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

Lee, MA — 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® 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 2004 and year-to-date developments:
(for more details, please visit www.wave.com ):

Wave Logo

About Wave Systems Corp.

Wave is a pioneer in hardware-based PC security that provides software to help solve critical enterprise PC security challenges such as data protection, strong authentication, network access control and the management of these enterprise functions.  Wave is a founding member of the Trusted Computing Group (TCG), a consortium of more than 100 companies that forged open standards for hardware security.  Wave’s EMBASSY® 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) as well as hard drives that comply with TCG’s “Opal” self-encrypting drive (SED) standard.  Self-encrypting drives are a growing segment of the data protection market, offering increased security and better performance than most existing software-based encryption solutions.  TPMs are standard equipment on many enterprise-class PCs shipping today and have shipped on an estimated 300 million PCs worldwide.  Using TPMs and/or SEDs and Wave software, enterprises can substantially and cost-effectively strengthen their current security solutions.  Visit http://www.wave.com for more information.

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.

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.

For more information please contact:

Wave Contact:
Gerard T. Feeney, CFO
Wave Systems Corp.
413-243-1600
info@wave.com
Wave Investor Relations Contact
David Collins, Richard Land
Catalyst Global LLC
212-924-9800
wavx@catalyst-ir.com

 

Wave Systems Corp. and Subsidiaries
(a development stage company)

Consolidated Balance Sheets
(in thousands)
(Unaudited)

 

March 31, 2005

 

December 31, 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 sale 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 shares outstanding – basic

 
77,212
67,338

# # #

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