8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):
August 24, 2007

RAE Systems Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-31783	77-0280662
(State or other jurisdiction	(Commission File No.)	(I.R.S. Employer
of incorporation)		Identification No.)

3775 North First Street
San Jose, California 95134
408-952-8200
(Address and telephone number of registrant’s principal executive offices)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EXHIBIT 99.1

Item 2.05 Costs Associated with Exit or Disposal Activities.

     On August 24, 2007, the Board of Directors of RAE Systems Inc. (the “Company”) approved the discontinuation of the Company’s mobile digital video recording (DVR) business and a reduction in force in order to reduce expenses and concentrate resources on the Company’s sensing and safety markets. The restructuring is expected to be completed by the end of the quarter ending September 30, 2007.

     The Company expects to record in the quarter ending September 30, 2007 an estimated four to five million dollar charge primarily associated with impairment of goodwill and other intangible assets which includes the write-down of certain fixed assets and approximately $200,000 in severance-related expenses. Substantially all of the charges are non-cash items with the exception of the severance-related charges.

     The press release issued on August 29, 2007 is attached as Exhibit 99.1 hereto.

Item 2.06. Material Impairments.

     The information set forth under Item 2.05 of this Current Report on Form 8-K is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits. The following exhibit is filed herewith:

Exhibit No.	Description
99.1	Press release dated August 29, 2007.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: August 29, 2007

RAE SYSTEMS INC.
By:	/s/ Randall Gausman
Name:	Randall Gausman
Title:	Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press release dated August 29, 2007.

EX-99.1

Exhibit 99.1

For Immediate Release

Company Contact:	IR Agency Contact:
Investor Relations	Christiane Pelz
408-952-8402	415-433-3777
investorrelations@raesystems.com	CPelz@lhai.com

RAE Systems Implements Cost Reductions

— Exits Digital Video Recording Business —

SAN JOSE, Calif. — August 29, 2007 — RAE Systems Inc. (AMEX: RAE), a leading global developer and manufacturer of rapidly deployable, multi-sensor chemical and radiation detection monitors and networks for industrial applications and homeland security, announced it will decrease operating expenses by reducing its work force and exiting the mobile digital video recording (DVR) markets.

“We are focused on returning to profitability and sustaining it for the long-term,” said Robert I. Chen, president and chief executive officer. “We are concentrating our resources in our traditional sensing and safety markets and have stopped our current investment in digital video recording. However, we expect to redeploy the DVR technology as the pervasive sensing market develops.”

In the third quarter of 2007, the company expects to record an estimated $4 to $5 million charge, primarily associated with impairment of goodwill and other intangible assets. The charge also includes the write-down of certain fixed assets and severance-related expenses. Except for approximately $200,000 relating to severance, substantially all of the charges are non-cash items. The Company expects these actions to save approximately $1.7 million annually. The restructuring is expected to be completed by the end of the company’s quarter ending September 30, 2007.

About RAE Systems

RAE Systems is a leading global provider of rapidly deployable sensor networks that enable customers to identify safety and security threats in real time. Products include multi-sensor chemical detection, wireless gas detection, and radiation for energy production, refining, mining, industrial and environmental safety, and public and government first responder security sectors. RAE Systems’ products are used in over 65 countries by many of the world’s leading corporations and by many U.S. government agencies. For more information about RAE Systems, please visit www.RAESystems.com.

Safe Harbor

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

For Immediate Release

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 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.

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