RAE Systems Sees Faster Than Expected Worldwide Adoptions of Wireless Sensing Systems in Q2

SUNNYVALE, Calif. August 3, 2004 RAE Systems Inc. (AMEX: RAE), a leading global developer and manufacturer of rapidly-deployable, multi-sensor chemical and radiation detection monitors and networks for homeland security and industrial applications, today provided details of second quarter worldwide customer deployments.

We entered the second quarter with increasing deal sizes, including multi-million dollar orders we announced from the U.S. EPA and a branch of the U.S. military, said Robert I. Chen, president and CEO of RAE Systems. Our handheld and fixed monitor segments continue to demonstrate robust growth, and we were pleased to observe a faster than expected adoption of our wireless sensing networks, Rapid Deployment Kits and AreaRAE five gas wireless gas detection systems. This is significant for us, since the global market for wireless sensing networks is estimated to be as high as $7 billion by 2010, and our solutions are gaining traction in key areas including public venue protection, supply chain monitoring, and indoor air security.

Selected North American application deployments from the second quarter included several municipal fire departments, which purchased GammaRAE, pager sized radiation detectors, for first responder use. A major engineering and construction company purchased AreaRAEs and ppbRAEs for wireless monitoring related to their work at the Department of Energy Hanford Site in southeast Washington State. The Department of Defense purchased AreaRAE Rapid Deployment Kits and a state Bureau of Homeland Security purchased multiple 4-gas, QRAEs for confined space entry.

Europe and Middle East highlights included Qatar Chemical Company, a major facility in the Middle East, which purchased ToxiRAE IIs, with expected ongoing orders. Two separate major oil exploration companies in the Netherlands purchased BadgeRAEs and QRAEs. The Defense Energy Support Center Europe purchased MultiRAE Plus and ToxiRAEs. In Greece, ppbRAEs were purchased for indoor air quality (IAQ) and security applications. Finally, wireless AreaRAEs were delivered for use in vinyl chloride manufacturing industry in Hungary.

Air quality and security continue to be themes that are receiving attention from both government organizations and industry groups throughout Asia. In addition to increased sales in China generated by KLH, IAQRAEs were sold into various companies and organizations in Korean petrochemical, catalytic coating and construction industries, where regulations now require indoor air quality monitoring. Marking a growing presence in Southeast Asia, fixed deployment, RAEGuard VOC monitors were sold for waste water treatment applications in Thailand.

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 40 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 continue to be strong. 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.