 Protection through Detection Protection through Detection RAE Systems Inc. RAE Systems Inc. (AMEX: RAE) (AMEX: RAE) Bob Chen, President & CEO Bob Chen, President & CEO Don Morgan, Vice President & CFO Don Morgan, Vice President & CFO Bob Durstenfeld, Dir., Corp. Marketing Bob Durstenfeld, Dir., Corp. Marketing Exhibit 99.1 |
 Protection through Detection Protection through Detection 2 2 Safe Harbor Statement Safe Harbor Statement This presentation (including information incorporated or deemed incorporated by reference herein) contains “forward-looking statements” within the meaning of the Private Litigation Reform Act of 1995. Forward-looking statements are those involving future events and future results that are based on current expectations, estimates, forecasts, and projects as well as the current beliefs and assumptions of our management. Words such as “outlook”, “believes”, “expects”, “appears”, “may”, “will”, “should”, “anticipates”, or the negative thereof or comparable terminology, are intended to identify such forward looking statements. Any statement that is not a historical fact, including estimates, projections, future trends and the outcome of events that have not yet occurred, is a forward-looking statement. Forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed under the section entitled “Risk Factors” in our reports filed with the SEC. Many of such factors relate to events and circumstances that are beyond our control. You should not place undue reliance on forward-looking statements. |
 Protection through Detection Protection through Detection 3 3 Our Our Business PRODUCTS Detect toxic gases & radiological agents Portable Rugged Rugged Battery operated Battery operated SYSTEMS Provide integrated & actionable threat information Wireless networks Remote monitoring / Web Integrated data (GPS, weather) Application-specific system SW |
 Protection through Detection Protection through Detection 4 4 Markets Industrial / Environmental Safety & Hygiene Confined Space Hazardous Waste Oil & Gas Environmental Monitoring Homeland Security Military First Responders Public Venue Protection Port / Border Security |
 Protection through Detection Protection through Detection 5 5 Customers Regulatory Economic Purchase Purchase Drivers Drivers Health & Safety Security Health & Safety Security Enterprise Government Government |
 Protection through Detection Protection through Detection 6 6 RAE Systems Business RAE Systems Business Portables Integrated Wireless Systems Wireless Systems Components & Accessories ents & Services |
 Protection through Detection Protection through Detection 7 7 Business Mix - Business Mix - 2004 2004 Portables Portables 48% 48% Integrated Integrated Wireless Systems Wireless Systems 18% 18% Distribution Distribution 17% 17% Service Service 4% 4% Consumables Consumables 13% 13% |
 Protection through Detection Protection through Detection 8 8 Global Operations Global Operations Cost-efficient Cost-efficient infrastructure infrastructure in China in China Headquarters in Headquarters in Silicon Valley, Silicon Valley, USA USA |
 Protection through Detection Protection through Detection 9 9 Worldwide Presence` Worldwide Presence` Shanghai Shanghai Tokyo Tokyo Hong Kong Hong Kong Singapore Singapore France France Spain Spain U.K. U.K. Benelux Benelux Beijing Beijing San Jose, CA San Jose, CA Denmark Denmark |
 Protection through Detection Protection through Detection 10 10 Geographic Mix Geographic Mix Americas Americas 65% 65% Europe Europe 10% 10% Asia Asia 25% 25% Americas Americas 56% 56% Europe Europe 11% 11% Asia Asia 33% 33% 2004 2004 2005 2005 |
 Protection through Detection Protection through Detection 11 11 Channels & Partnerships Channels & Partnerships Americas Americas Direct sales Direct sales Distributors & reps Distributors & reps Europe Europe HQ in Denmark with pan- HQ in Denmark with pan- European direct sales staff European direct sales staff Subsidiaries in U.K & France Subsidiaries in U.K & France Direct presence in Middle East Direct presence in Middle East Asia Asia Direct sales through KLH Direct sales through KLH in China in China HK sales office HK sales office Distributors elsewhere Distributors elsewhere OEM |
