----------- -----------
Operating loss (3,269,102) (5,354,809) (20,539,642) (20,285,843)
Net interest income
(expense) (25,437) 67,252 (9,572) 334,292
----------- ----------- ----------- -----------
Net loss (3,294,539) (5,287,557) (20,549,214) (19,951,551)
Accretion of non-cash
beneficial conversion
feature on Series J
and Series K Preferred
Stock (657,000) - (657,000) -
----------- ----------- ----------- -----------
Net loss attributable
to common stockholders (3,951,539) (5,287,557) (21,206,214) (19,951,551)
Loss per common share -
basic and diluted $ (0.07) $ (0.11) $ (0.38) $ (0.43)
=========== =========== =========== ===========
Weighted average number
of common shares
outstanding during the
period 58,707,897 49,699,460 55,379,118 46,660,794

WAVE SYSTEMS CORP. AND SUBSIDIARIES
Consolidated Supplemental Schedule
(Unaudited)

Three months ended Twelve months ended
12/31/08 12/31/07 12/31/08 12/31/07
------------ ----------- ------------ -----------
Total net revenues $ 3,290,736 $ 1,875,319 $ 8,809,815 $ 6,306,960
Increase (decrease) in
deferred revenue 433,484 (188,827) 1,195,019 (115,034)
------------ ----------- ------------ -----------

Total billings
(Non-GAAP) $ 3,724,220 $ 1,686,492 $ 10,004,834 $ 6,191,926
============ =========== ============ ===========


Non-GAAP Financial Measures:

As supplemental information, we provide a non-GAAP performance measure
that we refer to as total billings. This measure is provided in addition
to, but not as a substitute for, GAAP total net revenues. Total billings
means the sum of total net revenues determined in accordance with GAAP,
plus the increase or minus the decrease in deferred revenue. We consider
total billings an important measure of our financial performance, as we
believe it best represents the continued increase in demand for our
software license upgrades. Total billings is not a measure of financial
performance under GAAP and, as calculated by us, may not be consistent
with computations of total billings by other companies.


WAVE SYSTEMS CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)

December 31, December 31,
2008 2007
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 951,563 $ 3,714,030
Accounts receivable, net of allowance for
doubtful accounts of $16,364 and $-0-
at December 31, 2008 and 2007, respectively 1,701,829 1,165,385
Prepaid expenses 227,967 339,342
------------ ------------
Total current assets 2,881,359 5,218,757
Property and equipment, net 408,440 682,512
Other assets 139,975 136,587
------------ ------------
Total Assets 3,429,774 6,037,856
============ ============

Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable and accrued expenses 7,655,834 3,253,320
Current portion of capital lease payable 63,537 -
Deferred revenue 1,484,044 289,025
------------ ------------
Total current liabilities 9,203,415 3,542,345
Long-term portion of capital lease payable 245,362 -
------------ ------------
Total liabilities 9,448,777 3,542,345
------------ ------------

Stockholders' Equity (Deficit):
8% Series I Convertible Preferred stock, $.01
par value. 220 shares issued and
outstanding (liquidation preference of
$968,000) in 2008 and -0- in 2007 2 -
Series J Convertible Preferred stock, $.01 par
value. 91 shares issued and outstanding
(liquidation preference of $364,000) in 2008
and -0- in 2007 1 -
8% Series K Convertible Preferred stock, $.01
par value. 456 shares issued and
outstanding (liquidation preference of
$1,276,800) in 2008 and -0- in 2007 5 -
Common stock, $.01 par value. Authorized
150,000,000 shares as Class A;
58,877,968 shares issued and outstanding in
2008 and 49,744,327 in 2007 588,780 497,443
Common stock, $.01 par value. Authorized
13,000,000 shares as Class B; 38,232 shares
issued and outstanding in 2008 and 2007 382 382
Capital in excess of par value 338,081,691 325,481,336
Accumulated deficit (344,689,864) (323,483,650)
------------ ------------
Total Stockholders' Equity (Deficit) (6,019,003) 2,495,511
------------ ------------
Total Liabilities and Stockholders' Equity
(Deficit) $ 3,429,774 $ 6,037,856
============ ============



Conference call: Today, March 12, 2009 at 4:30 P.M. EDT
Webcast / Replay URL: www.wave.com/news/webcasts
Dial-in numbers: 212-231-2903 or 415-226-5354




Contact:
Gerard T. Feeney
CFO
Wave Systems Corp.
413-243-1600
[e-mail]
Copyright © 2009 Thomson Financial. All rights reserved.





--------------------------------------------------------------------------------
Category Codes:
Massachusetts(R=USMA), North America(R=NAMR), United States of America(R=US), Americas(R=AMR)


Companies:
WAVE SYSTEMS CORPORATION(WAVX)

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