SOURCE: RAE Systems

May 16, 2011 08:00 ET

RAE Systems Announces First Quarter 2011 Results

Reports Revenue of $22.4 Million and Gross Margin of 61%

SAN JOSE, CA--(Marketwire - May 16, 2011) - RAE Systems Inc. (NYSE Amex: RAE), a leader in delivering innovative sensor solutions to serve industrial, energy, environmental, and government safety markets worldwide, reported financial results and business highlights for the first quarter ended March 31, 2011.

For the first quarter of 2011, RAE Systems reported revenue of $22.4 million, compared with $16.9 million in the same quarter in 2010. For the first quarter of 2011, The Americas contributed 49% of total revenue; Europe contributed 26%; and Asia contributed 25%. Gross margin for the first quarter of 2011 was 61%, compared with 56% for the first quarter of 2010, reflecting an improved product mix of sales primarily in the Americas and Europe. Total operating expenses for the first quarter of 2011 were $15.8 million, compared with $9.6 million for the first quarter of 2010. Total operating expenses for the first quarter of 2011 included legal expenses of $1.5 million related to the company's previously announced merger with a private equity firm and payment of a termination fee of $3.4 million to Battery Ventures, in accordance with the terms of the Battery Merger Agreement. The net loss for the first quarter of 2011 was $2.9 million, or $0.05 per share, compared with a net loss of $364,000, or $0.01 per share, for the first quarter of 2010.

About RAE Systems

RAE Systems is a leading global provider of rapidly deployable connected, intelligent gas detection systems that enable real-time safety and security threat detection. RAE Systems products are used in more than 95 countries by many of the world's leading corporations and government agencies.

RAE Systems offers a full line of wirelessly enabled solutions including personal, hand-held, transportable, and fixed instruments designed to meet the needs of any usage scenario. Applications include energy production, refining, industrial and environmental safety, public venue safety and government first responder markets.

For more information about RAE Systems, please visit raesystems.com.

Safe Harbor Statement

This press release may contain "forward-looking" statements, as that term is used in Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include, without limitation: expressions of "belief," "anticipation," or "expectations" of management; statements as to industry trends or future results of operations of RAE Systems and its subsidiaries; and other statements that are not historical fact. 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 investigation and receptiveness of the market to RAE Systems 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 Form 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 to Follow]

                             RAE Systems Inc.
                        Consolidated Balance Sheets
              (in thousands, except share and par value data)
                                (unaudited)


                                                  March 31,   December 31,
                                                    2011          2010
                                                ------------  ------------
ASSETS
Current assets:
 Cash and cash equivalents                      $     13,380  $     16,296
 Restricted cash                                           -         2,000
 Trade notes receivable                                2,117         2,018
 Accounts receivable, net of allowances of
  $3,821 and $3,539, respectively                     14,793        14,286
 Accounts receivable from affiliate                      187           200
 Inventories                                          13,320        11,546
 Prepaid expenses and other current assets             5,522         4,557
 Income taxes receivable                                 133           130
 Current assets of discontinued operation                  -         6,093
                                                ------------  ------------
      Total current assets                            49,452        57,126
                                                ------------  ------------
Property and equipment, net                           12,251        10,730
Intangible assets, net                                   110           196
Investments in unconsolidated affiliates                 139           184
Other assets                                             396           393
Noncurrent assets of discontinued operation                -         3,478
                                                ------------  ------------
 Total assets                                   $     62,348  $     72,107
                                                ============  ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
 Accounts payable                               $      7,308  $      5,475
 Accounts payable to affiliate                            13            25
 Bank lines of credit                                  1,810         1,814
 Accrued liabilities                                   9,878        11,957
 Notes payable to related parties, current               286           278
 Income taxes payable                                    428           128
 Deferred revenue, current                               586           557
 Current liabilities of discontinued operation             -         5,790
                                                ------------  ------------
      Total current liabilities                       20,309        26,024
                                                ------------  ------------
Deferred revenue, non-current                            796           776
Deferred tax liabilities, non-current                    143           141
Deferred gain on sale of real estate                   3,650         3,809
Other long-term liabilities                            1,527         1,491
Noncurrent liabilities of discontinued
 operation                                                 -           182
                                                ------------  ------------
      Total liabilities                               26,425        32,423
                                                ------------  ------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
 Common stock, $0.001 par value, 200,000,000
  shares authorized; 59,512,064 and 59,512,064
  shares issued and outstanding as of March 31,
  2011 and December 31, 2010, respectively                59            59
 Additional paid-in capital                           65,238        65,041
 Accumulated other comprehensive income                6,693         7,786
 Accumulated deficit                                 (36,735)      (34,311)
                                                ------------  ------------
      Total RAE Systems Inc. shareholders'
       equity                                         35,255        38,575
 Noncontrolling interest                                 668         1,109
                                                ------------  ------------
      Total shareholders' equity                      35,923        39,684
                                                ------------  ------------
      Total liabilities and shareholders'
       equity                                   $     62,348  $     72,107
                                                ============  ============