 Protection through Detection Protection through Detection Products, Products, Technology Technology & & Applications Applications |
 Protection through Detection Protection through Detection 13 13 Sensor Technology Sensor Technology Photo-Ionization Detection (PID) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Combustible Chemical Detection Tube Corona Discharge Ion Mobility Electro-chemical Solid Polymer Infrared Radiation Speciation A world leader in photo- A world leader in photo- ionization technology for ionization technology for detection of volatile detection of volatile organic compounds organic compounds (e.g. gasoline, benzene) (e.g. gasoline, benzene) 2005 2006 |
 Protection through Detection Protection through Detection 14 14 Intellectual Property Intellectual Property 18 patents focused on 18 patents focused on chemical sensor chemical sensor technologies technologies 9 9 years years remaining remaining on on fundamental fundamental PID PID patents patents |
 Protection through Detection Protection through Detection 15 15 Alarm (detect & warn) Measurement (instrument data) Hazard Hazard Detection Evolution Evolution Area Monitoring (manned multiple monitoring products, wireless point-to- point network) Pervasive Sensing (unmanned multiple sensors, wireless mesh network) Value-Add = Real-Time Decision Support |
 Protection through Detection Protection through Detection 16 16 Technology & Products RAEWatch AreaRAE MultiRAE MiniRAE 2000 ppbRAE ToxiRAE BadgeRAE Products Products Technology Alarm (detect & warn) Measurement (instrument data) Area Monitoring (manned multiple monitoring products, point-to-point network) Pervasive Sensing (unmanned multiple sensors, mesh network) |
 Protection through Detection Protection through Detection 17 17 Enterprise First Responders, Military Government Environmental Agency Applications Alarm (detect & warn) Measurement (instrument data) Area Monitoring (manned multiple monitoring products, point-to-point network) Pervasive Sensing (unmanned multiple sensors, mesh network) |
 Protection through Detection Protection through Detection 18 18 Application Scenarios Incident Command |
 Protection through Detection Protection through Detection 19 19 Application Scenarios Scenarios Public Venue Security Public Venue Security |
 Protection through Detection Protection through Detection 20 20 Emerging Application Scenarios Building Air Quality Monitoring Sensor/RF Node Sensor/RF Node Network Interrogator Network Interrogator |
 Protection through Detection Protection through Detection 21 21 Emerging Emerging Application Scenarios Application Scenarios Perimeter Monitoring Perimeter Monitoring Sensor/RF Node Sensor/RF Node Network Interrogator Network Interrogator |
 Protection through Detection Protection through Detection 22 22 Emerging Emerging Application Scenarios Application Scenarios Cargo Container Monitoring Cargo Container Monitoring Sensor/RF Node Sensor/RF Node Network Access Point Network Access Point Satellite Communicator Satellite Communicator Door Lock and RFID Door Lock and RFID Interior sensors monitor and Interior sensors monitor and communicate through the door lock communicate through the door lock sensor to the Network Access Point sensor to the Network Access Point and onto the Satellite Communicator and onto the Satellite Communicator Door lock sensor protects against Door lock sensor protects against intrusion and responds to RFID intrusion and responds to RFID signals to transmit container log to signals to transmit container log to RAE reader at portal on the dock RAE reader at portal on the dock |
 Protection through Detection Protection through Detection 23 23 Emerging Emerging Application Scenarios Application Scenarios Truck/Trailer Theft Prevention Truck/Trailer Theft Prevention Sensor/RF Node Sensor/RF Node Satellite Communicator Satellite Communicator Network Interrogator Network Interrogator Door Lock Door Lock Door Door Lock Lock |
