RAE Systems Reports Preliminary First Quarter 2005 Results and Restatement of Prior Results.SUNNYVALE Sunnyvale, city (1990 pop. 117,229), Santa Clara co., W Calif., near San Francisco; settled 1849, inc. 1912. A city in Silicon Valley, its many manufactures include semiconductors; machinery and instruments; electrical, electronic, and aerospace products; , Calif. -- RAE Systems Inc. (AMEX AMEX See: American Stock Exchange :RAE), a leading global developer and manufacturer of rapidly-deployable, multi-sensor chemical and radiation detection monitors and networks for homeland security Noun 1. Homeland Security - the federal department that administers all matters relating to homeland security Department of Homeland Security executive department - a federal department in the executive branch of the government of the United States and industrial applications, today reported preliminary results for the first quarter of 2005 and comparable results for the first quarter of 2004 as preliminarily restated. The Company also reported its intention to restate re·state tr.v. re·stat·ed, re·stat·ing, re·states To state again or in a new form. See Synonyms at repeat. re·state its consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge as originally filed on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for 2004. The Company had announced on May 10, 2005 that it was delaying the filing of its Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the first quarter of 2005 as a result of the findings of the Company and its independent registered public accounting firm in connection with the work performed under Section 404 of the Sarbanes - Oxley Oxley refers to several things: People
v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. Form 10-K for 2004 in the next several weeks. The Company's Form 10-Q for the first quarter of 2005 and amended Form 10-K for 2004 have not yet been finalized See finalization. due to the substantial amount of work associated with the restatements. Accordingly, the financial results and related per share amounts set forth below are preliminary and subject to adjustment pending completion of the prior period restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. processes. Don Morgan Don Morgan is a Canadian provincial politician. He is the Saskatchewan Party member of the Legislative Assembly of Saskatchewan for the constituency of Saskatoon Southeast. , Chief Financial Officer, stated, "We have substantially completed our review of the revenue recognition issues that we disclosed in our Form 10-K/A filing on May 2, 2005. We have prepared a draft report for our Board and independent registered public accounting firm for review and intend to restate results for prior years. As was mentioned in our previous Form 10-K/A filing, we found instances where certain government and commercial customers without signed standard contracts issued purchase orders with nonstandard non·stan·dard adj. 1. Varying from or not adhering to the standard: nonstandard lengths of board. 2. delivery terms of "F.O.B. destination," requiring that we defer de·fer 1 v. de·ferred, de·fer·ring, de·fers v.tr. 1. To put off; postpone. 2. To postpone the induction of (one eligible for the military draft). v.intr. recognition of revenue until the shipments reach the customer. In addition, we also reported that a single distributor, who had not signed a distributor contract, had from time to time included a clause in their purchase orders asserting as·sert tr.v. as·sert·ed, as·sert·ing, as·serts 1. To state or express positively; affirm: asserted his innocence. 2. To defend or maintain (one's rights, for example). a right to return products. Further, during the course of our study, we found a limited number of service contracts that were not properly deferred. As a result of our study, as of December December: see month. 31, 2004, we have preliminarily concluded that about 1/2 of 1% of 2004 revenues and a similar amount of revenues generated prior to 2004 (approximately $500,000 in the aggregate) will be deferred at December 31, 2004 and recognized in future periods. On a preliminary basis, we anticipate that the restatement will have no effect on our 2004 full-year basic and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $0.04 per share, as originally reported, and the restatement will reduce our total shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. by approximately 1/2 of 1%. While the study is not final, we believe that it is important to let our investors know our preliminary results for the first quarter of 2005." Preliminary First Quarter Financials For the first quarter of 2005, RAE Systems reported preliminary revenues of $12.2 million as compared to revenues of $7.8 million (as preliminarily restated) for the same quarter in 2004, an increase of 57 percent. Preliminary net income for the first quarter