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Wave Systems Reports Q2 Results and Reviews Growing Momentum of the Trusted Computing Marketplace

Lee, MA — August 9, 2005 — Wave Systems Corp. (NASDAQ: WAVX — today reviewed recent corporate progress and reported results for its second quarter (Q2) ended June 30, 2005.

Wave’s Q2 2005 net revenue rose to $258,000, compared to Q2 2004 net revenue of $6,000, principally due to an increase in software license revenue. Wave reported a net loss of $4.2 million, or $0.05 per basic share, for the second quarter of 2005, compared to a net loss to common stockholders of $4.3 million, or $0.06 per basic share, in Q2 2004. The year-ago second quarter included the benefit of a gain on the sale of marketable securities amounting to $1.2 million as well as a $300,000 charge relating to the write-off of impaired assets. The weighted average number of basic shares outstanding in the second quarters of 2005 and 2004 was 81,126,000 and 67,363,000, respectively.

For the six months ended June 30, 2005, Wave Systems reported net revenue of $335,000, versus revenue of $57,000 for the six month period ended June 30, 2004. Wave reported a net loss to common stockholders of $8.7 million, or $0.11 per basic share, for the first six months of 2005, compared to a net loss to common stockholders of $7.7 million, or $0.11 per basic share, in the first six months of 2004. The year-ago six month period included a $2.4 million gain on the sale of marketable securities. The weighted average number of basic shares outstanding in the first six months of 2005 and 2004 was 79,180,000 and 67,350,000, respectively.

As of June 30, 2005, Wave had total current assets of $1.9 million and no long-term debt. On August 1, 2005, Wave received proceeds of $2.3 million from the exercise of its Series A Common Stock Purchase Warrants, and on August 8, 2005 Wave completed a $3.6 million sale of common stock to investors under a Shelf Registration Statement.

Steven Sprague, Wave’s president and CEO, said, "To-date in 2005 has been a period of important milestones for Wave as we have extended our market reach with some of the largest and most important companies in the industry. With the release of the new 1.2 Trusted Platform Module (TPM) specification and the commencement of initial shipments by some vendors, we believe the momentum for broad scale adoption of trusted computing solutions will now accelerate. Importantly, our partners’ shipping volumes for trusted computing products incorporating Wave technology have increased in the second quarter, and we believe they will continue to increase in the third quarter."

Summary of recent progress:
(for more details, please visit

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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 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.

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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.
Wave Investor Relations Contact
David Collins, Richard Land
Catalyst Global LLC


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