 Protection through Detection Protection through Detection Markets & Markets & Growth Opportunities Growth Opportunities |
 Protection through Detection Protection through Detection 25 25 Market Opportunity Market Opportunity Homeland Homeland Security Security Spending Spending $41.1 Billion $41.1 Billion FY2006 budget request FY2006 budget request 7% Y/Y growth 7% Y/Y growth U.S. Department of U.S. Department of Homeland Security Homeland Security Chemical Chemical Sensor Sensor Market Size Market Size $2.8 Billion $2.8 Billion 8.5% projected growth per 8.5% projected growth per year through 2008 year through 2008 Freedonia report: Freedonia report: Chemical Sensors to Chemical Sensors to 2008: Liquid, Gas & 2008: Liquid, Gas & Biosensors Biosensors Growth of Growth of Investment in Investment in Fixed Assets Fixed Assets (factories, equipment, (factories, equipment, property & infrastructure) property & infrastructure) 25.8% 25.8% in 2004 in 2004 United States United States United States United States China China The Economist The Economist 27 Jan 2005 27 Jan 2005 |
 Protection through Detection Protection through Detection 26 26 Market Drivers Market Drivers Developing countries Developing countries Growing industrial Growing industrial infrastructure infrastructure Increasing focus on Increasing focus on human health & safety human health & safety Industrialized world Industrialized world Terrorism & other Terrorism & other safety concerns safety concerns Environmental & Environmental & industrial regulations industrial regulations |
    Protection through Detection Protection through Detection 27 27 Competitive Environment Competitive Environment History: North American mining industry History: North American mining industry COMPETITIVE COMPETITIVE STRENGTHS STRENGTHS • • A technology A technology leader in PID & leader in PID & emerging wireless emerging wireless systems systems • • Strong brand Strong brand • • Broad product Broad product offering offering • • Cost-efficient Cost-efficient infrastructure in infrastructure in China China |
 Protection through Detection Protection through Detection 28 28 Information Information Value Value Real-time Real-time Decision Decision Support Support Emerging Market Potential Emerging Market Potential $500 $500 $10,000 $10,000 $0.10 $0.10 Thousands Thousands Millions Millions Number of Sensors Number of Sensors Personal Personal Protection Protection Area Area Protection Protection Pervasive Pervasive Sensing Sensing |
 Protection through Detection Protection through Detection 29 29 Growth Strategy Growth Strategy Expand leadership position in emerging Expand leadership position in emerging wireless sensor networks wireless sensor networks Enhance & defend portable product line Enhance & defend portable product line Increase revenue in Europe & Asia Increase revenue in Europe & Asia Aggressively pursue rapidly growing safety Aggressively pursue rapidly growing safety market in China market in China Selectively pursue strategic acquisitions & Selectively pursue strategic acquisitions & partnerships partnerships Gain scale &/or address adjacent products & markets (accretive) Gain scale &/or address adjacent products & markets (accretive) Acquire complementary technologies Acquire complementary technologies |
 Protection through Detection Protection through Detection Financial Financial Overview Overview |
 Protection through Detection Protection through Detection 31 31 Company History Company History 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 2005 Company founded by Company founded by Robert I. Chen (current CEO) Robert I. Chen (current CEO) & Peter Hsi (current CTO) & Peter Hsi (current CTO) $1.1M angel $1.1M angel funding funding Public via Public via reverse merger reverse merger $32 M $32 M secondary secondary offering offering KLH acquisition KLH acquisition Moved to AMEX Moved to AMEX Sept. 11, Sept. 11, 2001 2001 Established operations Established operations in China in China |
