Contact: RAE SYSTEMS REPORTS RECORD SECOND QUARTER EARNINGS SUNNYVALE, Calif. – July 30, 2003–RAE Systems Inc. (OTC BB: RAEE.OB), a leading provider of hazardous environment detection solutions for homeland defense, today announced record financial results for the second quarter ended June 30, 2003. For the quarter, RAE Systems reported total revenues of $7.5 million compared to revenues of $5.2 million in the second quarter of 2002, an increase of 44%. Worldwide consolidated net profit for the second quarter was $794,800 or 1.7 cents per share, compared to a loss of 23 cents for the same quarter in 2002. For the first half of 2003, revenues were $14.8 million as compared to $9.7 million in the first half of 2002, an increase of 52.4%. Net profit for the first half of 2003 was $1.6 million as compared to a net loss of $10.2 million in the first half of 2002. The loss in 2002 was primarily attributable to a one-time non-cash merger cost related to the reverse merger completed in April 2002. The growth in revenue was largely due to increasing customer acceptance of the AreaRAE wireless network system among first responders. RAE Systems also benefited from federal Homeland Security funding funneled through organizations such as EMS teams, fire and rescue squads, HAZMAT teams, and law enforcement agencies. They also experienced increased sales in Asia for Indoor Air Quality applications. “We’re pleased with our solid performance in our fourth consecutively profitable quarter,” said Robert I. Chen, president and CEO of RAE Systems. “Following a surge in demand during the spring due to the war in Iraq and a heightened focus on homeland defense, our outlook continues to be strong in light of our long-standing relationships with first responders. RAE is the brand of choice among many first responder organizations around the U.S. as the federal government continues to release homeland defense grants.” Highlights of the second quarter include:
About RAE Systems Safe Harbor Statement This press release contains “forward- looking” statements, as that term is used in Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are denoted by such words as “continue to be strong”. These types of statements address matters that are subject to risks and uncertainties, which could cause actual results to differ materially. Factors that could cause or contribute to such differences include, but are not limited to, the general economic and industry factors and receptiveness of the market to RAE and its products. In addition, our forward- looking statements should be considered in the context of other risk factors discussed in our filings with the Securities and Exchange Commission, including but not limited to our annual report on Form 10-K and 10-Q filings, available online at http://www.sec.gov. All forward-looking statements are based on information available to the company on the date hereof, and the company assumes no obligation to update such statements. TABLES |
RAE Systems Inc. Condensed Consolidated Balance Sheets June 30, December 31, 2003 2002 ------------- ------------- (Unaudited) Assets Current Assets: Cash and cash equivalents $ 7,116,000 $ 7,193,500 Accounts receivable, net of allowance for doubtful accounts of $175,700 and $175,700, respectively 3,428,600 2,475,700 Inventories 4,204,500 3,176,400 Prepaid expenses and other current assets 1,007,500 402,000 Deferred income taxes 528,800 528,800 ------------- ------------- Total Current Assets 16,285,400 13,776,400 ------------- ------------- Property and Equipment, net 2,015,600 2,026,800 Deposits and Other Assets 143,000 81,800 Investment in Unconsolidated Affiliate 651,600 784,700 ------------- ------------- $ 19,095,600 $ 16,669,700 ============= ============= Liabilities and Shareholders' Equity Current Liabilities: Accounts payable $ 1,507,800 $ 942,400 Accounts payable to affiliate 725,400 757,900 Accrued expenses 1,699,600 1,689,700 Income taxes payable 1,502,600 1,726,200 Current portion of deferred revenue 50,700 149,700 Current portion of capital lease obligations 159,600 159,600 ------------- ------------- Total Current Liabilities 5,645,700 5,425,500 ------------- ------------- Deferred Revenue, net of current portion 26,700 -- Capital Leases Obligations, net of current portion 14,200 107,300 Deferred Income Taxes 277,200 277,200 ------------- ------------- Total Liabilities 5,963,800 5,810,000 ------------- ------------- Commitments and Contingencies Shareholders' Equity: Common stock, $0.001 par value; 200,000,000 shares authorized; 45,982,223 and 45,516,675 shares issued and outstanding, respectively 46,000 45,500 Additional paid-in capital 18,141,000 17,955,800 Deferred compensation -- (516,600) Accumulated deficit (5,055,200) (6,625,000) ------------- ------------- Total Shareholders' Equity 13,131,800 10,859,700 ------------- ------------- $ 19,095,600 $ 16,669,700 ============= ============= See accompanying notes to condensed consolidated financial statements. RAE Systems Inc. Condensed Consolidated Statements of Operations Three months