Wave behind revenue curve
Wave Systems has announced a widening net loss for its 1996 year-end results due to ongoing research and development.
The company's stock, which has traded between 1 and 3-3/16 during the past year, was down over nine percent in morning trading from yesterday's close of 2.
Wave reported a year-end net loss of $8.7 million, or 64 cents a share, compared with a loss of $6.8 million, or 50 cents per share, for 1995. The company announced year-end revenues of $1,458, compared with no revenues in 1995. The company's 1996 revenues all came in the first quarter; there were no revenues in the subsequent quarters.
Wave, which did not formally break out its fourth quarter results, generated a $2.6 million fourth quarter net loss, approximately, including a one-time charge of roughly $500,000 for discounting the price of its shares.
"We continue to focus our efforts on research and development and on building our base of relationships with hardware OEMs, content providers, distribution channels, and other potential beneficiaries of our proprietary technology and systems," said Steven Sprague, company president and CEO.
The company's lack of revenue is not of immediate concern to the company, said company spokesman David Collins.
The company received two private placements within the past year. In May, Wave received a $3.5 million investment from offshore investors, and at the end of the year it received a $3 million placement from a single domestic investor, said Collins.
But that $6.5 million in investments does not cover the company's losses.
And, although Wave has signed up 400 publishers for its WINPublish service, Collins said there is a time lag from when the service launched and when the company expects to make it a profitable aspect of its business.
"The business is building at a slow rate. There is a learning and educational curve," said Collins.
Collins explained there is an additional lag from the moment customers sign up with the service to when the products are made available. There is yet another lag between when the customers' products are available online and when they will be purchased.
In addition to raising money through private placements, the company is exploring strategic investments and relationships with companies, including Creative Technologies.
"[Through our involvement with Creative], we hope to see revenue of some substance, but I think it is going to take a while," said Collins.
Earlier this month, Wave announced that its electronic commerce service for microtransaction selling and buying of digital information over the Internet has been incorporated into Creative's Inspire, an application that delivers music, games, and entertainment to online customers.
The inclusion of WINPublish in Inspire lets Creative sell digital content and software on a pay-per-use basis.
WINPublish is billed as an electronic commerce solution for individuals and businesses, designed to put the economics of creation into the hands of the creator.
The user signs up for service, Wave encrypts the document and sends it back to the customer to post on a Web site. Then anyone wishing to purchase the document signs up with Wave, which decrypts the document and sends to purchaser.
"The service gives anyone the ability to offers goods online," said Collins.
The service costs $25 a year to sign up with service and Wave takes a percentage of the retail price of the product. Wave takes a 10 to 50 percent commission depending on the price of the product. The commission is higher for less expensive products, said Collins.
The company's long-term goal is to get its chips into a broad base of computers which will give individuals flexibility of having local information about accounts so that they do not have to stay logged on the the Internet.
Wave's selling, general, and administrative expense increased to $5.6 million during 1996, compared to $4 million in 1995, due to increases in personnel, sales, and marketing activities.
At year's end, the company had working capital of $3.2 million, total assets of $6.2 million, and long-term liabilities of $250,000.
Meanwhile, at Demo 97 last month, Wave Systems debuted a prototype of a hardware device that allows Web sites to support microtransactions. The device is expected to ship this year.
Wave also announced today that its principal corporate office was relocated during the first quarter of 1997 from New York City to Lee, Massachusetts, the location of the majority of Wave's employees as well as its back-office systems.