 Protection through Detection Protection through Detection 32 32 Revenue Growth Revenue Growth 9.4 10.8 18.398 19.039 21.828 31.361 45.54 60.3 $10 $10 $20 $20 $30 $30 $40 $40 2004 2004 2003 2003 2002 2002 2001 2001 2000 2000 1999 1999 1998 1998 $31.4M $31.4M $21.8M $21.8M $19.0M $19.0M $18.4M $18.4M $10.8M $10.8M $9.4M $9.4M $45.5M $45.5M CAGR CAGR 30% 30% $50 $50 $60 $60 2005 2005 $60.3M $60.3M |
 Protection through Detection Protection through Detection 33 33 2006 Guidance 2006 Guidance (*per February 2006 conference call) (*per February 2006 conference call) $10 $10 $20 $20 $30 $30 $40 $40 2004 2004 2003 2003 2002 2002 2001 2001 2000 2000 1999 1999 1998 1998 $31.4M $31.4M $21.8M $21.8M $19.0M $19.0M $18.4M $18.4M $10.8M $10.8M $9.4M $9.4M $68-73M $68-73M (E) (E) 2006 Sales 2006 Sales Guidance Guidance $68M to $73M* $68M to $73M* $50 $50 2005 2005 $45.5M $45.5M $60 $60 $70 $70 $60.3M $60.3M 2006E* 2006E* |
 Protection through Detection Protection through Detection 34 34 Income Statement Income Statement 2005 -2004 Comparison 2005 -2004 Comparison 2005 -UNAUDITED 2005 -UNAUDITED Q4 Q4 2005 2005 Q4 Q4 2004 2004 Total Year Total Year 2004 2004 Revenue Revenue Gross Profit Gross Profit R&D R&D Sales & Sales & Mktg Mktg G&A G&A Net Net Income (Loss) Income (Loss) EPS EPS $ 60.3 M COGS COGS $( 0.6)M $35.6 M $ 16.6 M $ 24.7 M TOTAL TOTAL $ 5.3 M $ 13.2 M $ 37.1 M $(0.01)/share $15.0 M $ 0.4 M $8.1 M $ 2.4 M $ 6.9 M $ 1.4 M $ 3.8 M $ 7.6 M $0.01/share $ 18.3 M $ 0.3 M $ 10.5 M $4.5 M $7.8 M $ 1.7 M $4.0 M $ 10.2 M $0.00/share $45.5 M $2.3 M $ 27.0 M $10.3 M $ 18.5 M $ 4.3 M $8.9 M $ 23.5 M $0.04/share $ 2.0 M Loss on Loss on Lease Lease Total Year Total Year 2005 2005 |
 Protection through Detection Protection through Detection 35 35 High-Leverage High-Leverage Business Model Business Model Gross Margin Gross Margin 50% - 50% - 60% 60% Pre-Tax Pre-Tax Operating Income Operating Income Target Target 10% - 10% - 20% 20% Strong Strong Balance Sheet Balance Sheet Cash & Cash & Investments Investments $29.5 M $29.5 M Debt Debt $1.7 M $1.7 M * As of December 31, 2005, Unaudited |
 Protection through Detection Protection through Detection 36 36 Summary Summary RAE Systems Investment Proposition RAE Systems Investment Proposition Growing worldwide markets Broad customer base & rapidly emerging applications Sustainable technical advantages Proprietary sensor technology System know-how & domain knowledge Growing consumables & service revenue High-margin “annuity” business Strong brand & worldwide market presence Globally distributed infrastructure Localized sales & support / cost-efficient manufacturing in China Financial strength Strong balance sheet High-leverage business model Access to capital |
 Protection through Detection Protection through Detection 37 37 Contact Us Contact Us Company Information: Company Information: InvestorRelations@RAESystems.com InvestorRelations@RAESystems.com 408-952-8449 408-952-8449 www.RAESystems.com www.RAESystems.com IR Agency Contact: IR Agency Contact: David Barnard, CFA David Barnard, CFA 415-433-3777 415-433-3777 David@lhai-sf.com David@lhai-sf.com |
 Protection through Detection Protection through Detection 38 38 Index Index 1. RAE Systems Inc. 2. Safe Harbor 3. Our Business 4. Markets 5. Customers 6. RAE Systems Business Segments 7. Business Segment Mix - 2004 8. Global Operations 9. Worldwide Presence 10. Geographic Mix - 2004 11. Channels & Partnerships 12. Products, Technology & Applications 13. Sensor Technology 14. Intellectual Property 15. Hazard Detection Evolution 16. Technology & Products 17. Applications 18. Application Scenarios - Incident Command 19. Application Scenarios - Public Venue Security 20. Emerging Application - Building Air Quality Monitoring 21. Emerging Application - Perimeter Monitoring 22. Emerging Application - Cargo Container Monitoring 23. Emerging Application - Truck/Trailer Theft Prevention 24. Markets & Growth Opportunities 25. Market Opportunity 26. Market Drivers 27. Competitive Environment 28. Emerging Market Potential 29. Growth Strategy 30. Financial Overview 31. Company History 32. Revenue Growth 33. 2005 Guidance 34. Income Statement 35. High-Leverage Business Model 36. Summary |