of 2005 was $93,000 or $0.00 diluted earnings per share, as compared to a net income of $19,000 (as preliminarily restated) for the same period in 2004, or $0.00 diluted earnings per share. As stated, this information is preliminary and is subject to adjustment based upon the completion of the Company's review as well as the review by the Company's independent registered public accounting firm. Investor Update "We continue to work diligently dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d with our independent registered public accounting firm towards filing an amended Form 10-K/A for 2004 with the appropriate restatement of history as well as filing our Form 10-Q for first quarter 2005," said Morgan Morgan, American family of financiers and philanthropists. Junius Spencer Morgan, 1813–90, b. West Springfield, Mass., prospered at investment banking. . "After we complete our filings, we expect to host a conference call with investors to provide more details about the quarter and to answer any questions that investors might have. We appreciate the patience our investors have shown as we work on making certain we are in full compliance with all of our public reporting responsibilities." Inasmuch as in·as·much as conj. 1. Because of the fact that; since. 2. To the extent that; insofar as. inasmuch as conj 1. since; because 2. the Company has determined to restate its financial results for 2004, investors should not rely upon the Company's previously filed financial statements for such period. About RAE Systems RAE Systems is a leading global developer and manufacturer of rapidly deployable, multi-sensor chemical detection monitors and networks for homeland security and industrial applications. In addition, RAE Systems offers a full line of portable single-sensor chemical and radiation detection products. RAE Systems' products enable the military and first responders first responder First response personnel Emergency medicine A person employed in the public sector–EMT, fire fighter, police, volunteer EMS–whose duties include provision of immediate medical care in the event of an emergency; FRs have basic emergency such as firefighters, law enforcement and other emergency management personnel to detect and provide early warning of weapons of mass destruction Weapons that are capable of a high order of destruction and/or of being used in such a manner as to destroy large numbers of people. Weapons of mass destruction can be high explosives or nuclear, biological, chemical, and radiological weapons, but exclude the means of transporting or and other hazardous materials. Industrial applications include the detection of toxic industrial chemicals, volatile organic compounds volatile organic compound Environment Any toxic cabon-based (organic) substance that easily become vapors or gases–eg, solvents–paint thinners, lacquer thinner, degreasers, dry cleaning fluids and petrochemicals. RAE Systems' products are used by many U.S. government agencies, including the Department of Homeland Security Noun 1. Department of Homeland Security - the federal department that administers all matters relating to homeland security Homeland Security executive department - a federal department in the executive branch of the government of the United States , the Department of Justice, and the Department of State, as well as all branches of the U.S. military, and by numerous city and state agencies. Our end users also include many of the world's leading corporations in the airline, automotive, computer and oil industries. Our products are used in civilian and government atmospheric atmospheric /at·mos·pher·ic/ (at?mos-fer´ik) of or pertaining to the atmosphere. atmospheric of or pertaining to the atmosphere. monitoring programs in over 50 countries. For more information about RAE Systems, please visit www.RAESystems.com. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement This press release may contain "forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. " statements, as that term is used in Section 21E of the Securities Exchange Act of 1934. Forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. include, without limitation: expressions of "belief," "anticipation," or "expectations" of management and preliminary financial results. The final financial results could change from the preliminary financial results based upon the finalization Writing the table of contents (TOC) on a recordable CD or DVD disc. The finalization process ensures that the disc can be played back on most CD and DVD players. See disc-at-once. of the internal and external review by the Company and its independent certified See certification. public accounting firm. 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 here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" , and the Company assumes no obligation to update such statements.
RAE Systems Inc.