                             RAE Systems Inc.
                  Consolidated Statements of Operations
                  (in thousands, except per share data)
                                (unaudited)


                                                      Three Months Ended
                                                           March 31,
                                                    ----------------------
                                                       2011        2010
                                                    ----------  ----------
Net sales                                           $   22,447  $   16,855
Cost of sales                                            8,772       7,359
                                                    ----------  ----------
Gross profit                                            13,675       9,496
                                                    ----------  ----------
Operating expenses:
 Sales and marketing                                     5,089       4,173
 Research and development                                1,761       1,579
 General and administrative                              8,961       3,826
                                                    ----------  ----------
       Total operating expenses                         15,811       9,578
                                                    ----------  ----------
Operating loss from continuing operations               (2,136)        (82)
Other income (expense):
 Interest income                                             4          23
 Interest expense                                          (26)        (21)
 Other, net                                                (76)         46
 Equity in loss of unconsolidated affiliates               (46)        (51)
                                                    ----------  ----------
Loss from continuing operations before income taxes     (2,280)        (85)
Income tax expense                                        (585)       (129)
                                                    ----------  ----------
Loss from continuing operations                         (2,865)       (214)
Loss from discontinued operations, net of tax                -        (194)
                                                    ----------  ----------
Net loss                                                (2,865)       (408)
 Net (income) loss attributable to the
  noncontrolling interest, continuing operations           (39)         12
 Net loss attributable to the noncontrolling
  interest, discontinued operations                          -          32
                                                    ----------  ----------
   Net (income) attributable to the
    noncontrolling interest                                (39)         44
                                                    ----------  ----------
Net loss attributable to RAE Systems Inc.           $   (2,904) $     (364)
                                                    ==========  ==========


Earnings per common share - basic and diluted:
 Continuing operations                              $    (0.05) $    (0.01)
 Discontinued operations                                     -           -
                                                    ----------  ----------
Net loss per share - basic and diluted              $    (0.05) $    (0.01)
                                                    ==========  ==========

Weighted-average common shares outstanding - basic
 and diluted                                            59,512      59,405
                                                    ==========  ==========




The following table sets forth the components of our Consolidated
 Statements of Operations as a percentage of net sales:


                                                       Three Months Ended
                                                          December 31,
                                                      --------------------
                                                        2011       2010
                                                      ---------  ---------
Net sales                                                   100%       100%
Cost of sales                                                39%        44%
                                                      ---------  ---------
Gross profit                                                 61%        56%
                                                      ---------  ---------
Operating expenses:
 Sales and marketing                                         23%        25%
 Research and development                                     8%         9%
 General and administrative                                  40%        22%
                                                      ---------  ---------
       Total operating expenses                              71%        56%
                                                      ---------  ---------
Operating loss from continuing operations                   -10%         0%
Other income (expense):
 Interest income                                              0%         0%
 Interest expense                                             0%         0%
 Other, net                                                  -1%         0%
 Equity in loss of unconsolidated affiliates                  0%         0%
                                                      ---------  ---------
Loss from continuing operations before income taxes         -11%         0%
Income tax expense                                           -2%        -1%
                                                      ---------  ---------
Loss from continuing operations                             -13%        -1%
 Loss from discontinued operations, net of tax                0%        -1%
                                                      ---------  ---------
Net loss                                                    -13%        -2%
 Net (income) loss attributable to the noncontrolling
  interest                                                    0%         0%
 Net loss attributable to the noncontrolling
  interest, discontinued operations                           0%         0%
                                                      ---------  ---------
   Net (income) loss attributable to the
    noncontrolling interest                                   0%         0%
                                                      ---------  ---------
Net loss attributable to RAE Systems Inc.                   -13%        -2%
                                                      =========  =========

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