ended Six months ended June 30, June 30, ----------------------------------------------------- 2003 2002 2003 2002 ------------ ------------- ------------ ------------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net Sales $ 7,459,100 $ 5,167,300 $14,798,500 $ 9,712,600 Cost of Sales 2,615,700 2,151,400 5,528,500 4,176,200 ------------ ------------- ------------ ------------- Gross Margin 4,843,400 3,015,900 9,270,000 5,536,400 ------------ ------------- ------------ ------------- Operating Expenses: Sales and marketing 1,911,500 1,466,300 3,381,600 2,539,600 Research and development 757,000 611,300 1,463,000 1,205,300 General and administrative 1,160,400 1,951,400 2,348,000 2,796,600 Legal fees and settlement costs 1,900 166,100 90,500 244,000 Merger costs -- 8,734,700 -- 8,734,700 ------------ ------------- ------------ ------------- Total Operating Expenses 3,830,800 12,929,800 7,283,100 15,520,200 ------------ ------------- ------------ ------------- Operating Income (Loss) 1,012,600 (9,913,900) 1,986,900 (9,983,800) ------------ ------------- ------------ ------------- Other Income (Expense): Interest income 7,300 17,900 16,700 32,000 Interest expense (5,700) (40,600) (14,200) (100,100) Other, net 21,900 (13,500) 23,000 (15,900) Equity in loss of unconsolidated affiliate (67,200) (59,300) (133,100) (120,600) ------------ ------------- ------------ ------------- Total Other Income (Expense) (43,700) (95,500) (107,600) (204,600) ------------ ------------- ------------ ------------- Income (Loss) Before Income Taxes 968,900 (10,009,400) 1,879,300 (10,188,400) Income Taxes 174,100 7,800 309,500 7,800 ------------ ------------- ------------ ------------- Net Income (Loss) $ 794,800 $(10,017,200) $ 1,569,800 $(10,196,200) ============ ============= ============ ============= Basic Earnings (Loss) Per Common Share $ 0.02 $ (0.23) $ 0.03 $ (0.30) ============ ============= ============ ============= Diluted Earnings (Loss) Per Common Share $ 0.02 $ (0.23) $ 0.03 $ (0.30) ============ ============= ============ ============= Weighted-average common shares outstanding 45,851,788 43,228,593 45,745,275 34,435,323 Stock options 1,697,686 -- 1,525,955 -- ------------ ------------- ------------ ------------- Diluted weighted-average common shares outstanding 47,549,474 43,228,593 47,271,230 34,435,323 ============ ============= ============ ============= RAE Systems Inc. Condensed Consolidated Statements of Cash Flows Six months ended June 30, -------------------------- 2003 2002 ------------ ------------- (Unaudited) (Unaudited) Increase (Decrease) in Cash and Cash Equivalents Cash Flows From Operating Activities: Net Income (Loss) $ 1,569,800 $(10,196,200) Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 438,000 263,800 Provision for doubtful accounts -- (24,300) Inventory reserve (179,800) -- Compensation expense related to options 280,300 -- Amortization of deferred compensation -- 862,800 Common stock issued for services -- 2,121,600 Common stock purchase rights granted below fair value -- 2,308,300 Compensation expense related to warrants 27,400 4,305,800 Equity in loss of unconsolidated affiliate 133,100 120,600 Deferred income taxes -- -- Changes in operating assets and liabilities, net of effects of deconsolidation: Accounts receivable (952,900) (31,400) Inventories (848,300) 532,800 Prepaid expenses and other current assets (304,100) (72,200) Accounts payable 565,400 (50,100) Accounts payable to affiliate (32,500) 59,200 Accrued expenses 9,900 (69,400) Income taxes payable (223,600) (211,000) Deferred revenue (72,300) (94,500) ------------ ------------- Net Cash Provided by (Used In) Operating Activities 410,400 (174,200) ------------ ------------- Cash Flows From Investing Activities: Cash relinquished in deconsolidation -- (878,300) Restricted cash -- 3,000,000 Investment in affiliate -- (500,000) Acquisition of property and equipment (426,800) (570,300) Deposits and other (61,200) (686,400) ------------ ------------- Net Cash (Used In) Provided By Investing Activities (488,000) 365,000 ------------ ------------- Cash Flows From Financing Activities: Proceeds from the issuance of common stock 93,200 200 Proceeds from merger/reorganization -- 6,965,500 Payments on notes payable and lines of credit -- (4,425,800) Payment on capital lease obligation (93,100) (65,000) ------------ ------------- Net Cash Provided By Financing Activities 100 2,474,900 ------------ ------------- Net (Decrease) Increase in Cash and Cash Equivalents (77,500) 2,665,700 Cash and Cash Equivalents, beginning of period 7,193,500 3,742,600 ------------ ------------- Cash and Cash Equivalents, end of period $ 7,116,000 $ 6,408,300 ============ ============= Supplemental Disclosure of Cash Flow Information: Cash Paid: Income taxes $ 509,500 $ 218,800 Interest $ 14,200 $ 100,100 Noncash Investing and Financing Activities: Warrant issued for services $ 328,800 $ -- Capital leases entered into for equipment $ -- $ 329,800 ============ ============= See accompanying notes to condensed consolidated financial statements.