Condensed Consolidated Balance Sheets
Preliminary and Unaudited
----------------------------------------------------------------------
March 31, Dec. 31, Dec. 31,
2005 2004 2004
---------- ----------- ------------
as as
restated reported
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Assets
Current Assets:
Cash and cash equivalents $18,808,000 $21,566,000 $21,566,000
Short-term investments 8,981,000 6,745,000 6,745,000
Notes receivable 745,000 535,000 535,000
Accounts receivable, net of
allowance for doubtful accounts
of $667,000 and $665,000,
respectively 9,605,000 9,934,000 9,934,000
Accounts receivable from
affiliate 147,000 119,000 119,000
Inventories 8,323,000 7,815,000 7,675,000
Prepaid expenses and other
current assets 1,729,000 1,558,000 1,558,000
Deferred income taxes 1,564,000 1,538,000 1,392,000
----------------------------------------------------------------------
Total Current Assets 49,902,000 49,810,000 49,524,000
----------------------------------------------------------------------
Property and Equipment, net 11,914,000 11,287,000 11,287,000
Long Term Investments 4,422,000 4,500,000 4,500,000
Intangible Assets 2,031,000 2,150,000 2,150,000
Deposits and Other Assets 1,119,000 1,172,000 1,172,000
Investment in Unconsolidated
Affiliate 73,000 156,000 156,000
----------------------------------------------------------------------
Total Assets $69,461,000 $69,075,000 $68,789,000
----------------------------------------------------------------------
Liabilities and Shareholders'
Equity
Current Liabilities:
Accounts payable $ 4,022,000 $ 3,449,000 $ 3,449,000
Notes payable - related parties 875,000 859,000 859,000
Accounts payable to affiliate - - -
Accrued expenses 4,240,000 5,639,000 5,643,000
Income taxes payable 393,000 417,000 417,000
Current portion of deferred
revenue 1,767,000 1,118,000 722,000
Current portion of capital lease
obligations - - -
----------------------------------------------------------------------
Total Current Liabilities 11,297,000 11,482,000 11,090,000
----------------------------------------------------------------------
Long Term Notes Payable - Related
Parties 985,000 824,000 824,000
Deferred Revenue, net of current
portion 103,000 231,000 119,000
----------------------------------------------------------------------
Total Liabilities 12,385,000 12,537,000 12,033,000
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Commitments and Contingencies
Minority Interest in Consolidated
Entities 4,228,000 4,288,000 4,288,000
Total Shareholders' Equity 52,848,000 52,250,000 52,468,000
----------------------------------------------------------------------
Total Liabilities, Minority
Interest in Consolidated Entities
and Shareholders' Equity $69,461,000 $69,075,000 $68,789,000
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RAE Systems Inc.
Condensed Consolidated Statements of Operations
Preliminary and Unaudited
----------------------------------------------------------------------
Three months ended March 31,
-----------------------------------
2005 2004 2004
----------- ----------- -----------
as as
restated reported
----------------------------------------------------------------------
Net Sales $12,247,000 $ 7,808,000 $ 8,182,000
Cost of Sales 5,065,000 2,889,000 2,979,000
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Gross Margin 7,182,000 4,919,000 5,203,000
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Operating Expenses:
Sales and marketing 3,428,000 2,060,000 2,067,000
Research and development 1,084,000 920,000 920,000
General and administrative 2,477,000 1,712,000 1,712,000
----------------------------------------------------------------------
Total Operating Expenses 6,989,000 4,692,000 4,699,000
----------------------------------------------------------------------
Operating Income 193,000 227,000 504,000
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Other (Expense) Income:
Interest income 99,000 75,000 75,000
Interest expense (33,000) (4,000) (4,000)
Other, net (37,000) 17,000 17,000
Equity in loss of unconsolidated
affiliate (83,000) (68,000) (68,000)
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Total Other (Expense) Income (54,000) 20,000 20,000
----------------------------------------------------------------------
Income Before Income Taxes 139,000 247,000 524,000
and Minority Interest
Income Taxes 106,000 228,000 339,000
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Income Before Minority Interest 33,000 19,000 185,000
Minority Interest in Loss of
Consolidated Entities (60,000) -- --
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Net Income $ 93,000 $ 19,000 $ 185,000
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Basic Earnings Per Common Share $ 0.00 $ 0.00 $ 0.00
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Diluted Earnings Per Common Share $ 0.00 $ 0.00 $ 0.00
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Weighted-average common shares
outstanding 57,485,111 52,874,797 52,874,797
Stock options 2,573,656 4,317,663 4,317,663
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Diluted weighted-average common
shares outstanding 60,058,767 57,192,460 57,192,460
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