Wave Systems Corp. (fka WAVXQ)

[zen 88]

Wave Systems Reports Q1 Results; Highlights its Progress in Trusted Computing Marketplace

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LEE, Mass.--(BUSINESS WIRE)--May 10, 2005--Wave Systems Corp. (NASDAQ: WAVX; www.wave.com) today reviewed recent corporate progress and reported results for its first quarter (Q1) ended March 31, 2005.

Wave's Q1 2005 net revenue rose to $78,000, compared to Q1 2004 net revenue of $50,000, principally due to an increase in software license revenue. Wave reported a net loss of $4.5 million, or $0.06 per basic share, for the first quarter of 2005, compared to a net loss to common stockholders of $3.4 million, or $0.05 per basic share, in Q1 2004. The year-ago first quarter included the benefit of a gain on sale of marketable securities amounting to $1.2 million. Excluding the gain, Wave would have continued its trend of reduced year-over-year net losses. The weighted average number of basic shares outstanding in the first quarters of 2005 and 2004, was 77,212,000 and 67,338,000, respectively.

As of March 31, 2005, Wave had total current assets of $6.0 million, working capital of $2.8 million and no long-term debt.

Steven Sprague, Wave's president and CEO, said, "The commitment to trusted computing is continuing by a broad range of IT industry players. Most recent are announcements around the expected availability of next-generation Trusted Platform Module ("TPM") v1.2 security chips for trusted personal computers. The launch of this enhanced version TPM by a range of silicon providers and personal computer manufacturers should prove to be an important catalyst in accelerating industry adoption of trusted computing.

"As trusted PCs become more mainstream, Wave believes there will be a significant business opportunity in delivering trusted computing software solutions that address the security challenges facing businesses and governments today - issues like data and identity protection, network management and the strong authentication of users into enterprise networks. We believe that to be broadly adopted, secure solutions must fit into existing infrastructure and reduce costs and customer service.

"Into 2005, Wave continues to make progress. Wave's EMBASSY(R) Trust Suite ("ETS") secure software ships with certain products of one of the global leaders in PC motherboard sales; our software is available for sale on the web site of one of the global leaders in PC sales; we have contracts to have our products bundled with certain products of two other leading silicon chip suppliers, and our solutions are now available from additional reseller partners."

Summary of recent progress:

(for more details, please visit www.wave.com):

-- EMBASSY(R) Trust Suite 4.3: In April, in conjunction with Microsoft's WinHEC conference, Wave announced summer availability of ETS 4.3, designed to support the next generation security chip hardware, TPM 1.2, which is expected to be available from personal computer original equipment manufacturers also beginning this summer.

-- Giesecke & Devrient ("G&D"): In April 2005, Wave formed a strategic alliance with G&D to offer an enhanced security solution to address the trusted computing market. The collaboration will address G&D and Wave's respective joint development activities in the fields of smart card technology and trusted computing software.

-- Seagate Technology: In March 2005, at the Intel Developers Forum, Wave and Seagate conducted a technology demonstration showing the data protection benefits of linking the security of a TPM to a Seagate-trusted disc drive.

-- Dell: On February 1, 2005, Wave's ETS Enterprise Security Dell Edition 1.0 was made available for purchase on www.Dell.com.

-- Sonex ISG: In February 2005, Sonex Infrastructure Solutions Group agreed to distribute Wave's ETS software and infrastructure to enterprises. Sonex's distribution will encompass the Eastern European countries of Lithuania, Latvia and Estonia.

-- Microsoft: In January 2005, Wavexpress commenced offering its TVTonic video service to Media Center personal computer users via Microsoft's Online Spotlight. Online Spotlight is a selection of featured services within Microsoft Windows XP Media Center Edition 2005 that offers users a fast, simple way to access compatible services directly from the main navigation screen.

-- Operational Research Consultants ("ORC"): In January, 2005, Wave and ORC forged a strategic partnership to jointly market trusted computing and certified credentialing to provide identity management solutions to federal, state and local governments.

-- Groupement des Cartes Bancaires ("CB"): In January 2005, Wave announced that CB, the French banking authority for payment systems involving bank cards and terminals, will use Wave's secure software development tools to evaluate the potential of Trusted Computing Group compliant computing solutions.

-- Quadra Media LA: In March 2005, Quadra Media licensed TVTonic Direct from Wave's Wavexpress subsidiary for use in the delivery of Spanish language content to Spanish speaking households in the U.S.

About Wave Systems

Consumers and businesses are demanding a computing environment that is more trusted, private, safe and secure. Wave is a leader in delivering trusted computing applications and services with advanced products, infrastructure and solutions across multiple trusted platforms from a variety of vendors. Wave holds a portfolio of significant fundamental patents in security and e-commerce applications and employs some of the world's leading security systems architects and engineers. For more information about Wave, visit http://www.wave.com.

Safe Harbor for Forward-Looking Statements

Except for the statements of historical fact, the information presented herein constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include general economic and business conditions, the ability to fund operations, the ability to forge partnerships required for deployment, changes in consumer and corporate buying habits, chip development and production, the rapid pace of change in the technology industry and other factors over which Wave Systems Corp. has little or no control. Wave Systems assumes no obligation to publicly update or revise any forward-looking statements.

All brands are the property of their respective owners.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy any securities. No securities are being offered at this time.

Conference call: Today, Tuesday, May 10, 2005 at
4:30 P.M. E.S.T.
Webcast / Replay URL: http://www.wave.com
Dial-in numbers: 212-271-4563 or 415-537-1870

Wave Systems Corp. and Subsidiaries
(a development stage company)
Consolidated Balance Sheets
(in thousands)
(Unaudited)

March 31, December 31,
2005 2004
------------ ------------
Assets
Current Assets:
Cash and cash equivalents $ 5,067 $ 5,806
Marketable securities 569 722
Prepaid expenses and other receivables 339 272
------------ ------------
Total current assets 5,975 6,800

Property & equipment, net 1,241 1,435
Other assets 216 219
------------ ------------
Total assets 7,432 8,454

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses 2,698 2,900
Deferred revenue 453 351
------------ ------------
Total current liabilities 3,151 3,251

Liability for warrants containing cash
settlement provisions 378 493
------------ ------------
Total liabilities 3,529 3,744

Total stockholders' equity 3,903 4,710
------------ ------------
Total Liabilities and Stockholders' Equity $ 7,432 $ 8,454

Wave Systems Corp. and Subsidiaries
(a development stage corporation)
Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)


Three Months Ended
March 31,
---------------------------
2005 2004
------------ ------------

Revenues
Product -- 6
Services 7 --
Licensing and other 71 44
------------ ------------
Total Net Revenues 78 50

Cost of Sales:
Product -- 5
Services 9 --
Licensing and other 5 14
Amortization expense 155 8
------------ ------------
Total Cost of Sales 169 27

Gross Margin (91) 23

Operating Expenses:
Selling, general and administrative 2,997 3,305
Research and development 1,594 1,756
------------ ------------
4,591 5,061

Net interest income 21 7
Gain on sales of marketable securities -- 1,175
Unrealized gain on decrease in value of
warrant liability 115 447
------------ ------------
136 1,629

Net loss ($4,546) ($3,409)
============ ============

Net loss per share - basic ($0.06) ($0.05)
============ ============

Weighted average of basic shares
outstanding 77,212 67,338



Contacts


Wave Systems Corp.
Gerard T. Feeney, CFO
413-243-1600
[e-mail]
or
Jaffoni & Collins
David Collins, Richard Land
212-835-8500
[e-mail]



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