HOMELAND DEFENSE TECHNOLOGY LEADER RAE SYSTEMS BUILDS MOMENTUM IN REVENUE, CUSTOMERS, TECHNOLOGY

Hazardous environment detection solutions are rapidly adopted by federal, state and local authorities

SUNNYVALE, Calif. – May 5, 2003 -RAE Systems, (OTC BB: RAEE.OB) a leading provider of hazardous environment detection solutions for homeland defense, today announced three quarters of profitability and growing momentum. The company’s growing roster of U.S. and international customers and focus on technological leadership has translated into record revenues and a strong outlook. Some highlights of the company’s traction in the homeland defense technology market include:

Three consecutive quarters of profitability, with revenue growth increasing from $5.9 million in Q3 2002 to $6.3 million in Q4 2002 to $7.3 million in Q1 2003. This growth was driven by several factors. First, homeland security grants to first responders are beginning to reach municipalities, a group RAE Systems has supported since 1996. Second, the terrorist event at a Moscow theater last winter has influenced perceptions and spending decisions in Europe. Law enforcement agencies in the U.K. and on the continent are beginning to plan and budget for anti-terror needs.

RAE Systems’ products and networks are in use in every U.S. state. Recent projects include Connecticut, Delaware, Iowa and New York. Applications range from outfitting weapons of mass destruction response teams to installing redeployable sensing networks in high profile government buildings. At the recent Illinois Governor’s Inaugural Gala, a RAE device detected a propane leak before crowds arrived, preventing an accident.

US Federal Government Agencies including the ATF, the Department of Justice, National Guard Civil Support Teams, Marine Corps, the EPA and NASA are turning to RAE Systems to protect their employees and the public. In February 2003, the Texas Urban Search and Rescue Task Force and the Texas National Guard, sixth WMD/Civil Support Team called on RAE Systems to help protect the shuttle recovery teams from toxic gas threats. RAE detectors were used to determine whether monomethylhydrazine (MMH) or nitrogen tetra oxide (N2O4) were present in any of the 78,000 shuttle fragments that were ultimately recovered. “There were no injuries at all, no exposure,” said Jesse Ybarra, a member of the Texas Task Force and firefighter with the Houston Fire Department. “Recovery conditions in the field were always changing and uncertain, and RAE Systems gave us peace of mind that our search teams were safe from potentially toxic hazards.”

RAE Systems joined forces with All Set Tracking AB, a provider of technology and security solutions to intermodal container transportation companies around the world, to respond to the U.S. Government’s Maritime Transportation Security Act, signed into effect as Public Law 107-295 by President George W. Bush in November of 2002. The goal of the partnership is to offer joint solutions that address the security and integrity of the 13 million containers of ocean freight that enter the United States’ 361 seaports each year.

Rae Systems added radiation detection to their hazardous environment sensor portfolio. The GammaRAE and NeutronRAE pager-sized detectors are front line security devices to provide life critical, real-time detection of hidden radiation sources. The GammaRAE and NeutronRAE deliver instantaneous feedback to front line homeland defense personnel such as border guards, coastal defense forces, and cargo port screeners to prevent illicit trafficking of radioactive materials in compliance with the rigorous ITRAP (Illicit Trafficking Radiation Assessment Program) compliance standards.

RAE Systems received its 17th patent for “Non-Dispersive Infrared Gas Sensor Technology.” The technology is deployed in the MultiRAE IR gas detector, a handheld, five-gas monitor with the capability to simultaneously read and display carbon dioxide (CO2), volatile organic compounds (VOCs), combustible gas levels, oxygen, and toxic gases, as well as in the AreaRAE-IAQ, a wireless gas monitor incorporating both NDIR and PID technologies for indoor air quality (IAQ) measurement. It combines VOC measurement with traditional IAQ parameters like temperature, humidity, CO2 and carbon monoxide (CO) in a single package.

“Around the world, militaries, governments, emergency response teams and industrial manufacturers increasingly rely on RAE Systems to protect lives and secure assets,” said Bob Chen, president and CEO of RAE Systems. “By aggressively developing innovative technologies and products that provide superior safety and security, we have achieved three consecutive quarters of growth and profitability.”

Contact:
Bob Durstenfeld
408-585-3534
bdurstenfeld@raesystems.com

About RAE Systems
RAE Systems Inc. is the leader in rapidly deployable sensing networks for homeland defense and a leading manufacturer of portable, wireless and fixed atmospheric monitors, photo-ionization detectors, radiation detectors, gas detection tubes, sampling pumps and security monitoring devices. Our customers use our products to monitor gas and other volatile organic compounds in confined spaces, to establish a perimeter security around hazardous material sites and to detect the illicit traffic of radioactive materials. RAE Systems’ customers operate in such industries as safety and security, oil and gas, pharmaceuticals, utilities, food, chemical, airlines, military and hazardous material storage and disposal, and its monitors are used in civilian and government atmospheric monitoring programs in over 50 countries. For more information about RAE Systems, please visit www.RAESystems.com

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 “growing momentum”, “growing roster”, “strong outlook”, and “aggressively developing”. 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.